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EU targets for CO2 reduction for the automotive industry: Climate protection or industrial policy?

Renate Künast, Winfried Herrmann, Matthias Wissmann, Karl Otto Schallaböck, Peter Hennicke, Ferdinand Dudenhöffer
ifo Institut für Wirtschaftsforschung, München, 2008

ifo Schnelldienst, 2008, 61, Nr. 03, 03-14

The EU Commission wants to limit the carbon dioxide output of new cars sold in the EU to 130 grams CO2 per kilometre, on average, by the year 2012. In the opinion of Renate Künast and Winfried Hermann of the Green Party, the proposals do not go far enough. Although it is clear that the German automotive industry will not be able to reach this target, German car manufacturers have placed too much emphasis on speed and luxury to the neglect of environmental innovations. The federal government has placed the economic interests of the German automotive industry above climate protection and the needs of consumers: "It is not the EU Commission that is lobbying for France and Italy, but Merkel, Gabriel and Glos who are lobbying for Porsche, Mercedes and BMW." For Matthias Wissmann, of the German automotive industry association, the proposals of the EU Commission are not acceptable. The target of limiting the CO2 output of cars to a fleet average of 120 g/km is not the problem; however, a regulation for the reaching this goal must be constructed in a way that is neutral in competitive terms. The proposed regulation does not meet this demand. The automotive industry would face sanctions that amount to a multiple of the costs of other branches of industry. In the opinion of Karl Otto Schallaböck and Peter Hennicke, Wuppertal Institute for Climate, Environment and Energy, car manufacturers should have known decades ago that major adjustments to low-consumption and low-emission vehicles were coming. For this reason it is sensible and appropriate to place heavy fines on transgressors for this instrument to be effective in lowering or balancing out emissions. For Ferdinand Dudenhöffer, Center of Automotive Research (CAR) in Gelsenkirchen, the Commission has submitted an economic proposal that could be further improved. This would mean expanding the pooling for the CO2 market: "Dimas is open to this idea, those in the automotive associations are not."

JEL Classification: L620,Q250

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ifo Institut für Wirtschaftsforschung, München, 2008