German Plan to Tax Cars on Emissions Gets Wary Nod | Business| Economy and finance news from a German perspective | DW | 19.02.2007
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German Plan to Tax Cars on Emissions Gets Wary Nod

Plans by the German government to tax cars based on emissions instead of engine size in a bid to encourage carmakers to design "greener" cars have met with a cautious welcome.

Those who drive polluting cars will be penalized under the proposed plan

Those who drive polluting cars will be penalized under the proposed plan

German Transport Minister Wolfgang Tiefensee insisted Monday that a planned flat tax on cars based on emissions would not impose a financial burden on car owners. "The aim is not to make more money, but to do something for the environment," he said.

Tiefensee pointed out that the levy would instead replace an existing tax that rises in step with the cubic capacity of a car's engine.

"Overall car owners will not pay more taxes that they have until now," said Sigmar Gabriel, the country's environment minister.

Wolfgang Tiefensee zum Transrapid Unglück

Wolfgang Tiefensee says German carmakers have to do more to cut emissions

Tiefensee said over the weekend that Germany and other European carmakers had to do more to protect the environment after the head of the UN Environment Program (UNEP), Achim Steiner said in a newspaper interview that European nations were not doing enough to fight climate change and had grown complacent.

"The government will be pursuing that aim and that's why we're going to reform the motor vehicle taxes. The size of the engine will no longer be the determining factor but rather the impact on the environment, not only CO2 but other pollutants," Tiefensee told a news conference.

"Those who continue to drive stink-bombs will have to pay more. We want a system that both rewards and punishes. I'm sure that'll help boost technology for cars in Germany and Europe that pollute less and need less fuel."

Tiefensee said legislation could possibly be drafted by Berlin before the year is out.

Germany Europe's biggest polluter

Germany remains Europe's biggest polluter. Though German Chancellor Angela Merkel has vowed to make fighting climate change a priority during Germany's twin presidencies of the EU and G8, the country's recent track record on cutting greenhouses gases has slipped.

Germany had pledged to cut CO2 emissions by 21 percent from 1990 to 2012 under the Kyoto Protocol, but is likely to fall short of its target by one-fifth. Scientists warn that if emissions aren't curbed, it will lead to dramatic climatic changers, triggering frequent droughts and floods.

BdT Autobahn nach Tschechien bald fertig

Some say imposing a speed limit on Germany's Autobahns is the quickest way to cut pollution

Critics have said that a general speed limit on highways would be the quickest way to cut emissions. Germany's 12,000-kilometer autobahn system is unique in the world, having no limits on most of its length. But Tiefensee has strongly opposed speed limits.

Advocates say plan could cut pollution

Tiefensee's proposal to tax cars based on emissions was welcomed by some on Monday.

"If Germany went ahead with such a tax, then I'm sure many others would follow," EU Industry Commissioner Günther Verheugen told a German radio station.

The German car industry too seemed open to the proposal. Bernd Gottschalk, president of the association of German carmakers, said it would give people an additional incentive to trade in their cars for new, more efficient vehicles.

DaimlerChrysler, maker of Mercedes cars and trucks, welcomed the proposal in principle. A spokeswoman said changing the tax scale from engine size to emissions made sense, but added, "The tax should not have an impact on competition."

Currently the flat vehicle tax in Germany for a used car of just under 2 liters' engine capacity is about 300 euros ($390) per year.

Environment Minister Sigmar Gabriel said nine of the European Union's 27 nations already tax cars according to emission quality and this had been partly successful in cutting carbon-dioxide output.

Critics say tax is not fair

However battle lines could soon be drawn over the tax change. The revenues end up in the coffers of Germany's 16 states, none of which wants to lose income if motorists switch to less-polluting cars.

State governments indicated they would wait to see what Berlin proposed.

Autos auf dem Parkplatz

Critics argue that the car tax is unfair

Motorists' clubs were critical. The biggest, the ADAC, said it would only back the change if it did not lead to an increase in overall revenues. Spokesman Martin Remper said an emissions tax should not apply to older cars at all.

Another club, AvD, assailed the tax as unfair, since it would apply regardless of how far or how fast a car was actually driven.

"Somebody who races to every intersection has got a different consumption from those who drop their speed in advance," spokesman Johannes Huebner said. "This tax would be unconstitutional." He said it would be fairer to tax fuel only, not cars.

Analysts said an outcry was likely if the tax turned out to be punitive on lower-income buyers of cheap cars while favoring rich people who can afford to buy sophisticated exhaust-reducing features.

Torsten Albig, a Finance Ministry official, added that it would be almost impossible to fairly assess the exhaust quality of pre-2005 cars. Even quality labels for new cars could be contested.

The European Commission has already issued an emissions target for the continent's truck and bus fleet. By 2012, heavy vehicles are supposed to reduce their average carbon-dioxide emissions to 130 grams per kilometer driven.

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