28 January 2009

Germany Joins EU in Tying Car Fees to Emissions - Greenhouse Gas Sin Tax

After weeks of political bickering, Germany's governing coalition has agreed on a new plan to partially base new vehicle taxes on CO2 emissions. The country joins a growing EU trend.

Spiegel Online International, 01/27/2009

The European Union has long been urging member states to implement emissions-based tax systems for vehicles travelling on its roads. The more greenhouse gases emitted by a vehicle, so goes the logic, the more owners should pay.

Smaller, fuel-efficient cars will owe less tax in the future.

Smaller, fuel-efficient cars will owe less tax in the future. (AP)

It is a plea that a number of EU countries have responded to. There are a dozen countries that have introduced CO2 emissions as a factor in their motor tax system. This week, Germany -- the 27-member-block's most car-obsessed nation -- indicated that it was preparing to follow suit.

After weeks of sometimes intense bickering, leading members of Germany's governing coalition reached an agreement on Monday evening on the composition of the new vehicle tax. According to the agreement, which is set to go into effect on July 1 once it makes its way through parliament, all new cars will be taxed according to both engine size and CO2 emissions per kilometer travelled.

Yet even though Chancellor Angela Merkel's coalition government -- which pairs her conservatives with the center-left Social Democrats -- hails the agreement as a step forward in the fight against global warming, environmentalists have wasted no time in blasting the deal.

The plan, Green Party environment expert Bärbel Höhn told theSaarbrücker Zeitung, "is a classic case of deceptive packaging. It is labelled 'climate protection.' But in fact it doesn't do much to change the status quo." She was echoed by Green Party floor leader Renate Künast, who criticized the deal because it does little to disadvantage gas guzzlers.

Taxes on smaller cars, though, would drop. An Opel Agila, for example, which emits 120 grams of CO2 per kilometer and is outfitted with a 1.2 liter diesel engine, would cost its owner €123.50 ($164) per year, some €75 less in taxes than under the current system. Each gram of CO2 emitted per kilometer over the penalty-free 120 gram limit, would cost drivers an additional €2. Engine size and type determines the rest.

But even as the formula makes it cheaper to buy small, fuel-efficient cars, it results in only a slight up-tick for those who opt for powerful polluters. For example, automobile taxes for a 12-cylinder Audi Q7 -- a car which is often lampooned in Germany for being particularly environmentally unfriendly -- wouldn't change at all. For the four-wheel-drive Mercedes GLK sport utility vehicle, taxes would only rise by a modest 4.7 percent.

Still, it is an improvement over the first draft of the law considered by the coalition. Some members of Merkel's Christian Democrats had taken the automobile industry position and argued for a version that would have actually lowered taxes on large gas guzzlers. With carmakers Audi, BMW, Mercedes and Porsche leading the way, a large percentage of cars produced by the German auto industry has traditionally emphasized speed and luxury over economy and fuel efficiency. Vehement criticism led the CDU to back away from its position. "We managed to prevent a load of nonsense," said Environment Minister Sigmar Gabriel, who is a member of the Social Democrats.

Despite the weaknesses of the new agreement, it brings Germany into line with a growing European Union consensus on the virtues of emissions-based automobile tax rules. Over a dozen EU countries have now inserted CO2 emissions into their vehicle tax formulas, including France, Italy, Spain and the United Kingdom.

cgh -- with wire reports
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