Some countries are teaming up to oppose the decision made by the European Parliament in February, which approved a new law banning the sale of petrol and diesel cars from 2035. The alliance aims to delay the implementation of the new law.
The new law is part of a broader effort to combat climate change in the EU. It prohibits the sale of petrol and diesel cars from 2035, hastening the bloc’s transition to electric vehicles.
As per the legislation, carmakers must achieve a 100 percent reduction in carbon emissions from new vehicles, meaning no new conventional fossil fuel-powered cars will be sold from 2035 onwards.
This measure aims to reduce the EU’s carbon emissions from cars, accounting for around 15 percent of total CO2 emissions.
Concerns on Affordability and Competitions
A coalition of countries prioritizing cars, primarily led by Germany, formed an alliance with nations such as Italy, Poland, Bulgaria and the Czech Republic to dilute the new legislation. Their objective is to exempt cars that use e-fuels from the ban.
Some have raised concerns that Europe’s industry and the general public are not adequately prepared for such a significant transition.
The European People’s Party Group, a political group located in the center-right of the European Parliament, warns that the law may lead people to drive older vehicles with combustion engines once new sales are banned because they won’t be able to afford an electric replacement.
Jens Gieseke, a member of the European Parliament (MEP) from Germany affiliated with the European People’s Party, argued that the surging energy cost has rendered claims that electric vehicles are cheaper “null and void.”
Other opponents of the legislation point out that car batteries are not produced domestically within the EU but imported from abroad. This EU plan has also been met with resistance from companies due to its complex application process and reliance on funds already allocated to green transition programs.
At a summit in Brussels in February, EU leaders shifted their focus to improving policies that would make European companies more competitive with the U.S. and China instead of loosening state-aid rules, which they believed would disadvantage smaller EU states.
Siemens Energy CEO Christian Bruch has criticized the speed of implementation and lack of predictability for financing plans in EU green transition programs, despite the bloc’s pledge of over 380 billion euros ($414 billion) until 2030.
Frans Timmermans, the vice president of the EU, cautioned MEPs that China is introducing 80 new electric car models to the global market from last year until the end of this year.
“These are good cars,” Timmermans said during the plenary debate. “These are cars that will be more and more affordable, and we need to compete with that. We don’t want to give up this essential industry to outsiders.”
Companies like Volkswagen have disclosed their intentions to discontinue the sale of vehicles powered by combustion engines in Europe by 2035.
However, certain industry organizations have cautioned against prohibiting a particular technology, contending that policymakers must endorse a vast expansion of charging infrastructure to accomplish more ambitious goals.
The European Commission wants to make heavy vehicles meet stricter standards for a few reasons. First, heavy vehicles cause more than 25 percent of the EU’s greenhouse gas emissions from road transport, and reducing reliance on fossil fuels is a must.
The organization also considers the new standards will save money for buyers of heavy vehicles, improve air quality, and support jobs in emission-free technology and charging infrastructure.
Comparison of EU, U.S. Incentive Programs for Green Tech
According to Timmermans, in contrast to the U.S. Inflation Reduction Act, which lacks a clear long-term vision for its transport system, the EU’s measures give Europe an advantage.
The IRA provides support to companies looking to expand their operations in renewable energy technologies such as solar, wind, and hydrogen. This support includes funding for critical raw materials and financing for operating expenditures.
The funding is available at a fixed amount per product, which reduces the risk associated with scaling up production. They are offered in the form of tax breaks, which makes them immediately accessible.
For Sweden, the ban on petrol and diesel cars is expected to influence the economy and environment positively.
Sweden has a highly developed electric vehicle market, with the highest number of electric cars per capita in Europe. The ban can potentially accelerate the transition towards electric vehicles, creating new opportunities for Swedish automakers and charging infrastructure providers.
For example, Swedish battery developer and manufacturer battery supplier Northvolt has noted the allure of U.S green tech incentives, calling tax credits in IRA impossible to ignore.
By setting up a battery factory of comparable size in North America, Northvolt would be eligible for approximately $8 billion in tax credits by the end of this decade. This aligns with the tax credits highlighted by the battery supplier to Volkswagen Group and BMW, which cover around 30 percent of cell manufacturers’ operating costs under the law.
“It is clearly driving the investments now at a very rapid pace,” Northvolt CEO Peter Carlsson said in an interview. “Unfortunately, there is a risk that these investments are a little bit taking the momentum out of Europe.”
Executives from Siemens Energy and Volvo AB praised the U.S. subsidy framework last week for its clear 10-year funding window for tax breaks that can be implemented immediately, echoing the comments made by Northvolt, which highlighted the tax credits included in IRA.