GERMANY

In a study commissioned by the environmental group Transport & Environment (T&E), it has come to light that the European Union's five largest economies are collectively spending a staggering EUR 42 billion (USD 45.60 billion) each year on subsidies for fossil-fuel company cars. This significant financial support for carbon-emitting vehicles stands in stark contrast to the EU's stated green transition goals, prompting calls for a shift towards electric vehicle (EV) incentives.

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The research, conducted by consultancy Environmental Resources Management (ERM) and released on Monday, breaks down the subsidies by country. Italy leads the pack, providing EUR 16 billion in subsidies for fossil-fuel company cars, closely followed by Germany at EUR 13.7 billion. France and Poland contribute EUR 6.4 billion and EUR 6.1 billion annually, respectively.

These findings are particularly significant given that company cars constitute approximately 60% of new car sales in Europe. The subsidies come in various forms, including benefit-in-kind arrangements that offset consumer taxes and provide fuel usage benefits. Companies often offer these vehicles as perks to employees, creating a substantial market for fossil-fuel-powered cars.

The study highlights that a considerable portion of these subsidies - around EUR 15 billion across the four countries - goes towards supporting SUVs, which are known for their higher fuel consumption and emissions. On average, company car drivers receive an annual tax benefit of EUR 6,800, with this figure soaring to EUR 21,600 for larger, more polluting models.

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Stef Cornelis, T&E's director of fleets, expressed strong criticism of the current subsidy structure. "This is completely illogical and completely unacceptable, that we're still pouring billions of taxpayer money into a technology that's completely contradictory to the European Commission's green transition agenda," said Cornelis.

The timing of this study is particularly relevant as Europe faces a downturn in EV sales. In August, sales of fully electric cars in the European Union plummeted by 43.9%, with Germany and France - the continent's largest EV markets - recording drops of 68.8% and 33.1% respectively, according to industry data. This decline is partly attributed to the higher cost of EVs compared to their fossil-fuel counterparts, making them less accessible to many consumers.

Interestingly, the ERM study found that among the countries examined, only the United Kingdom - no longer an EU member - provides financial incentives for company car drivers to switch to EVs. This stark contrast highlights the potential for policy changes within the EU to encourage a shift towards more environmentally friendly vehicles.

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The revelations from this study come at a crucial time for EU climate policy. European Commission President Ursula von der Leyen recently outlined priorities for the EU's new climate chief, Wopke Hoekstra, in a letter dated September 17. Among these priorities is the task of proposing methods to phase out fossil fuel subsidies, aligning with the broader goals of the European Green Deal.

This massive spending on fossil fuel subsidies raises questions about the EU's commitment to its climate objectives. As the bloc aims to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, the continued support for fossil-fuel vehicles seems at odds with these ambitions.

Environmental groups and climate activists are likely to use this study as ammunition in their calls for more aggressive policies to promote EVs and other low-emission vehicles. They argue that redirecting these substantial subsidies towards electric and hybrid vehicles could significantly accelerate the transition to cleaner transportation.

The automotive industry, a key player in this scenario, faces increasing pressure to adapt to changing environmental standards. While many manufacturers are investing heavily in EV technology, the current subsidy structure appears to be propping up demand for traditional fossil-fuel vehicles, particularly in the lucrative company car market.