Clear the Air

Government agrees to fix diesel cars, introduce rebates

Stau
The process of negotiations. Source: DPA

Angela Merkel’s coalition government has agreed at last on how to cut diesel emissions in cities, while avoiding diesel bans. The chancellor’s conservative Christian Democratic Union, its sister party, and partner Social Democrats struck a deal to end Germany’s long-running diesel dispute in the early morning hours of Tuesday.

Carmakers, however, rejected parts of the plan, which aims to incentivize car owners to exchange older diesel cars and buy newer, cleaner cars instead. The plan also allows for some diesel models to receive retrofits, to reduce toxic emissions. BMW however, said on Tuesday that it was unwilling to refit cars, and Opel and Mercedes-maker Daimler were also skeptical.

Lawmakers want to avoid diesel bans in 60 German cities where levels of toxic nitrogen dioxide gases emitted by diesel cars are particularly high. Courts have already ordered Hamburg, Frankfurt and Stuttgart to ban from city centers older diesel models which are most polluting. Since then, uncertainty about the future of diesel cars has dented consumer confidence and pushed down resale values.

Ms. Merkel and her colleagues felt extra pressure to act, as the states of Hesse and Bavaria hold elections this month. Some cities in those states, such as Munich and Frankfurt, could face diesel bans. Ms. Merkel’s conservative party, and its Bavarian partner the Christian Social Union, are likely to lose support in those elections, as voters turn to the Alternative for Germany, an anti-immigrant party, or the Greens. The Social Democrats, Ms. Merkel’s junior coalition partner, will also lose votes, forecasters say.

Exchange programs work

The government’s plan, of refits or exchanges, only applies to Germany’s 14 most polluted cities, which include Hamburg, Cologne, Stuttgart and Munich, and others which have yet to be named.

VW, BMW and Mercedes-maker Daimler and some of their rivals from abroad, such as Renault, will offer exchange premiums of up to €10,000 ($11,600) to owners of diesels if they trade in an old car for a new one. Owners of diesel cars sold between 2006 and 2015 are eligible for the premiums, while drivers of diesels sold between 2011 and 2015 could also have their cars refitted with a new catalytic converter.

The retrofit option is more controversial: the car industry has always said refitting diesel cars is expensive, inconvenient and possibly ineffective. The government, and particularly the Social Democrats, insisted on the repairs, however, saying not everyone can afford to buy a new car, even with a hefty discount.

BMW and Opel’s outright rejection of the repairs undermines the plan’s prospects of success. If partially implementing this measure doesn’t reduce nitrogen dioxide levels sufficiently, courts might still ban diesels from inner cities.

This article was updated on Tuesday to add the details of the agreement.

Franz Hubik is an automotive reporter for Handelsblatt. Silke Kersting reports for Handelsblatt from Berlin, focusing on consumer protection, construction, environmental policy and climate change. Stefan Menzel writes about the auto industry. Klaus Stratmann covers energy policy and politics for Handelsblatt. Gilbert Kreijger controbuted to this story. To contact the authors: hubik@handelsblatt.com, kersting@handelsblatt.com, menzel@handelsblatt.com, stratmann@handelsblatt.com

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