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EU Readies $22 Billion to Stimulate Auto Market

The biggest question is which models will qualify?
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Europe’s moribund car market may be getting a $22 billion boost.

That’s the piece of a proposed $110 billion recovery plan to be set aside for the European Union’s transport sector, according to Germany’s Sueddeutsche Zeitung.

Envoys are hammering out the details now. The package is likely to be unveiled publicly by the EU’s policy arm, the European Commission, on May 27.

Car Sales or Climate Change

The automotive slice of the pie would create a single sales incentive program—likely to be matched by carmakers—across the 27-nation region for as long as two years. The big question: which models will be covered?

cars on highway

 Getty Images

Not surprisingly, carmakers favor support for all models. A broad-based program, they point out, would help them justify reopening all their factories and calling back all their workers. Good point for politicians trying to get their local economies back in gear as the coronavirus pandemic continues.

But politicians, along with the EC, also say the only scheme likely to fly is one that helps build demand for “green” vehicles. Policymakers continue to debate exactly what should and should not qualify.

Moving CO2 Target

Through 2019, carmakers were required to meet a CO2 fleet average of 130 grams per kilometer. This year, the industry began a two-year phase-in of a 95-g/km limit.

Producers that miss the mark face a per-vehicle noncompliance charge of $104 (€95) for each gram of overage.

Germany, whose domestic carmakers make a large proportion of relatively high-emission vehicles, suggests that the EU plan cover vehicles that emit as much as 140 g/km of CO2.

That tone-deaf proposal is “completely unacceptable,” retorts the environmental group Transport & Environment. T&E thinks incentives should apply only to electric cars and other zero-emission vehicles. The head of European auto club ACE suggests a more likely option: Cover any vehicle that meets the current 95 g/km standard.

Grab Bag of Projects

Funds for the incentive plan would come from two existing EU programs, not from the massive, U.S.-style bailout initiatives being discussed separately across Europe, according to the Sueddeutsche.

The newspaper says the rest of the $110 billion plan would go for everything from cleaner power sources and EV charging stations to improved railways and more energy-efficient buildings.

The main challenge for the EC will be achieving consensus on a single plan that can be approved by all 27 of the EU’s member nations. On that point, the jury is still out.

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