EU countries set to water down car emission rules

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Good morning. Warning signs are flashing red in two of Europe’s most volatile regions. Armed militants stormed a village in Kosovo yesterday, killing a policeman in an attack that the country’s leader blamed on Serbia. And Armenians are fleeing from the enclave of Nagorno-Karabakh after a rapid assault by Azerbaijan’s armed forces, sparking fears of ethnic cleansing.

Today, we preview a decision to water down another EU environmental policy — this time on car pollution — while our Netherlands correspondent hears from the country’s finance minister about her stance on the race to lead the European Investment Bank.

Exhausted

In the latest blow to the EU’s green ambitions, member states are set to agree on standards for vehicles emissions today that in some aspects resemble those put in place almost a decade ago, writes Ian Johnston.

Context: In November, the European Commission proposed new rules on non-carbon related emissions from vehicles, tackling air pollution. The rules include new standards for particles released from brakes and tyres and complement other rules for the automotive industry on CO₂ emissions.

But the so-called Euro 7 proposals have run into opposition from countries keen to support their car and truck industries. Member states including the Czech Republic, France and Italy have successfully pushed for less onerous restrictions than those set out by the commission.

Proposals on exhaust emissions are now similar to those in the previous Euro 6 legislation in place since 2014. Negotiators are also expected to give industry an additional six months to adapt to the changes, one EU diplomat said.

Germany, home to a powerful automotive industry, wants the text to protect the use of e-fuels — synthetic fuels that have a lower carbon footprint than traditional fuels — but several diplomats said there was little backing for the German measures.

The weakening of the proposals comes as the commission said it will listen more closely to industry concerns about the burden of environmental regulation.

Meanwhile, the EU suffers from surprisingly bad air quality: In 2021, 97 per cent of the bloc’s urban population was exposed to concentrations of fine particulate matter above guidelines by the World Health Organization, according to a report by the EU’s environment agency.

One diplomat defended the weaker rules, saying stricter guidelines could “divert resources away from electrification of vehicles” as it would force carmakers to develop more sophisticated combustion engine cars. “We should not push industry to divert their efforts but make them focus on zero emission,” the diplomat said.

Once adopted by ministers today, the new rules will have to be negotiated with the European parliament. The ministers are also expected to discuss ways to strengthen the single market at today’s meeting.

Chart du jour: Loose cap

Russia has succeeded in dodging the G7 oil price cap on most of its crude exports, boosting the Kremlin’s war chest, according to an FT investigation.

Taking a risk

In good news for the EU’s former competition chief Margrethe Vestager, Dutch finance minister Sigrid Kaag has signalled her support for the Dane’s sales pitch to run the European Investment Bank, writes Andy Bounds.

Context: The race for the next head of the world’s biggest development bank is heating up, with former chief Werner Hoyer stepping down at the end of the year. There are five candidates competing for the support of EU countries, but two frontrunners: Nadia Calviño, Spain’s economy minister, and Vestager.

Kaag told the FT that the Netherlands had not decided who to back among “some very strong players”. But she supported Vestager’s argument that the bank should move into riskier lending, especially in the developing world.

Vestager has said that the state-backed institution too often lends as cautiously as a privately run one.

Despite the Dutch reputation for frugal housekeeping, Kaag said that with other actors such as China and Russia wooing developing countries, multilateral institutions needed to deliver “the biggest bang for the buck”, particularly on poverty reduction and climate action.

“We do want them to invest their capital more and be more forward leaning when it comes to risk,” Kaag said. “The traditional conservative manner of dealing with the issues and therefore investment we feel, is not cutting it,” she said.

Kaag and prime minister Mark Rutte, another liberal, dominate the four-party coalition in The Hague, which is continuing as a caretaker government ahead of elections in November.

While this does not necessarily mean the liberal government in the Netherlands will eventually back their political soulmate Vestager in the EIB race, it is a strong show of support.

On fiscal policy, the Netherlands however continues on its well-trodden path. Kaag made clear that the Netherlands would continue to push for binding debt reduction targets in the reform of the EU debt rules, a position resisted by Italy and others.

What to watch today

1. EU ministers for competitiveness meet.

2. International Atomic Energy Agency holds it general conference in Vienna.

Now read these

• Tomorrow’s warfare: Nato states have backed a €1bn fund to boost start-ups working on defence technologies.

• Next addiction: As Europe weans itself off Russian gas, a top energy official from the EU has warned of a new dependency on US fossil fuels.

• Mercosur now: Latin American countries are getting tired of dragging trade negotiations with the EU and have set an ultimatum.