Why Germany has blocked the road to banning EU combustion engines

Good morning, happy Monday. Estonian prime minister Kaja Kallas saw her Reform party triumph at yesterday’s election with an increased vote share of more than 31 per cent. She’s almost certain to remain in charge at the head of a to-be-formed coalition government.

Today, we bring you up to speed with Berlin’s screeching U-turn on banning combustion cars in the EU by 2035, and reveal the provisional list of green technologies set to get a leg-up under new incentives from Brussels.

Road rage

The tone was “constructive”, said European commission president Ursula von der Leyen of yesterday’s conversations with German cabinet ministers about Berlin’s threat to veto an EU ban on internal combustion engines by 2035.

But there was no sign of a breakthrough in a row pitting Germany and Italy, Europe’s big carmaking nations, against the majority of the continent, write Laura Pitel in Berlin and Alice Hancock in Brussels.

Context: Rome and Berlin last week demanded that the ban (which has already been agreed by member states and the European parliament) be watered down, forcing the EU to indefinitely postpone what was supposed to be a rubber-stamp vote tomorrow.

Officials in Berlin say they are waiting for a compromise proposal. That has gone down badly in Brussels. “I think this is Berlin trying to pin it on the Commission,” said an EU official, who said that the demands of German transport minister Volker Wissing to “go beyond” what had already been agreed would mean reopening the whole negotiation, adding: “That is impossible.”

Germany has demanded that cars using synthetic e-fuels, which are produced using electricity from renewable hydrogen and other gases and can be used in conventional engines, should be exempt from the ban. That would offer a lifeline to the German car industry, which is home to auto giants such as Volkswagen, BMW and Mercedes-Benz and generates about a fifth of the country’s industrial revenues.

Wissing, the free marketeer, pro-car Free Democrat who has spearheaded Germany’s opposition to the ban, said that Frans Timmermans, the EU’s commissioner for the Green Deal, should “simply exempt combustion engines . . . if they only run on synthetic fuels”. He told German tabloid Bild am Sonntag: “Then we would have a technologically-open solution.”

Von der Leyen (who joined a German cabinet away day at Schloss Meseberg, a baroque palace north of Berlin) said yesterday that Brussels was fully supportive of new technologies. But she stressed that those “must also always be in line with our climate policy goals”.

The row has caused splits in the German cabinet. But yesterday chancellor Olaf Scholz, who often plays umpire in his three-party coalition, praised Wissing as a “very, very good transport minister.”

Scholz voiced confidence that the gridlock could be eased. But there still seems plenty of mileage left in the dispute.

Chart du jour: Small cracks

Women account for a third of key decision makers in an average large listed company in the EU, more than double a decade ago. Spain this weekend proposed a law to introduce binding quotas for women in all listed companies and in its government cabinet.

Picking (green) winners

There are eight days until Brussels unveils its legal response to the US’s Inflation Reduction Act, with fights brewing about which sectors to include, writes Alice Hancock.

Nine sectors including batteries, solar and wind power, heat pumps and renewable hydrogen are to be considered “strategic net zero technologies”, according to a draft of the Net Zero Industry Act seen by the FT. Projects in those areas will be in line for quicker permitting procedures, less stringent environmental checks and investment schemes.

Context: the EU is launching a fightback against the US’s $369bn green incentives package, after several industrial players in key sectors warned that they would be tempted to leave Europe for sunnier investment opportunities across the pond.

But what of the sectors not among the nine named?

Take, for example, sustainable aviation fuels, which are made from non-fossil fuel feedstocks such as biomass or waste cooking oil and, although still nascent, are touted by airlines as key to their decarbonisation.

Airlines for Europe, a trade group, has described its exclusion as “alarming” given the incentives being rolled out by Washington. “We cannot have a situation where the USA rolls out the red carpet for [sustainable aviation fuel] producers while Europe rolls out nothing but red tape.”

Conversely, the inclusion of nuclear fission technology has raised hackles in some EU member states. “Nuclear power is not renewable nor sustainable and should not be the focus of investment for climate neutrality,” said one diplomat.

Others will be delighted that nuclear made the list. Not least France, given its current campaign for recognition of its ailing nuclear industry in EU energy legislation.

What to watch today

1. Ursula von der Leyen begins her week in North America with a two-day visit to Canada.

2. Finland’s president Sauli Niinistö begins a five-day visit to the US.

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