View from Brussels: Brakes on EU engine ban

“The reports of my death are greatly exaggerated,” can now be misattributed to the internal combustion engine as well as Mark Twain after the events of last week, following a particularly underhanded u-turn by Berlin and Rome.

Last year, the European Parliament and Council of the 27 EU member countries agreed on new engine standards that will gradually decarbonise the car sector and eventually lead to a de facto ban on petrol and diesel engines in 2035.

It took a lot of negotiating but the deal was eventually struck behind closed doors, aided in no small part by several of the industry’s biggest players like Volkwagen, Volvo and General Motors, among others, saying that they are already planning to stop making new ICEs.

In Brussels, new rules are generally set using the following process. The European Commission proposes the new law, then the Parliament and member countries hammer out their own positions on that new regulation or directive.

Generally, the Parliament wants the rules to be more ambitious than what the Commission suggested, while governments aim to water down the document as much as possible, perhaps by making targets voluntary rather than binding or shaving a percentage point here and there.

Once their positions are set, they come together in trilateral negotiations with the Commission, always behind closed doors. After a few rounds of horse-trading, a deal is struck and that is normally the end of the matter.

All that is left is for MEPs and governments to reconvene and rubber-stamp the final agreement. Very rarely does this throw up any surprises. This is one of those instances though.

MEPs have already said yes to the 2035 deadline and the associated targets, leaving just the Council to give its nod of approval. Governments must vote it through by a qualified majority, which is calculated using population size.

Germany and Italy can count on the likes of Bulgaria and Poland — also populous countries — to support their sudden change of heart. Remember that this was not their first opportunity to voice their criticisms, but here we are.

Italy’s about-face is relatively comprehensible, given its lucrative luxury car industry and the unpredictability of the far-right government now headed by Prime Minister Giorgia Meloni.

Her government has already cancelled a so-called ‘super bonus’ incentive scheme that offered incredible subsidies to help renovate buildings. Meloni cited tax avoidance and even organised crime as reason enough to scale back the programme.

When the ‘Brothers of Italy’ leader took over from Mario Draghi, a former head of the European Central Bank who was installed as prime minister to help navigate Italy out of trouble, there were fears that her government would prove to be unstable.

This is perhaps the first proof of those fears.

Germany, meanwhile, is much harder to understand. Its government is not threatening to vote against the measure but to abstain, which yields rather the same outcome, unless it is granted a crucial exemption that was discarded during the negotiations: e-fuels.

E-fuels are chemically similar to petrol and can be used in existing internal combustion engines, making them a viable drop-in substitute for conventional fuels. They can be produced using renewable power and captured CO2 but still emit their own pollution when combusted in an engine.

They have been identified as potential solutions for heavier and more complex forms of transport such as aviation, shipping and long-distance trucking. But they are expensive, in short supply and, as mentioned, still pollute.

So despite the German government’s big auto lobby investing billions of euros in going all-electric, Berlin is holding up the final agreement until e-fuels are included and allowed to be used in engines post-2035.

The current pact says that the Commission should come up with a proposal on how so-called ‘climate-neutral’ fuels can be used post-2035 but has so far made no indication that it will work on that any time soon. Germany wants more assurances.

Commission President Ursula von der Leyen met with the German government this weekend, in an attempt to broker a way forward and although a joint announcement on backing clean tech was hammered out, there is reportedly no compromise in place yet.

EU diplomats have said that they are puzzled that Berlin has chosen this particular hill to die on, given the clear writing on the wall for the internal combustion engine. The delay is only likely to allow global competitors in North America and Asia to steal a march on European industry.