European plans to tackle vehicle emissions that cause climate change are at risk of coming undone, sending car manufacturers such as Daimler and BMW back to the drawing board to avoid potential fines.
A series of events over the past weeks have highlighted the region’s struggle to contain greenhouse gases and air pollution, wrong-footing automakers including BMW and Volkswagen Group that remain reliant on engines running on diesel.
“It’s safe to say our original premises and plans to meet fleet emissions goals are good for the bin,” said Dieter Zetsche, CEO of Daimler. “We think we can meet them still, but it’s not totally up to us but depends on how the customer decides to act.”
Policies to lower emissions were clouded by the revelation last month by the EU that the amount of carbon dioxide produced by new cars rose last year, reversing at least seven years of steady decline of the greenhouse gas in many countries. A further sign of cracks in the system was the bloc’s decision to resort to suing Germany and five other member states for exceeding air pollution limits.
Finally, in a direct blow to automakers, Hamburg became the first German city to impose driving restrictions on some cars running on diesel — a fuel that produces less CO2 than gasoline but more harmful air pollutants.
If manufacturers fail to comply with emissions rules, they are at risk of projected fines of 4.5 billion euros ($5.3 billion), according to study by PA Consulting.
The root of the European problem over emissions can mostly be traced to Volkswagen’s diesel cheating scandal that erupted in 2015 and caused consumers to shun vehicles running on the fuel partly because of fears they would be outlawed.
A landmark German court decision in February allowed bans in principle, causing people to give up diesel even faster despite offers from automakers to clean up older models and take back cars in the event of restrictions.
Diesel’s collapse has upended a core plank in the EU’s strategy to lower greenhouse gases: namely to encourage, at least in the short-term, use of the engine technology because it burns hydrocarbons more efficiently than gasoline, thereby cutting carbon emissions.
That policy stemmed from a successful lobbying effort by automakers in Europe for incentives to make diesel cheaper after the 1997 signing of the global Kyoto protocol climate change agreement, which required signatories to commit to cutting CO2. Manufacturers like BMW, VW and Daimler sought to capitalize on their engineering prowess in diesel technology, while other countries, like Japan, backed research into hybrid and electric cars.