Germany to halt environmental bonus for EVs directly (update)

The German government announced a direct halt of the environmental bonus in 2024 after it had to compromise its budget for the coming years. First, it sounded like Germany would phase out EV incentives earlier than planned; now, it has been scrapped entirely as of last Sunday.

“We will phase out the environmental bonus, i.e., the subsidy for EVs, sooner,” said German Economy Minister Robert Habeck at a press conference with Federal Chancellor Olaf Scholz and Finance Minister Christian Lindner on Wednesday. “It pains me, but that is the price we must pay for maintaining the central components, the pillars of the Climate and Transformation Fund.”

Protests

The government’s share would already have dropped next year. Only BEVs and FCEVs with a net list price of up to €45 000 would have been eligible, and the subsidy amount for vehicles under €40 000 was to be reduced, too.

Now, the stop is coming in very abruptly and generates a lot of criticism. “We find the funding freeze on 17 December, which was announced at short notice on Saturday, extremely unfortunate,” the three deputy leaders of the parliamentary group Verena Hubertz, Detlef Müller, and Matthias Miersch told the German Press Agency (dpa). They all belong to the coalition party SPD. They called Federal Economics Minister Robert Habeck (Greens) to “organize a more reliable transition”.

Canceling the environmental bonus (Umweltbonus) was “not an easy decision”, said a spokesperson of the Federal Ministry of Economics and Climate Protection (BMWK) led by the Green party. He explains that it was “a direct consequence of the ruling by the Federal Constitutional Court and the resulting budget consolidation”.

“This is an incredible breach of trust for tens of thousands of customers who have ordered their e-vehicles on the assumption that the subsidy will be paid,” said Arne Joswig, President of the German Association of the Motor Trade (ZDK).

“The least we could do would be to let the environmental bonus run until the end of the year and, at the same time, in coordination with the federal states and local authorities, ensure that registration offices remain open until 31 December 2023 so that registrations can be made,” he added.

It is expected that carmakers will offer compensation to clients, at least those offering cars with a net list price of up to €45 000, which used to be eligible for the Umweltbonus.

Illegal

The announcement to stop incentives comes after the German Federal Constitutional Court declared the appropriation of funds, initially set aside to fight the Covid-19 pandemic, for climate protection projects unlawful in mid-November.

The German government thus had to cut spending, and the Climate and Transformation Fund (KTF) is at the center of these cuts. According to the government, the KTF will still be “the central instrument for climate-friendly transformation”.

However, the budget will be significantly reduced by €12 billion in 2024 and a total of €45 billion by 2027. The total volume of the fund will then be around €160 billion.

Diesel privilege

On the contrary, the taxation of diesel compared to gasoline, known as the ‘diesel privilege’, which has been criticized again since the ruling, will not be touched. The company car tax and commuter allowance are not affected either.

Of course, this is criticized: “In too many areas, this compromise amounts to a standstill instead of the progress promised by the government. The cost-saving budget pushed through by the FDP (German liberal party, editor’s note) cuts support for the solar industry and allows subsidies for EVs to expire earlier,” said Greenpeace economic expert Bastian Neuwirth in an initial statement.

“But the harmful company car privilege will not be abolished, and diesel fuel will be subsidized to the tune of billions more. This is hampering ecological modernization,” he added.

However, this is likely to be only a temporary setback for 2024. After all, with the EU guidelines for fleet emissions and fuel consumption coming into force in 2025, more electric cars will need to hit the road to offset the CO2 emissions of combustion engines. Also, in Germany.

For a country with the Green Party being the second-biggest in the government, the road to sustainability has certainly been wobbly these last years. Also, in Germany, the growth of EVs is slowing down. Inside the all-important car industry are voices insisting on continuing with ICE cars for a lot longer and subsidizing cars indirectly with internal combustion engines.

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