EU Delays Combustion Engine Ban Vote as Germany Pushes E-Fuels

(Bloomberg) -- The European Union postponed a vote originally scheduled for next week on phasing out combustion engine cars as it seeks more time to reach a compromise with Germany over e-fuels.

EU ministers were scheduled to vote Tuesday in what was supposed to be a routine approval of a deal the bloc clinched last year to effectively ban new vehicles that run on fossil fuels beginning in 2035. But Daniel Holmberg, a spokesman for Sweden, which holds the EU’s rotating presidency, confirmed the vote delay on Twitter and said diplomats will return to the issue “in due time.”

The delay reflects concern that Germany would have abstained — a move that could derail the bloc’s green plans, according to people familiar with the matter. 

Some German officials have signaled that they think a deal is achievable that will preserve the broader ban. 

“If the commission has a credible stance in conversations with the ministers and the German government, I’m optimistic that a solution will be found,” Sven Giegold, state secretary at Germany’s Federal Ministry for Economic Affairs and Climate Action, said Thursday, adding that the negotiations are difficult.

Germany is seeking assurances that the European Commission, the EU’s executive arm, will put forward provisions on how so-called e-fuels can be used in combustion engine cars after the 2035 cut-off. While the bloc’s executive branch is obliged to come up with a proposal after consulting with stakeholders, there is no set timeline for such a move, beyond a general review in 2026.

The last-minute hiccup is highly unusual in EU lawmaking, given the deal between the EU’s 27 member states and parliament was struck in October last year and the upcoming vote is usually a formality. The EU is scrambling to come up with a solution that would assuage Germany, meaning a compromise is still likely, even if the final approval is delayed.

The problem is that designing a carve-out for e-fuels, which are produced from renewable electricity, is likely to be technical, and there isn’t much time to reach a deal before EU parliamentary elections next year. It’s unclear exactly what assurances Germany is currently seeking.

Germany’s objections were announced on Tuesday evening by Transport Minister Volker Wissing. His pro-business party, the FDP, want a more flexible approach to some elements of Europe’s environmental program than other partners in the governing coalition. The FDP, which has suffered a series of setbacks in regional elections, is keen to be seen as a champion of technological choice as well as supporting German jobs. 

For his part, Chancellor Olaf Scholz sees synthetic fuels for cars as inefficient and is convinced that battery-driven e-cars will eventually prevail and dominate the market for consumer mobility, a person familiar with the matter said. His reasoning is that they are projected to be much cheaper in daily operating costs than cars driven on synthetic fuel, which require a lot of power in the production process, the person added.

European Commission President Ursula von der Leyen is set to meet Scholz on the sidelines of a German cabinet meeting on Sunday, where the topic will likely be discussed. 

Decarbonizing transport is seen as a key pillar of the bloc’s goals to cut emissions by 55% this decade on the way to climate neutrality by 2050, but there are concerns over the impact on the bloc’s dominant auto industry.

The worries over the transition to electric vehicles was made clear last month when Ford Motor Co. said it will cut about 3,800 jobs across Europe, with workers in Germany and the UK set to be the hardest hit.

Many doubt that e-fuels are the solution, given they are significantly more expensive than conventional fuel, and currently very scarce. They also argue that such fuels should be used in aviation, which is more difficult to decarbonize.

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