Germany’s Climate Obstacle: Its Love Affair With Combustion Cars

Germany’s transport and energy ministries sit just 450 feet apart, separated by a Berlin Wall monument, in the city’s government quarter. Civil servants and tourists regularly amble across the park between the two buildings. Yet the divide between the departments’ progress on cutting planet-warming emissions threatens to torpedo Chancellor Angela Merkel’s climate goals.

To neutralize greenhouse gas emissions by mid-century, Merkel wants to have as many as 10 million electric vehicles on the road by 2030—twenty times the number today—and a beefed-up energy grid to support them. Getting there will require her transport and energy ministers to work together, along with the environment ministry. But all three come from separate political parties with different agendas. 

Politicians like Transport Minister Andreas Scheuer, a member of the Christian Social Union party, are worried about a too-rapid shift to EVs, fearing Germany will face the same deindustrialization that's ravaged Detroit and former industrial cities in the U.K. They’re also reluctant to end a century-old love affair with the internal combustion engine, a German invention that played a leading role in its post-war economic recovery.

Germany’s Climate Obstacle: Its Love Affair With Combustion Cars

Meanwhile Energy Minister Peter Altmaier, from Merkel’s Christian Democratic Union party, has successfully cut emissions in Germany’s energy sector, but struggled to speed up the grid improvements needed to support the EV target. Construction of powerlines to transport electricity from wind farms in the North Sea to Germany’s energy-intensive south has foundered, with projects mired in legal challenges. The country isn’t building enough grid-scale batteries. 

Until the two ministries cooperate on policies to boost adoption of EVs, Germany has little hope of meeting its emissions targets. The level of greenhouse gas emissions from transport has hardly budged since the end of the Cold War and now accounts for a fifth of Germany's total. The nation is the starkest example of a decarbonization problem repeated across Europe. While wind turbines and solar panels are rapidly stripping the electricity supply of pollution, vehicles continue to spew emissions.

“It is a big problem,” says Ferdinand Dudenhoeffer, a professor at the Center for Automotive Research in Duisburg. “German politicians want to go in the future, but they also want to save the past.” 

From France, home to violent yellow-vest protests against hikes in car fuel taxes, to Italy, where consumers struggle to afford big-ticket car purchases amid an economic slump that predates the pandemic, policy makers are finding that electrifying transport is one of the most challenging parts of getting to net zero. 

Germany’s Climate Obstacle: Its Love Affair With Combustion Cars

Germany’s automakers dragged their feet for years on EVs, in part because consumers didn’t seem all that interested in them. Its powerful lobby has also been able to steer government policy to support combustion engine models. Just 1.2% of the 48 million cars on German roads today are electric, according to the Federal Motor Transport Authority. It doesn’t help that electricity prices are the highest in Europe, but taxes on diesel and gasoline fuels remain below European Union averages.

There are signs things are changing as the global auto industry pivots more sharply to electrification. National champions Volkswagen AG, Daimler AG and BMW AG in recent months have announced targets to sell millions of EVs by 2030. Volkswagen plans to build six battery factories as part of its efforts to supplant Tesla Inc. Elections this year could also accelerate the shift. The German Greens, which are calling for a 2030 ban on the internal combustion engine, have already seen strong results in two regional elections this month.

Still, the German auto giants have said they'll continue to build combustion engine cars for as long as customers want to buy them—and they have a huge global footprint. Their cars are responsible for heat-trapping gases produced all over the world, from country roads in Russia to traffic in downtown Beijing. Volkswagen in 2019 said its vehicles were responsible for around 2% of global carbon dioxide emissions.

Following the flurry of automaker announcements and a move by the government to extend subsidies for electric cars, analysts at Deloitte updated their forecasts for EV adoption. Even with the new push, they still think Germany will only have around 8.5 million alternative drive cars—which includes hybrid models—by 2030. To do its part to meet the EU’s goal of cutting emissions by at least 55% from 1990 levels by 2030, Germany would need about 14 million battery-powered cars, according to Berlin-based think tank Agora Energiewende.

Germany’s Climate Obstacle: Its Love Affair With Combustion Cars

The industry is a huge source of pride for Germany, and a big driver of employment—making its lobby extremely influential. The German Association of the Automotive Industry has consistently pushed back against efforts to cut CO₂ emissions from car transport and has said targets for a 37.5% greenhouse gas reduction by 2030 are “not possible to implement.”  It also rejects calls for an electric-only future, insisting that efficient combustion engines and synthetic fuels are other ways to hit climate targets. 

Germany’s Climate Obstacle: Its Love Affair With Combustion Cars

A revolving door between automakers and government makes it difficult for more progressive thinking to break through. Eckart von Klaeden, a one-time official in Merkel’s Chancellery, is now head of external affairs at Daimler. Volkswagen is partially state-owned and the Quandt family dynasty that own around 45% of BMW's stock has contributed hundreds of thousands of euros in donations to Merkel’s CDU. 

There’s also little public pressure as the well-known car brands enjoy deeply embedded support. German consumers are the most sustainably minded in the world, according to market researchers GfK, but they’re also loyal to their nation’s automakers. “The car is always a different topic in Germany,” says Petra Sueptitz, director of consumer insights at GfK, noting that the country has the smallest share of people in the world who don’t own a vehicle. “Germans are addicted to their car brands. They are also addicted to cars in general.”

Consumers balk at the high initial cost of EVs, and manufacturers won’t produce cheaper models until battery prices are low enough that they can turn enough of a profit on compact cars. It’s unlikely the batteries for smaller family-sized cars that are popular in Germany will meet cost parity with combustion engines until 2028, according to James Frith, an analyst at clean energy reasearch group BloombergNEF.

Potential buyers also fret over the lack of charging infrastructure. In order to support 10 million electric vehicles, Germany would need 1 million charging stations by 2030, according to the government. It currently has just over 40,000. That means it needs to build 2,000 per week, Germany's automaker association says, compared with the 200 that are currently being installed each week.

“We’ll see a huge scarcity of charging points, and a lot of noise about this in the coming months,” says Henrik Thiele, co-founder of Munich-based charging firm Quello GmbH, even as the number of EVs per charging station in Germany has doubled since 2017 to nearly 17 vehicles.

It’s still possible for Germany to hit its 10 million target, especially if the Greens enter government. The country is the top filer of patents for transport technology, according to the World Intellectual Property Organization’s 2020, a sign the technical know-how exists to ramp up EV production. But a whole-of-government push will be needed to make sure “market barriers for EVs and advantages for conventional drives are removed,” says Claudia Kemfert, professor of energy economics at the DIW research institute in Berlin.

This article is part of Bloomberg Green’s Carbon Benchmarks series, which analyzes how countries plan to reach net-zero emissions.  Click here to get e-mail alerts when new stories are published.

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