19 Jan 2021, 12:21
Charlotte Nijhuis

Climate regulation threatens competitiveness of German auto industry - Deutsche Bank

Clean Energy Wire

Structural challenges pose a threat to the competitiveness of Germany as a business location for the automotive industry, Deutsche Bank writes in a monitoring report. Climate policy regulation of the automotive sector is triggering “the biggest structural break in the industry in decades,” the author writes. Strict CO2 limits for new passenger cars in the EU for 2021 as well as for 2030 mean that manufacturers will have to bring more electric cars to the market. The resulting increase in costs will likely have a negative effect on value creation and employment in the automotive industry in Germany, the report states. The CO2 limits chosen by the EU for passenger cars and the subsidies for electric cars on a national level are “extremely inefficient (expensive) and hardly effective instruments” to achieve emission reduction in the transport sector, Deutsche Bank argues. The report advocates instead for the integration of emissions from the transport sector into EU emissions trading via an upstream approach. Other factors that challenge the position of Germany as an automotive location include the uncertainties regarding climate and energy policy, which cause a reluctance to invest in energy-intensive sectors, such as metal production or the chemical industry, the report states. The planned tightening of European emissions standards (Euro 7) will also increase costs for the auto industry, which will put pressure on the production of “cars for average citizens” in Germany, according to the report.

The take-up of electric vehicles has been slow in Germany compared to many other markets. But thanks to new government incentives, registrations have picked up sharply in recent months. The number of newly registered electric cars in Germany tripled in 2020 compared to the year before. Germany has been struggling to lower emissions in the transport sector, which have remained broadly stable for decades as gains from more efficient engines have been eaten up by heavier cars.

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