Source: Politico, 2021-09-01
Europe's carmakers have their orders: Electrify or die.
That automotive ultimatum landed during the summer on both sides of the Atlantic amid efforts to green up transportation. It put to rest a long-festering argument over which technology will be dominant for decarbonising passenger vehicles but sparked a fresh political struggle over the terms and pace of transition.
“I think it is fair to say that there is no other option for global automakers than to transition quickly to electric vehicles,” said Peter Mock, a Researcher at the International Council on Clean Transportation who tracks the auto industry.
The direction of travel is clear, but there's going to be a fight this fall between the EU's green-minded members and a bloc of car countries — conscious of the economic and human importance of their auto industries — over the future of the combustion engine.
In July, the European Commission set out proposals to end the sale of new petrol and diesel cars across the EU from 2035 by calling for only zero-emission cars to be sold after that date. That's seen as an indirect mandate for electric vehicles and a death sentence for other technologies like natural gas, biodiesel and hybrid-electric.
A few weeks later in August, US President Joe Biden declared batteries to be the future of the American automotive industry and laid out plans to make sure half of all new vehicles sold in the US by the end of the decade are battery-powered.
Those goals are crucial if both the EU and the US are to hit their targets of becoming net-zero emitters of carbon dioxide by mid-century. Cars and vans account for almost 15% of the EU's CO2 emissions.
It's already clear that demand for electric vehicles is accelerating. Long a marginal market, EV sales have jumped despite a pandemic-induced slump in overall car registrations. Globally, electric vehicles have now hit 7% of the market, according to consultancy Wood Mackenzie, although much of those sales are concentrated in richer EU countries and China.
That's still far from what's needed to decarbonise road transport.
The European front of that effort — part of the EU's Green Deal — will heat up in Brussels in the coming months as the bloc looks to turn the Commission's draft ideas into law.
On the one side, smaller climate-conscious EU countries including the Netherlands, Denmark and Austria lobbied in 2021 year for the EU to set a fossil fuel end date and will likely back the 2035 zero car emissions deadline.
On the other side are Europe's traditional auto heartlands such as Germany, France and Italy along with Central European countries such as the Czech Republic, Romania, Poland, Slovakia and Hungary that have built a big part of their post-communist prosperity on the automotive industry.
"We have repeatedly said that the EU's climate goals must be set in a way not to harm our industry," Czech Prime Minister Andrej Babiš said this summer. "It must be done reasonably, not based on ideology."
Cue a contentious battle over one of Europe's last big manufacturing industries, responsible for 2.6m direct factory jobs.
As the European Parliament and Council finalise EU car and van CO2 standards, the group of car countries will be clamoring to eke out as many years as possible for profitable gasoline and diesel engine vehicles. In Berlin, there is still enthusiasm for hydrogen and synthetic fuels as alternatives to batteries, not least among the ruling Christian Democrats.
Carmaking lobbyists demand the continued sale of hybrids, which offer motorists an engine alongside a battery.
“There is a disagreement about 2035," said an Élysée Official representing the French government. "Our approach is to keep an open technological view that allows us to keep [plug-in] hybrid cars, because we think that this is an important driver for the ecological transition."
The Commission is also working on updating its Euro 7 car pollution standards. Those will regulate everything from tailpipe nitrogen oxides to particulate matter from brakes and tires, further strengthening the case for ditching internal combustion engines. They are already being heavily criticised by the industry for being too ambitious.
The cost and scale of the green transition is still in flux.
Policies compelling automakers to sell millions of e-vehicles don't guarantee there will be a mass market for them, especially since clean models cost more upfront even if they save in fuel bills in the long-run.
Rich countries have launched expensive premium programs aiming at trimming purchase costs, with Germany already extending its subsidies to 2025. The demand for such schemes is high — the Dutch government's comparatively modest €13.5m allocation for 2021 was used up by the end of August.
The auto industry also wants governments to help finance enough charging infrastructure to convince people that making the switch won't be hugely inconvenient.
Even the UK government’s climate Spokeswoman Allegra Stratton said in August 2021 she wasn’t ready to ditch her diesel car while charge points are sparse. “I don’t fancy it just yet,” she said, citing recharging times.
Then there's making sure thousands of jobs aren't lost.
The Commission's battery czar Maroš Šefčovič reckons there could be a skills shortage equivalent to 800,000 jobs by 2025 in industries critical to the production of cells needed for electric cars. That means more needs to be done to retrain car workers to work in battery plants.
Any such effort will have to be part of a much broader push covering hundreds of thousands of workers.
The French government has so far offered up €50m to Renault and Stellantis to help retrain some of its workers, but the Élysée Official said the Commission's emissions plan didn’t include broader support for the auto industry to get through the transition.
The first government to face these policy challenges head-on will arguably be the coalition that takes power following September's German election; the country's car industry directly employs more than 880,000 people.
All the main parties largely agree that diesel and gasoline are on the way out, but they differ on the pace of transition. Only the Greens want the phaseout date for petrol and diesel pulled forward to 2030, a policy that, should the party be in the next government, would put Germany at odds with other big car countries in upcoming EU negotiations.
Some are already on board with Europe ditching the combustion engine.
"The faster we change course, the greater the potential for Germany to distinguish itself in battery technologies," said Ferdinand Dudenhöffer, a Professor at the Center Automotive Research in Duisburg.
With Tesla set to open its massive new car plant just outside Berlin later in 2021, and Chinese e-carmakers launching in Europe, the Continent's auto industry, and the countries that rely in it, faces a stark choice — get in early, or face extinction.
"The faster we go into the future, the stronger we will be in the future," Dudenhöffer said.