EU disappoints car industry on fuel sulphur

Commission hesitates on German "sulphur-free" tax breaks; new draft of world fuel charter issued

The European Commission has backed Germany's bid to introduce tax breaks for low-sulphur fuel. But it has disappointed car firms by saying it needs more time before pronouncing on whether fiscal incentives for "sulphur-free" petrol and diesel planned from January 2003 would be acceptable in the EU single market.

In an opinion for the Council adopted on Friday, the Commission says it has "no concerns" in agreeing to Germany's request to reduce mineral oil tax by euros 0.015 (DM0.03) per litre on fuel with 50 parts per million (ppm) sulphur from November 2001. But the Commission says it needs time to examine "technological issues and environmental benefits" as well as effects on competition and trade of Germany's second request to introduce similar fiscal incentives for fuel with less than 10ppm sulphur, which they propose calling sulphur-free.

Germany formally requested EU permission for the tax incentives last autumn, alongside a call for a revision of EU law to require motor fuels to be made sulphur free from 2007 (ENDS Daily 13 October 1999). Under current EU law, maximum sulphur levels of both petrol and diesel will fall to 50ppm from January 2005. The Commission's opinion on Germany's fiscal incentives plan will now be scrutinised by EU finance ministers.

Car firms are disappointed that the Commission has not immediately backed German incentives for sulphur-free fuel. "The Commission's answer is not what we hoped because we wanted a green light [for the 10ppm tax breaks], Giovanni Margaria of the European Car Manufacturers' Association Acea told ENDS Daily. Last month, the association urged the Commission to support Germany's bid for 10ppm incentives (ENDS Daily 21 December 1999).

Meanwhile, an alliance of European, American and Japanese car makers' associations has issued a draft revision of the world fuel charter for comment by 10 February. It includes a new, fourth category of sulphur-free gasoline and diesel, defined as containing no more than 5-10ppm. The US association has also launched a new web site dedicated to reporting developments in reducing sulphur in automotive fuels.

Follow Up:
European Commission, tel: +32 2 299 1111. Opinion on German request, ref: COM 2000(25). See also American car makers' web site on Low-sulphur fuels, which includes the World Fuel Charter revised draft.

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