German automakers' opposition to CO2 goal may hit them later

The usually reserved Ola Kallenius was practically bubbling over with optimism in Paris. "These are the best of times," were the words Daimler's incoming CEO used to describe the shift towards electric, autonomous, shared and connected cars.

"It is of course a big challenge to transition a whole industry and a whole infrastructure from being solely combustion-based to going into heavy electrification, so we have to manage carefully how we navigate through this transformation financially," he said."But technically we are excited about it."

Volkswagen brand strategy chief Michael Jost told Automotive News Europe in August he estimates the share of its European sales mix coming from zero-emission cars could reach parity with its combustion engine range already in 2030. Given that the brand plans annual sales of fewer than 150,000 fully electric cars in Europe in two years' time at the earliest, that scenario would effectively mean its CO2 fleet emissions would halve by the end of the next decade without any further progress.

Privately, however, it seems Germany's automakers are telling a very different story to Chancellor Angela Merkel. Her government led efforts this week to water down proposed European legislation that called for a 40 percent cut in new-car fleet emissions by 2030. While some key European allies like the Netherlands demanded more, Germany pushed for the lowest proposed cut of just 30 percent. In the end, the bloc decided on a figure of 35 percent.

But in pursuing a higher figure, Germany has acted against its own long-term interests and those of its most important industry, not to mention the rest of Europe.

The country has committed itself as an EU member state to the Paris climate accord. One core element of Merkel's climate protection plan is a minimum 40 percent cut in transport sector emissions by 2030. The biggest contributor bar none is from passenger cars, with the rest essentially coming from trucks.

Since this target includes the entire fleet of all vehicles on German roads, the onus to cut emissions is even greater on those sold new. Currently the trend is not Germany's friend either: unlike every other sector, transport emissions have steadily increased since 2010.

Failure to comply means either other sectors have to deliver steeper cuts or Germany would be dragged before the European court and forced to pay heavy penalties as part of its binding obligations under the EU's Effort Sharing Decision.

Naturally there are real life consequences for cracking down on carbon emissions. The industry has warned repeatedly that 3.4 million jobs in car manufacturing are at stake. Charging infrastructure is also sparse in many areas with three-quarters of the 100,000 charging points in Europe concentrated in just four EU countries – the Netherlands, Germany, France and the UK.

But the acute risk is that down the line far more drastic consequences would need to be taken in a much shorter time frame. Whether that means a sharp rise in fuel taxes, driving bans blanketing many urban areas, or tempo limits on its famed Autobahn - the alternatives are bound to be unpopular for consumers and automakers alike.

The current discussion in Germany of whether to retrofit older diesels with expensive after-treatment systems shows that when the industry and government collude in the face of EU legislation, reality invariably hits. And when it does, they are forced to act in haste and under significant political pressure to stitch up a solution, invariably losing credibility in the process.

Instead of blocking efforts to impose stricter targets, they should be working hand-in-hand to prepare for the inevitable disruptions. The landmark Agenda 2010 reforms has shown that with enough of a time horizon, Germany can reshape its own economy.

"If you have in your DNA - like your founding fathers - this inner unrest for what is next, you never stand still. You never rest on your laurels, you are always looking for that next frontier," Daimler's Kallenius said. "Our team absolutely loves this challenge."

This is the kind of optimism the German auto industry needs to tackle climate change. If they do not, others most certainly will for them.