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5 things to know about Germanys diesel deal

BERLIN — The German government is in a race against time to save diesel.

Chancellor Angela Merkel convened a meeting of ministers and coalition leaders for marathon overnight talks to settle a dispute over how far to push the industry to fight air pollution, while at the same time staving off growing pressure to bar diesel cars from inner cities.

The six-hour summit broke up in the early hours of Tuesday morning, and warring Transport Minister Andreas Scheuer and Environment Minister Svenja Schulze papered over their recent spats to present the deal.

The plan only applies to Germanys 14 smoggiest cities, where pollution exceeds 50 micrograms of nitrogen dioxide per cubic meter. In all, some 65 localities break EU legal limits for air quality.

Heres what you need to know.

1. Cash-for-cars scheme

The crux of the “draft concept,” according to Scheuer, is offering around 1.4 million motorists a choice: Get a cash incentive to trade in an old banger for a new, cleaner model, or submit the car for an exhaust system retrofit at the cost of automakers.

“This new failure by the federal government makes it clear that to ensure clean air across Germany, the courts must step in” — Jürgen Resch, head of NGO Deutsche Umwelthilfe

“We want to avoid driving bans … and secure the future of diesel,” said Scheuer, from Bavarias conservative Christian Social Union.

The auto industry favors the premium program — which would immediately apply to owners of dirtier and older cars meeting Euro 4 and Euro 5 standards. Daimler said it will offer motorists up to €5,000 off their latest models and Volkswagen and BMW also followed suit.

By offering big trade-in premiums on diesel models, carmakers can prop up sagging diesel sales and try to restore the fuels tarnished reputation.

“The German governments proposals offer the opportunity to make the debate more objective and thereby regain confidence in diesel technology,” said the German auto industrys chief lobbyist Bernhard Mattes, head of the Verbandes der Automobilindustrie (VDA).

2. Hardware upgrades

Tuesdays deal was less clear on a push to get carmakers to pay for hardware upgrades, installing selective catalytic reduction systems in cars meeting the older emissions standards to reduce nitrogen dioxide output.

The cost of such upgrades is about €3,000 per vehicle, and both Scheuer and the car industry opposed the idea, instead preferring cheaper software upgrades.

The hardware retrofits would only apply to Euro 5 standard vehicles and Volkswagen warned that such systems still need to be approved for deployment and that such a “solution causes increased consumption and a loss of comfort.”

Mattes was clear that hardware updates were not the favored option and Scheuer called the upgrade plan a “draft concept” rather than a done deal, with the federal Cabinet still needing to sign off.

3. The deal papers over coalition cracks

The agreement has apparently healed a rift between the transport ministry, in the hands of conservatives, and the environment ministry, run by the Social Democrats, the junior members of the ruling coalition.

Scheuer and Schulze were forced to banter in front of journalists while waiting to lay out the deal on Tuesday after weeks of openly briefing against one another in national media and on Twitter. While Scheuers team argued the hardware fix cannot be performed on Euro 4 standard vehicles and that it would weaken engine performance and raise fuel consumption in newer vehicles, Schulze maintained hardware updates were the only way to make the necessary improvements to air quality.

Two things brought them together — the need to forestall outright bans and a commitment to spare motorists from footing the bill to make their cars cleaner.

Schulze can claim success with Tuesdays cross-party commitment that includes a mention of hardware upgrades; Scheuer had repeatedly argued carmaker-funded software updates are sufficient.

However, Scheuer carried the day in a broader EU battle over carbon dioxide pollution in car exhaust after Germany backed the European Commissions call for a 30 percent cut by 2030, far below the 50 percent advocated by Schulze.

By offering diesel vehicle owners the choice, the hope is that most will opt for a shiny new German-made model rather than upgrading existing cars. Thats something all coalition parties support as they defend an industry that employs more than 800,000 and by some estimates makes up a quarter of national GDP.

4. Green groups vow to fight on

Twin pressures forced the government to act — and neither shows any sign of relenting.

One was the 2015 Dieselgate scandal, when Volkswagen admitted to rigging more than 11 million cars to cheat on emissions tests. Other carmakers have since become embroiled in their own emissions problems, and the scandals have so tarnished the reputation of diesel that sales of diesel-engined cars have plummeted. The European Commission has launched an in-depth emissions-related collusion probe of German carmakers.

The second is that German courts have stepped in, ruling cities can impose bans on the most polluting diesel cars to clean up illegal levels of pollution.

Despite Tuesdays agreement, green groups vowed to continue their court battles.

German Transport Minister Andreas Scheuer and Environment Minister Svenja Schulze came together to present their compromise on October 2, 2018 | Sean Gallup/Getty Images

“This new failure by the federal government makes it clear that to ensure clean air across Germany, the courts must step in,” said Jürgen Resch, the head of NGO Deutsche Umwelthilfe. The NGO has 34 cases underway nationwide and has already scored wins in Stuttgart and Frankfurt.

In the next 10 weeks, Reschs team expects eight more court decisions on whether diesel cars should be banned in cities. That includes areas not covered in the 14 worst-offending cities picked by the government.

5. Getting non-German carmakers involved

Scheuer has repeatedly taken exception to finger-pointing at German carmakers for the pollution problem, saying many other auto companies also make diesel cars.

He again called on foreign automakers to join in any scrappage program. Frances Renault timed an announcement for Tuesday, saying it would offer incentives ranging from €2,000 to €10,000 for German owners of older cars to trade them in for newer and cleaner ones.

“We expect the foreign car manufacturers to make comparable offers to their customers,” the German transport ministry said in a statement.

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