German Finance Minister Christian Lindner plans to provide tax incentives for cars run on synthetic fuels from renewable energy sources, or e-fuels, but only in a few years.
It is noted in a draft proposal from the Ministry of Finance, seen by dpa on Tuesday, that a switch to climate-neutral drives and combustion engines with e-fuels could contribute to reducing carbon dioxide (CO2) emissions in the German transport sector.
The controversial support measures, however, are not expected to commence until 2030.
Significant registration numbers for "e-fuel-only vehicles" are expected from the year 2030, according to the draft bill. Furthermore, it states that due to the ongoing EU legislative process regarding the approval of e-fuel-only vehicles, tax exemption should only become effective from January 1, 2030.
The draft bill asserts that the tax incentives for e-fuel-only vehicles could further accelerate the market uptake of climate-neutral e-fuels. This could complement the increasing electrification of the transport sector and reduce the use of fossil fuels.
In accordance with the principle of "technology openness", Lindner's party, the pro-business Free Democrats (FDP), the junior partner in Germany's three-party coalition, particularly supports an increased use of e-fuels.
The "Growth Initiative" of the German government mentions tax equality for vehicles operated solely with e-fuels with fully electric vehicles, particularly concerning vehicle tax and company car taxation.
Support limited until 2042
Specifically, the draft says vehicle tax exemption for cars powered only by e-fuels is to be granted from the first registration of the car between January 1, 2030, and December 31, 2039, for a duration of 10 years – at the longest until December 31, 2042.
Rules concerning company car taxation of e-fuel-only vehicles in the Income Tax Act are proposed to be temporarily in effect for the whole of the 2030s. It is assumed that this support period is precisely aimed to make the technology sufficiently market-ready.
The EU member states and the European Parliament have agreed on a ban for new cars with diesel and petrol engines from 2035. From then on, new cars must not emit carbon dioxide, as occurs in the combustion process of petrol and diesel. The FDP is pressing for exceptions for vehicles with e-fuels.
Criticism from environmental association
Jens Hilgenberg, head of transport policy at Friends of the Earth Germany, said: "It is incomprehensible to set a tax exemption for vehicles that may never exist and to now spend several hundred thousand euros of tax money on regulatory adjustments.
"In terms of energy efficiency and also price, e-fuels will foreseeably be inferior to direct electricity use in electric cars."
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