Germany Joins EU in Green Car Tax Cuts

28 January, 2009 07:16:00

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Germanyâ€™s ruling coalition has reached an agreement on a new vehicle tax that will focus on cutting CO2 emissions while avoiding significant tax increases for large sport-utility vehicles.

The European Union has long been urging member states to implement CO2 emissions-based tax systems for vehicles traveling on its roads.

According to the agreement, which is set to go into effect on July 1 once it makes its way through parliament, all new cars will be taxed according to both engine size and CO2 emissions per kilometer traveled.

Each gram of CO2 emitted per kilometer over the penalty-free 120 gram limit, would cost drivers an additional €2. Engine size and type determines the rest.

Over a dozen EU countries have now
inserted CO2 emissions into their vehicle
tax formulas, including France, Italy, Spain
and the United Kingdom.

The rule will cut the annual levy on Daimler AG’s Smart ForTwo model to €20 ($26.5) from the present €67 ($88.9) or for example on GM’s Opel Agila, which emits 120 grams of CO2 per kilometer and is outfitted with a 1.2 liter diesel engine, from €123.50 ($164) per year, some €75 less.

But even as the formula makes it cheaper to buy small, fuel-efficient cars, it results in only a slight up-tick for those who opt for powerful polluters.

An owner of VW’s Audi Q7 Quattro SUV will pay €926 (1228), almost unchanged from the current fee.

Germany’s government has estimated that the tax break would probably cost 2 billion euros in 2009.

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