Manufacturing News From Europe: Trade Agreement with the US, Fossil Fuel Ban Hits Roadblock

EU delays vote on fossil fuel car ban as Germany holds out

The European Union on Friday delayed a vote to ban sales of new petrol or diesel-engine cars from 2035, after Germany made a last-minute push on the use of synthetic fuels.

Ministers from the EU's 27 member states were expected to nod through the legislation at a routine meeting on Tuesday, after the European Parliament gave its approval last month.

But a spokesman for Sweden, which holds the rotating EU presidency, said EU ambassadors had decided to push back the vote to a later meeting and would "revert to the issue in due time".

Economic powerhouse Germany, which boasts one of the world's biggest car manufacturing industries, said it wants further assurances from Brussels that synthetic fuels could still be used in engines after 2035.

Coming so late in the day, Berlin's objections were viewed as highly unusual since EU member states had already signed off on the ban last year.

Germany's transport minister, Volker Wissing, said that if the vote had been held then Berlin would "not have given its agreement today".

"We have always made it clear that the European Commission should present a proposal on how synthetic fuels could be used in combustion engines after 2035," he said.

The plan to phase out cars running on fossil fuels is a keystone of the bloc's push to become climate-neutral by 2050, with net-zero greenhouse gas emissions.

If Germany had abstained from the vote then it likely would not have passed, since it requires a majority of member states representing at least 65 of the bloc's population to go through.

Italy, another major car maker, has already said it is opposed, and Poland and Bulgaria were also expected not to vote in favor.

Berlin's last-ditch move was seen as a product of domestic politics. The liberal Free Democratic Party, which is part of the governing coalition, is seeking to burnish its pro-business credentials after poor regional election results.

European diplomats are hoping that Brussels can reach a compromise with the German liberals by reaffirming its intention to look into the usage of synthetic fuels.

EU eyes trade deal with US to access green benefits

The European Union is seeking a trade agreement with the United States that will allow the EU to access some benefits under President Joe Biden's ambitious climate plan, an EU official said Friday.

Officials are hoping to make progress on this as early as next week, when Biden hosts European Commission chief Ursula von der Leyen at the White House.

In those talks next Friday, Western support for Ukraine, relations with China and transatlantic trade friction are expected to top the agenda.

During the visit, both sides plan to try and reach an in-principle agreement on issues such as access to raw materials, the EU official said, speaking on condition of anonymity.

European leaders are concerned that Biden's landmark Inflation Reduction Act (IRA) -- a vast climate plan aimed in part at reducing dependence on Chinese imports -- could come at the expense of European jobs, especially in the energy and auto sectors.

While the IRA allows "certain alleviations when it comes to partners who have a Free Trade Agreement-like status," the EU does not have such an accord with the United States, the official said.

"The good thing is, of that description in the Inflation Reduction Act... you can also have something else which looks like an FTA, which can be more limited," the official added.

"That is exactly what we're working on," he said.

The IRA includes $370 billion that goes towards reducing greenhouse gas emissions.

The act involves tax cuts for companies that invest in clean energy, along with subsidies for electric vehicles, batteries and renewable energy projects -- if they are manufactured in the United States.

But the climate action plan also allows some exceptions for countries which have free trade agreements with the U.S.

For now, the EU official said the aim is to avoid a "subsidy race" which he called "a lose-lose situation for both sides."

Noting that the U.S. and EU have the same objective of fighting climate change and of keeping certain non-market economies under control, "with all these shared objectives, let's not step on each other's toes," he said.