Nearly a year after Germany halted subsidies for electric vehicle (EV) purchases, the government is revisiting the idea — but with a twist that’s stirring controversy.
Buyers Shoulder the Full Cost
Instead of traditional funding methods, German officials are considering a plan to finance these subsidies by increasing fuel taxes on diesel vehicles, a move that could spark public backlash.
The decision to end subsidies last year led to a steep decline in Germany’s EV sales as buyers were forced to shoulder the full cost, according to Motor.
Germany’s ambitious goal of putting 15 million electric cars on the road by 2030 suddenly looked far-fetched.
Now, as some federal states, like Lower Saxony and Saarland, lobby for renewed subsidies, the government is revisiting its support for EV purchases, but it’s unclear where the funding would come from.
Increase Diesel Tax
The answer appears to lie in diesel. Historically, diesel has been taxed at a lower rate than gasoline in Germany, a difference that some argue is long overdue for adjustment.
Under the proposed plan, increasing diesel taxes would not only generate revenue for EV subsidies but also bring diesel and gasoline taxes to a more comparable level. This aligns with a “polluter pays” approach, as diesel vehicles typically emit more CO2.
However, this approach is politically and socially fraught. Diesel vehicles have been popular in Germany for decades, with owners appreciating their fuel efficiency and lower fuel costs. An added tax on diesel could disproportionately affect drivers who rely on diesel cars for affordability, especially in rural areas where EV infrastructure is less accessible.
Critics argue that this selective taxation on diesel, without addressing gasoline, is discriminatory. If enacted, the measure might even face legal challenges.
Political analysts warn that the move could also have a significant political cost for leaders who support it, especially as public frustration mounts over rising fuel prices.
The decision now lies with the German federal government, which must weigh the push for EV adoption against the economic burden on diesel drivers, potentially setting the stage for both social and political repercussions.
