German finance minister proposes tax exemption for combustion engine 'e-fuel-only' cars

Germany’s finance minister Christian Lindner, a Free Democrat (FDP), has proposed several tax exemptions for combustion engine cars that run exclusively on renewables-based synthetic fuels – also called e-fuels -, reported Frankfurter Allgemeine Zeitung (FAZ). In a draft legislative reform, the finance ministry proposes to exempt such cars from the vehicle tax, and include e-fuel-only company cars in the same special regulations that apply to cars with electric motors and hybrid drives.

In the draft, the ministry says that in addition to electric mobility, it aims to support combustion engine cars that run exclusively on e-fuels to contribute to decarbonising road transport. In practice, the planned change is unlikely to have any impact initially, as pure e-fuel cars are still a long way from being launched on the market, wrote FAZ. The draft bill states that significant registration figures for e-fuels-only vehicles are not expected until 2030.

Carmakers across the globe are investing heavily in battery-electric vehicles. Plans for using e-fuels in road transport, on the other hand, have been heavily criticised by many experts because a lot of energy is lost in their production and use, and it is much more efficient to use the electricity directly in electric vehicles. Most experts believe that synthetic fuels will remain scarce and expensive, and should only be used whenever there are no alternatives for decarbonisation - for examples in long-distance aviation or shipping. NGOs have decried the FDP's insistence on e-fuel cars as a futile attempt to secure a future for combustion engine technology, which delays the transition to electric vehicles.

Last year, a crucial EU vote on car fleet emissions to spell a de-facto 2035 combustion engine ban had to be delayed following FDP insistence on exceptions for e-fuels. German auto industry lobby group VDA also said last month that the country will need biofuels and e-fuels to ensure that the country's existing fleet of combustion engine vehicles can help reach climate targets.