EU agrees steep fines to cut car CO2 from 2012

By Paul Taylor

BRUSSELS (Reuters) - The European Commission enraged Germany and its carmakers on Wednesday by proposing tough legislation to force down emissions of carbon dioxide from cars, with steep fines on manufacturers that fail to comply.

With several commissioners dissenting, the European Union executive set a four-year phase-in period from 2012 for fines on manufacturers whose fleets exceed an average of 120 grams per km of the main greenhouse gas blamed for global warming.

"This will send a strong signal to the world about the determination of the European Union to take bold measures on climate change," EU Environment Commissioner Stavros Dimas told a news conference.

German Chancellor Angela Merkel slammed the plan as "not economically favorable," telling journalists in Berlin it would burden Germany and its carmakers disproportionately.

German producers of heavier luxury vehicles such as Porsche, with by far the highest emissions of any major carmaker, BMW and Mercedes-Benz, could face billions of euros in fines unless they change course fast.

The DJ Stoxx European car sector index fell 1.4 percent, triple the broader market's decline. Shares in Porsche were down 3.87 percent.

German Environment Minister Sigmar Gabriel, often a backer of EU green initiatives, called it a "competition war" against the German car industry to benefit French and Italian rivals.

But France complained that the Commission had let makers of heavier, more polluting vehicles off too lightly by varying the emission target according to the weight of the car.

Environmental campaigners accused Brussels of a sell-out for phasing in the fines over four years and setting no ambitious long-term goal.

Greenpeace transport spokeswoman Franzisaka Achterberg said the EU had stood up like a lion for the world's climate at a U.N. conference but "is going down like a lamb and putting carmakers' short-term profits before our common survival."

Fines on companies for non-compliance will start at 20 euros ($28.80) per new car for each excess gram per km in 2012 on average over the whole fleet, and rise to 95 euros g/km in 2015.

"The proposal is backed by credible penalties," Dimas said, noting that voluntary curbs had failed and road transport was the second-biggest source of emissions after power generation.

Car producers denounced the plan, which requires makers of heavier luxury vehicles to make bigger cuts than manufacturers of smaller, lighter cars, and vowed to lobby member states and the European Parliament to fight them.

"It's a bad decision. It is not balanced," Ivan Hodac, secretary-general of the European Automobile Manufacturers Association, told Reuters.

"The level of penalties is totally unacceptable, up to 100 times higher than what is paid by other industries in the EU's emissions trading scheme," he said.