In a striking revelation, Europe’s five largest economies are collectively spending a whopping €42 billion ($45.6 billion) every year subsidizing fossil-fuel-powered company cars, according to a recent study commissioned by environmental advocacy group Transport & Environment (T&E). The findings have triggered calls for an urgent shift in government spending towards promoting electric vehicles (EVs), especially as Europe aims to achieve its ambitious green transition goals.
The study, conducted by consultancy Environmental Resources Management (ERM), highlights that company cars account for a staggering 60% of new car sales in Europe. Italy leads the pack with €16 billion in subsidies for fossil-fuel company cars annually, followed by Germany at €13.7 billion. France and Poland contribute €6.4 billion and €6.1 billion, respectively, to fuel these high-emission vehicles.
A significant portion of these subsidies—around €15 billion—goes towards subsidizing gas-guzzling SUVs, which have higher pollution levels. On average, company car drivers enjoy a substantial annual tax benefit of €6,800, with that figure rising as high as €21,600 for larger, more polluting models.
T&E’s director of fleets, Stef Cornelis, condemned the massive financial support for fossil fuels, stating, “This is completely illogical and completely unacceptable, that we’re still pouring billions of taxpayer money into a technology that’s completely contradictory to the European Commission’s green transition agenda.”
This revelation comes at a time when EV sales across Europe have taken a sharp nosedive. In August alone, sales of fully electric vehicles plummeted by 43.9% in the European Union, with Germany and France—the region’s biggest EV markets—reporting declines of 68.8% and 33.1%, respectively. High costs for EVs, in comparison to their fossil-fuel counterparts, have kept them out of reach for many consumers, further hampering the region’s green transition efforts.
Interestingly, the ERM study found that the United Kingdom, which is no longer part of the EU, is the only country offering financial incentives to encourage company car drivers to switch to EVs.
This data underscores the urgency for a paradigm shift in the EU’s fiscal policies. European Commission President Ursula von der Leyen has already signaled the need for reform, instructing the EU’s new climate chief, Wopke Hoekstra, to prioritize phasing out fossil-fuel subsidies.
As the clock ticks towards 2030, when the EU has pledged to drastically reduce emissions, these findings will likely fuel further debate over how best to align financial policies with the continent’s climate goals. Will European leaders heed the call to stop supporting fossil-fuel giants and accelerate the transition to electric vehicles? The stakes, both economic and environmental, have never been higher.
