The European Commission will take a fiercely contested decision today on how to share the burden of cutting carbon dioxide (CO2) emissions among car makers, with Germany battling to defend its big luxury models.
Germany, which has several manufacturers that specialise in heavy, high-performance vehicles, is lobbying to put more of the onus for achieving cuts in the main greenhouse gas blamed for global warming on smaller cars, produced mainly by France's Peugeot and Renault and Italy's Fiat.
Within the European Union executive, the debate has pitted vice president for Enterprise Guenter Verheugen, a German keen to protect the competitiveness of his country's car industry, against Environment Commissioner Stavros Dimas, from Greece.
Dimas says the credibility of the 27-nation EU's claim to global leadership on climate change is at stake, just days after nearly 200 nations agreed at a UN conference, in Bali, to launch negotiations on a new pact to cut greenhouse gas emissions after the Kyoto Protocol expires in 2012.
The Commission wants car manufacturers to cut emissions to an average 120g/km by 2012, mostly through improvements in engine technology.
The issues now are who has to make the main reductions, and how high the fines should be for non-compliance.
Senior Commission officials have agreed in principle that fines on carmakers failing to meet the limits will be phased in over three years, an EU source said.
"The polluter will pay - but later," the source said.
However, officials were meeting down to the wire in a bid to narrow differences on the level of the fines and share-out between heavy and light cars.
Those blanks will be filled in when the 27 commissioners meet on Wednesday morning following a last-minute session on Tuesday at which Commission President Jose Manuel Barroso tried to reconcile the differences, the source said.
EU sources said the Commission would consider a range of fines from €10-€90 per additional gram on average.
One source said fines could start at the bottom of that scale in 2012 and reach perhaps 30 per cent in 2015.
However, another source said Dimas considered that any fine less than €35 per gram would be an insufficient deterrent.
"Sanctions have to be credible. Otherwise, as in the United States, manufacturers will just raise car prices, pass on the costs to the consumer and pay the fines," the source said.
A spokeswoman for the European Automobile Manufacturers Association, Sigrid de Vries, said the industry was already making huge investments to meet green targets and the Commission should avoid, what she called, "unnecessary and unprecedented penalties".
Germany signalled opposition last week to the key target of achieving an average 130g/km by 2012 through improvements in engine technology, arguing more should be done by other measures, such as biofuels that are already expected to deliver a 10g/km reduction.
A draft of the proposed legislation showed carmakers will be allowed to team up and form pools to spread the burden of meeting the tough new limits.
"Where manufacturers form a pool, [ they] should be deemed to have met their targets under this regulation, provided that the average emissions of the pool as a whole do not exceed the target emissions for the pool," the draft said.
It said targets should encourage reductions from all carmakers while recognising that bigger cuts could be made from heavy cars.
Special purpose vehicles, such as those built to accommodate wheelchairs for the disabled, would be excluded from the rules.