The locomotive of Europe is back in action. For once, France and Germany put aside their differences and struck an agreement on the future of the automotive industry and the criteria for the new “Made in Europe”. At the heart of the pact is a trade-off between the two European giants that unlocks two dossiers at the top of the European competitiveness agenda. Germany obtains more flexibility on CO2 emission reduction obligations for cars, while France receives the green light for European preference criteria to give a fast track to European companies over global competition. In detail, the 90% cut in CO2 emissions by 2035 (compared to 2021) is confirmed, but without offsetting through emission credits by manufacturers, to take into account the “growing use of renewable fuels”. Essentially, the agreement aims to “legally” guarantee that internal combustion engine vehicles can continue to be registered even after 2035, provided they are powered by CO2-neutral fuels.
This marks the opening toward biofuels that Italy has been requesting for a long time, and a victory for the argument of technological neutrality. Finally, the use of “green” steel and low-CO2 aluminum in automotive production is also rewarded. “Our Italian friends also essentially agree,” declared German Chancellor Friedrich Merz. The two dossiers are intertwined with the action to relaunch EU competitiveness, in line with the Draghi Report, and defense against Chinese competition. This defense includes not only the recent EU-Peking agreement limiting the export of hybrid and plug-in cars to Europe, but also the European preference itself, useful for directing investments and public procurement. The pact also agrees on the scope of application for “Made in Europe”—the focus of a heated debate among EU co-legislators negotiating the Industrial Accelerator Act—and extends it to EEA members (Iceland, Liechtenstein, and Norway) and Great Britain.
Today’s agreement is a surprise twist that effectively closes the gap between Berlin and Paris, who have recently clashed on various issues ranging from trade agreements and relations with China to protectionism and the budget. This follows the joint initiative at the beginning of the month requesting a “commercial shield” against unfair competition from China. This request was immediately accepted by the European Commission: “A new tool for decisive action, restricting access to the single market where it is in the interest of the Union, quickly and immediately,” announced European Commission President Ursula von der Leyen at the end of the EU summit. This demonstrates that when the Franco-German axis moves, it is capable of setting the line. Germany and France should not face major obstacles when the agreement is brought to the European negotiation table. For Macron, the goal is clear: “To successfully achieve the transformation of our automotive industry, while simultaneously maintaining our climate commitments and production in Europe.”
