42 Billion Euros Spent Annually by 5 Largest EU Countries to Subsidize Fossil Fuel Company Cars, Study Finds

The five biggest countries in the European Union spend 42 billion euros each year on subsidizing fossil-fuel-powered company cars, a new study commissioned by Transport & Environment (T&E) says.

The report by Environmental Resources Management (ERM), “Company car fossil fuel subsidies in Europe,” called for increased subsidies for electric vehicles (EVs).

“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,” Stef Cornelis, T&E’s fleet director, told Reuters.

About 60 percent of new cars sold in Europe are company cars.

“Company cars are seen as perks provided to employees as a part of their salary. While they are partially intended for work travel, they are also used privately – such as for commuting – to the benefit of the driver,” a press release from T&E said. “This is the first study of its kind that calculates these subsidies for every car model registered in Europe’s six biggest car markets, rather than relying on archetypal averages or example models.”

According to the study, Italy gives 16 billion euros annually in fossil fuel company vehicle subsidies, followed by Germany’s 13.7 billion euros.

France provides 6.4 billion euros in dirty fuel company car subsidies each year, with Poland close behind with 6.1 billion.

“Very high fossil fuel subsidies are found in Italy, Germany, France and Poland. This is mainly due to significant benefit-in-kind (BiK) tax breaks for petrol and diesel company car drivers. This tax break overwhelmingly benefits the most affluent consumers, with company car drivers earning nearly double as much as the average European consumer,” T&E said in the press release.

Along with company cars, consumer tax offsets and fuel usage benefits are often provided, reported Reuters.

Drivers of company cars receive an average yearly tax benefit from 6,800 to 21,600 euros for larger, highly polluting car models.

“SUVs typically have much higher CO2 emissions than the average car and therefore a bigger climate impact,” the press release said.

EV sales in Europe have dropped recently to a three-year low. The largest EV markets in the EU — France and Germany — reported drops of 33.1 percent and 68.8 percent respectively, industry data said. Overall, EU sales of EVs were down 43.9 percent in August.

The study found that the United Kingdom was the only country to provide company car drivers with financial incentives to switch to EVs.

“The UK and Spain have a fairer tax system, with higher BiK rates counterbalancing tax breaks from depreciation write offs and VAT deduction for petrol and diesel vehicles. The UK specifically has a high BiK for polluting cars and a low rate for battery electric vehicles, which translates into a low fossil fuel subsidy and high corporate BEV uptake, reaching 21.5% in H1 2024. Spain has a relatively high BiK rate, but fails to incentivise companies to opt for electric cars, translating into a low corporate BEV uptake (at 3.7%),” T&E explained.

Just 12.4 percent of new company cars are totally electric, and the corporate car market is electrifying more slowly than private cars for the third year in a row.

“Tax benefits for company car drivers are one of the biggest fossil fuel subsidies out there. EU’s top governments have fiscal systems where the polluter pays principle does not apply and contradict the goals of the EU Green Deal. The European Commission needs to intervene,” T&E said. “Accelerating corporate car electrification will create a lead market for clean technology and boost demand for EVs while at the same time bring investment certainty for key industrial sectors such as carmakers, battery manufacturers and the power sector.”