German Court Ruling Puts Millions of Diesel Cars at Risk of Bans

Germany’s top administrative judges put millions of diesel cars at risk of being banned from city centers in a ruling that sent the shares of the country’s carmakers lower.

The judges in Leipzig refused to overturn lower court decisions that pushed Stuttgart and Dusseldorf toward plans that would remove older diesel vehicles from inner cities. The court said the towns could still include exemptions for some drivers to avoid disproportionate effects.

“Bans are generally permissible and can be implemented in a way to avoid disproportionate effects,” Presiding Judge Andreas Korbmacher said Tuesday. “European Union rules require that cities must be implement them if there are no other effective measures to reduce pollution.”

Shares of carmakers declined after the decision. Volkswagen fell as much as 2%, while BMW fell 0.8% and Daimler shares were down 0.6%.

Drivers and carmakers have been anxiously watching the case, which put the future of diesel cars in Germany in question. The ruling affects millions of vehicle owners and their access to city centers across the nation. The judges’ decision is a blueprint for more than 50 other municipalities that also struggle with regulation-busting pollution levels of nitrogen dioxide.

“This is a full win for us,” said Juergen Resch, head of environmental group DUH, which brought the initial cases. “The court backed us in all major legal issues. We now expect from the car industry to upgrade cars and from the federal government to provide the necessary rules to allow cities to apply bans coherently everywhere.”

The lower courts had argued that banning diesel cars in inner cities is the most effective way to cut pollution swiftly and meet EU pollution limits. No other proposal would bring cleaner air to quickly mend the situation, the Stuttgart court decided. Car owners’ property rights are less important than protecting the health of citizens, according to those rulings.

In 2017, 66 German cities failed to meet the EU standards, although some only break the threshold by a few grams.

“We have legal clarity now," said Wolfram Sandner, a lawyer for Baden-Wuerttemberg, Stuttgart’s home state. “The ruling allows us the sort of flexibility we wanted to get. The federal government now should amend laws to allow a coherent application in all cities across Germany.”

The ruling should bring to an end the era when policymakers try everything to protect the auto industry, Claudia Kemfert, a transport policy expert at the Berlin-based DIW research institute, said in a statement.

“Policymakers and car companies now finally have to act,” Kemfert said. “They now have to take the required measures to banish especially dirty diesel vehicles from the streets. The auto makers are at last obliged to effectively retrofit models with excessively high emissions.”

Diesel engines are the main emitters of nitrogen dioxide, which causes respiratory problems and has been linked to premature deaths. Under European Union rules, member countries had to keep the gas under 40 microgram per cubic meter in the air by 2010. Six years years after that deadline, the average levels in Stuttgart were still about double of what’s allowed.

Owners of diesel cars with Euro 5 emissions technology face a “significant” drop in the resale value of their vehicles, consultancy EY said in a report. The court said Euro 5 cars must be exempt from bans until Sept. 2019, while Euro 4 vehicles and earlier models can be removed from the streets immediately.

Diesel Growth

The industry promoted diesel as a way to reduce output of CO2, a greenhouse gas blamed for global warming. That encouraged carmakers to stick with the technology despite difficulties in meeting tougher standards.

EY said sales of diesel cars will continue to slide and may only make up 25% of the total this year, compared to 51% in 2015.

That’s the year VW admitted using software to cheat emissions tests on 11 diesel models. The company has already paid out more than 25 billion euros (US$31 billion) in fines, settlements and other costs since the scandal came to light, and other carmakers still face probes.

Diesel bans are the wrong way to solve a problem that only affects very specific places under very specific circumstances, Thilo Brodtmann, managing director of Germany’s VDMA machine makers association, said in a statement.

“These bans also affect drivers, like tradespeople or technicians, who rely on diesel vans for their work,” Brodtmann said. “It would be much more sensible to keep the air clean by improving traffic management and making public transport more attractive. Driving bans lead only to an increase in monitoring requirements and a patchwork of new regulations.”