German car giants call for tax fairness on hydrogen engines
There’s trouble at the pump – again. And for once, it’s not the usual complaint about fossil fuel prices soaring.
No, instead, Germany’s automotive heavyweights are getting vocal about an obscure but particularly annoying roadblock standing between hydrogen combustion engines and mainstream adoption: energy taxes.
A who’s who of German automotive – including Bosch, Daimler Truck, MAN, ZF, and even Volvo (quietly Swedish but thoroughly involved) – has collectively penned an open letter to the German government, politely, yet firmly pointing out the glaring inconsistency in current EU tax regulations.
Hydrogen engines face taxing troubles
Simply put: hydrogen fuel used in fuel-cell vehicles enjoys a cosy, tax-free existence, whereas the same stuff burned in a hydrogen engine is slapped with hefty energy taxes.
Worse still, refuelling stations can’t yet distinguish between hydrogen destined for fuel cells and hydrogen for engines, leading station operators to play it safe and refuse service altogether to combustion engines. Slightly awkward.
Both fuel cell and combustion-powered hydrogen vehicles are officially classified as zero-emission under EU law.
Currently, hydrogen engines are taxed at €0.901 per kilogram, but are set to rise to an eye-watering €1.257/kg in 2027. That’s enough to put even the bravest early adopters off their strudel.
“This unequal tax treatment distorts competition and hampers market growth,” say the companies.
They argue that a tax exemption for hydrogen engines would not only encourage faster adoption of zero-emission commercial vehicles, but also maintain Germany’s famed automotive competitiveness, as rivals in China, India, and the US start to embrace hydrogen combustion.
Could EU rules offer a loophole?
Their proposed solution leverages a convenient loophole – or “provision,” if you’re being polite – in the EU Energy Tax Directive, allowing exemptions for pilot projects aimed at greener tech or renewable fuels.
Conveniently, hydrogen engines tick both boxes, the letter points out.
The firms argue that since electricity and gas used in hydrogen production are already taxed heavily – and both battery-electric and fuel-cell technologies have benefited from generous tax breaks – denying combustion hydrogen the same privileges is unfair.
“This unequal tax treatment not only distorts competition but also creates real obstacles for hydrogen engine adoption,” the companies said in their joint letter.
Whether Germany’s policymakers take heed, or the whole saga descends into bureaucratic limbo, we will have to wait and see.
