A recent study commissioned by environmental group Transport & Environment (T&E) reveals that the European Union’s five largest economies spend a staggering €42 billion ($45.60 billion) each year on subsidies for fossil-fuel company cars. The study, conducted by consultancy Environmental Resources Management (ERM), calls for a shift towards greater subsidies for electric vehicles (EVs) to align with the EU’s green transition goals.
Company cars account for around 60% of all new vehicle sales in Europe, with Italy leading the way by providing €16 billion in subsidies, followed by Germany at €13.7 billion, according to the ERM study. France and Poland contribute €6.4 billion and €6.1 billion annually, respectively, in support for fossil-fuel company vehicles.
The study highlights that company cars, often offered as employee perks, come with significant benefit-in-kind subsidies, including tax offsets and fuel usage benefits. SUVs, a popular vehicle choice, receive about €15 billion in subsidies across these countries, while company car drivers enjoy an average annual tax benefit of €6,800, with high-polluting models benefiting even more—up to €21,600.
“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 director of fleets, told Reuters.
The study’s release comes as sales of electric vehicles (EVs) in Europe have plummeted, largely due to their higher price tags compared to fossil-fuel models, making them unaffordable for many. In August, sales of fully electric cars in the EU dropped 43.9%, with Germany and France, the two largest EV markets, experiencing declines of 68.8% and 33.1%, respectively.
Notably, the ERM study found that the United Kingdom, a former EU member, is the only country offering financial incentives for company car drivers to switch to EVs. European Commission President Ursula von der Leyen recently tasked the EU’s new climate chief, Wopke Hoekstra, with phasing out fossil-fuel subsidies, as outlined in a letter dated September 17.
