EU fails to reach agreement on car emissions regime

(BRUSSELS) - The EU has failed to reach agreement on new rules to cut car emissions after a day of talks foundered over the issue of penalties to be levied on non-complying automakers, officials said on Tuesday.

Talks between the EU French Presidency, the European Commission and the European Parliament on the package were brought to a close overnight without a compromise plan being agreed, German conservative euro MP Werner Langen said.

A fifth such "triologue" on the issue has been scheduled for December 3.

"We still need to discuss the amount of fines to be levied and also the long-term objective for 2020 on CO2 reduction," Langen said.

The Socialist group in the European Parliament welcomed the level of agreement that has been reached so far, speaking of "a positive achievement on many important issues.

"On the penalties chapter, some political groups asked for a pause for reflection before concluding that agreement," the Socialists added in a statement.

Sources said that the Italians were especially keen that the penalties for breaching the emissions targets be kept low.

"But if you make them too low they just become a car tax on consumers, as manufacturers push the costs onto them, rather than an incentive to create greener cars," one source said.

Before the meeting, ambassadors of the 27 EU member states met on Monday, reaching broad agreement on the CO2 emissions targets for cars, but not on the penalties to be charged to automakers who fail to reach them.

Under the scheme, new car emissions would have to begin to be reduced in 2012, with annual reductions until 2015, when the target is for 130 grams of CO2 per kilometre.

The aim for 2020 is to bring emissions per kilometre down to 95 grams.

That 2015 date is already a compromise agreed by EU governments last month, giving car makers three extra years to reduce emissions from their cars at a time when the industry has been badly hit by the economic crisis.

New car sales in Europe slumped 14.5 percent in October, the sixth monthly fall in a row.

There is strong political opposition in Europe to any measures which will further impact the industry.

France and Germany are determined to help their car industry weather the economic storm, President Nicolas Sarkozy said Monday following talks with Chancellor Angela Merkel.

"We will not let down our automobile industry, this is a permanent fixture for Europe," Sarkozy said. "I understand that in Germany, there is precisely this same willingness."

Sarkozy reiterated his concern that a 25-billion-dollar (20-billion-euro) rescue plan for the Big Three US automakers -- Chrysler, General Motors and Ford -- will leave European car manufacturers at a disadvantage.

"I think we are closer to a deal but there's no deal as yet," one European diplomat said, agreeing that the fines system was the major sticking-point.

The hope is that a deal can be reached ahead of an EU summit in mid-December.