In a move that could prove hugely damaging for the fleet industry, the German government is proposing to increase the taxation on diesel fuel.

Diesels now account for over 40% of German car production and constitute a large proportion of the German fleet market. Any increase in fuel tax would drastically increase the cost of fleet operation.

Diesel is increasingly popular as it is widely seen as a cleaner alternative to petrol engines with lower CO2 emissions and better fuel consumption.

However, the German government has cited research claiming diesel emissions are 20 times more carcinogenic than petrol emissions. It has even gone so far as to declare the tax increase an effort to remove an “environmentally harmful subsidy” on diesels. These claims have been widely disputed by the German automotive manufacturers association, the VDA.

The VDA claims that the overall tax burden on diesel users in already higher than that for petrol users. It also claims that the proposal is simply an easy way for the government to fill a budget deficit, rather than being a genuine attempt to improve the environment by reducing emissions.

Additional tax on diesels holds considerable dangers for Germany. Not only will it damage sales and reduce demand for the vehicles, it will destroy jobs associated with the fuel. In addition, it will reduce the country’s abilities to reduce CO2 emissions in line with international climate protection accords. A large part of the burden of reducing emissions has been credited to the increase in the use of diesel engines in vehicles.

An increase in diesels’ net price will significantly increase costs for German fleet operators as a high proportion of company vehicles are diesel and are required to do high miles. This move can hardly come at a worse time for the German fleet industry, which has already suffered from reduced fleet growth and increasing competition as a result of the wider economic downturn.

The German press has reported that the controversial proposals, which are backed by Germany’s ruling Social Democrat and Green parties, are not in fact supported by many other elements in the government, including the chancellor, Gerhard Schroeder. With such elements opposing it, the new tax may be difficult to bring into final realisation.