Definition and legal background of the environmental premium
Die Environmental premium refers to a government incentive measure aimed at promoting environmentally friendly behavior in the transport sector through financial incentives. In German law, the environmental premium in particular was related to the statutory regulation for the extraordinary scrapping of older vehicles as well as the purchase of lower-emission motor vehicles. The goal of this measure was to reduce environmental pollution by replacing outdated cars with vehicles that produce fewer pollutants. The environmental premium is a prominent example of financial steering instruments in national and European environmental law.
Legal foundations and development
Introduction through Economic Stimulus Package II
The legal basis for the environmental premium in Germany was established by the “Act to Safeguard Employment and Stability in Germany” (so-called Economic Stimulus Package II). The relevant regulations were set forth in the “Guidelines for Promoting the Sale of Passenger Cars through Environmental Premiums” issued by the Federal Ministry for Economics and Technology. The program started on January 27, 2009 and ended on December 31, 2009.
The environmental premium was designed as an extraordinary support measure to counteract the economic downturn resulting from the global financial and economic crisis of 2008/2009 and at the same time contribute to environmental protection.
Subsequent regulations and further developments
Following the first environmental premium, various other programs with similar objectives were created, for example, the promotion of electromobility through the so-called “innovation premium” (commonly known as the “environmental bonus”, regulated by the corresponding guideline of the Federal Government). These developments demonstrate the ongoing evolution of the environmental premium as an incentive instrument in environmental and transport law.
Requirements and procedure for receiving the incentive
Eligible conditions for funding
To be able to claim the environmental premium, applicants had to meet certain requirements:
- Scrapping an old vehicle: The old vehicle had to be at least nine years old, registered to the applicant, and assigned to emission standard Euro 4 or worse.
- Purchase of a new vehicle: As a replacement, a new vehicle or a nearly new vehicle registered to the applicant meeting at least Euro 4 emission standard needed to be purchased.
- Proof of proper scrapping: The correct and final de-registration of the old vehicle at a recognized dismantling facility was mandatory and had to be evidenced.
- Timing of acquisition: The new vehicle had to be purchased and registered in close temporal connection with the scrapping process.
Application process
Applications were submitted electronically to the Federal Office for Economic Affairs and Export Control (BAFA). Required documents included, among others, registration certificates, proof of scrapping, and purchase contracts for the new vehicle. Payment of the premium was made upon positive review and approval.
Funding volume and limitations
The environmental premium was a flat rate of 2,500 euros per application. The funding volume was limited and allocated on a first-come, first-served basis. Once all funds were exhausted, the program was ended.
Legal nature of the environmental premium
The environmental premium constitutes a so-called “subsidy under public law”. It is subject to the provisions of budgetary and subsidy law, in particular:
- § 23, § 44 Federal Budget Code (BHO)
- Subsidies Act (SubvG)
- EU State Aid Law (Art. 107 et seq. Treaty on the Functioning of the European Union – TFEU)
The incentive was structured as a voluntary state benefit, for which there was no legal entitlement. The granting took place within the framework of an administrative procedure at the discretion of the approving authority.
Legal issues and controversies
EU state aid law and competition law
The environmental premium was reviewed for compatibility with European law, especially with regard to Art. 107 TFEU (“state aid”). The Federal Government had to notify and obtain approval from the European Commission to prevent market distortions. The Commission declared the environmental premium as compliant with state aid rules, as it did not confer inadmissible competitive advantages on individual market participants.
Subsidy fraud and recovery
In connection with the implementation of the environmental premium, there were isolated criminal investigations for subsidy fraud (§ 264 Criminal Code), such as by forged scrapping certificates or incorrect information about the vehicle’s condition. Furthermore, the recovery of disbursed funds was examined and executed in cases of false statements.
Environmental premium and climate protection law
Classification under funding law
The environmental premium is part of Germany’s funding instruments within the framework of obligations under the Climate Protection Act (KSG) and European climate objectives. It is intended to create incentives for the reduction of CO₂ emissions in road traffic and to encourage the replacement of old vehicles with those using modern emission control technologies.
Criticism from an environmental law perspective
The measure was partly criticized from an ecological standpoint, as the disposal of functional old vehicles was considered wasteful of resources and the promotion of new car sales was interpreted as strengthening the automotive industry. The actual effect on pollutant emissions and the reduction of CO₂ emissions was therefore controversially debated and examined scientifically.
Summary of the legal situation
The environmental premium is a historically significant instrument of German funding policy that was implemented within a strict legal framework according to budgetary and subsidy legislation and in compliance with European law. It exemplifies the link between environmental law and economic steering via state incentive systems. In the context of ongoing climate policy, the form and design of the environmental premium have continuously evolved, so that today’s funding instruments focus primarily on supporting low-emission powertrains and alternative technologies.
References and web links
- Act to Safeguard Employment and Stability in Germany (Economic Stimulus Package II), Bundestag Printed Matter 16/11740
- Guidelines for Promoting the Sale of Passenger Cars through Environmental Premiums, Federal Ministry for Economics and Technology
- Information on the environmental premium on the website of the Federal Office for Economic Affairs and Export Control (BAFA)
- European state aid law: Art. 107 et seq. TFEU
Frequently asked questions
Who is legally entitled to the environmental premium?
In principle, individuals and, where applicable, businesses that meet the legal requirements are entitled to claim the environmental premium. Legally relevant is that the applicant acts either as a natural or a legal person. For federal incentive programs or those of the Federal Ministry for Economic Affairs and Climate Action (BMWK), specific requirements are set out in the respective guidelines and administrative regulations. For example, it is usually required that the applicant is the owner of the supported vehicle and has a residence or business headquarters in Germany. The jurisdiction and extent of claims are governed by applicable state and federal laws, EU state aid rules, and the exact provisions of each program, such as the guideline for promoting the sale of electric vehicles. For legal entities, entitlement depends on whether they are organized according to the Commercial Code (HGB) or as a registered association (e.V.), and whether there are tax-specific considerations (such as non-profit status) that may affect eligibility. In addition, obtaining the environmental bonus is tied to the proper application to the respective federal agency, adherence to deadlines, and submission of necessary proof.
What legal requirements must be met to apply for the environmental premium?
The requirements are essentially derived from the relevant statutes or funding guidelines. In addition to ownership and a place of residence or business in Germany, other legal conditions must be met to apply. These include having a valid purchase or lease agreement for an eligible vehicle and, depending on the program, the scrapping of an old vehicle in accordance with waste legislation (certified disposal facility, documented proper recycling). The applicant must provide all evidence and documents required by the application (such as purchase agreement, registration certificate, proof of scrapping if necessary) within a set deadline. It must also be checked whether the vehicle is considered a “new vehicle” according to § 2 of the funding guideline or whether young used cars may also qualify. Furthermore, the vehicle must not be explicitly excluded from promotion based on its type or manufacturer. Compliance with data protection regulations and timely application are also mandatory legal requirements.
What deadlines must be observed when applying for and using the environmental premium?
The relevant deadlines are specified in detail in the respective funding programs or administrative regulations. Usually, the application for the environmental premium must be submitted to the appropriate funding authority within a specific period after purchase or initial registration of the supported vehicle, typically within nine months of initial registration or contract date. The incentive is also often time-limited—either to a specific date or until the available funds are exhausted. Many programs also stipulate minimum holding periods for the vehicle, which are legally binding: for example, many bonus programs require the vehicle to remain registered to the applicant for at least six to twelve months, otherwise the premium may be reclaimed. Special rules for minimum duration apply to leased vehicles. Missing deadlines results in the complete loss of entitlement to the premium.
What are the legal consequences of violating the conditions for the environmental premium?
Any violation of the terms and conditions for funding—for instance, providing false information, failing to comply with the minimum holding period, or unauthorized disposal of the promoted vehicle—has significant legal consequences. In particular, this includes (full or partial) repayment of the granted premium to the awarding authority according to § 48 (1) Administrative Procedure Act (VwVfG). Repayment is usually enforced by an appealable administrative decision. In cases of intentional or grossly negligent misrepresentation, criminal proceedings for subsidy fraud under § 264 of the Penal Code (StGB) may also be initiated. Fines in accordance with § 36 Administrative Procedure Act (VwVfG) and permanent exclusion from future incentive programs are also possible.
Can the environmental premium be legally combined with other funding measures?
Whether and to what extent the environmental premium can be combined with other incentives depends on the relevant legal provisions of the funding programs. Generally, combining federal subsidies is permitted to a limited extent, provided this does not amount to double funding. The guidelines usually state that the sum of all funding may not exceed a certain proportion of the eligible expenses, and require notification of any other subsidies received. Illegal accumulation or incorrect information in this regard results in the loss of entitlement to the premium or repayment of funds already paid. For European incentive programs, EU state aid rules also apply to prevent overfunding.
How is legal proof of vehicle scrapping provided when applying for the environmental premium?
The legal proof requirement is specified in the respective guidelines (e.g. End-of-Life Vehicle Ordinance, waste law). Scrapping must be carried out by a certified dismantling operation authorized under ElektroG or the relevant End-of-Life Vehicle Ordinance. Crucial here is the issuance of a so-called recycling certificate, which must be provided by the disposal company to the vehicle owner in accordance with § 15 of the End-of-Life Vehicle Ordinance (AltfahrzeugV). The recycling certificate in its original form must be submitted to the agency processing the application. Deregistration and final cancellation of the vehicle must also be evidenced by appropriate certificates. Failure to comply with these statutory requirements or submitting manipulated certificates will result in rejection or claw-back of the environmental premium and may also have administrative and criminal consequences.
What legal remedies are available against the rejection of an application for the environmental premium?
Legal remedies under administrative law are generally available to applicants whose application for the environmental premium is rejected. As a first step, an objection can be filed within the statutory period (usually one month from receipt of the rejection notice) (§ 68 et seq. Code of Administrative Court Procedure, VwGO). If the objection is not granted, it is possible to bring an action before the competent administrative court. The judicial process will review both formal and substantive legal aspects of the rejection. Throughout the entire appeals process, the suspensive effect of the remedy generally applies, unless otherwise stipulated. Legal protection is limited exclusively to a review of the eligibility requirements regulated in the relevant funding program and the factual determinations made by the approving authority.
