BERLIN/FRANKFURT (Reuters) - German Chancellor Angela Merkel will hold a high-level meeting on Sunday to discuss whether to require the car industry to carry out costly hardware upgrades for older diesel vehicles to reduce inner-city pollution, government sources said.
The meeting comes as a deadline of the end of the month set by Merkel looms to stave off bans on older vehicles and follows a report by the Spiegel news weekly that Merkel supports such hardware retrofits, which would cost thousands of euros per vehicle.
The news weekly said, without naming any sources, that Merkel had instructed her transport minister to draft legislation that would allow cars running to the Euro-5 standard on emissions to avoid inner-city bans.
Merkel's ruling alliance has been split on the best way to tackle the problem, with the environment ministry backing hardware retrofits costing around 3,000 euros ($3,500) per vehicle rather than tweaks to engine management software seen as less effective.
Transport Minister Andreas Scheuer, meanwhile, favours incentives for drivers of older diesel vehicles to trade them in for newer, models in order to reduce overall pollution caused by the fleet of cars on the road.
POLLUTION POLITICS
Election politics are playing a role in the debate, with Scheuer's Christian Social Union facing what could be its worst result in decades in Bavaria, the southern state that it rules and that is home to carmakers BMW <BMWG.DE> and Audi <NSUG.DE>.
The state of Hesse also goes to the polls in October and there Chief Minister Volker Bouffier, a member of Merkel's Christian Democrats, is fighting a court order to ban older diesels from the streets of Frankfurt.
Hesse introduced a motion on Friday in the upper house of parliament, which represents Germany's 16 federal states, demanding hardware retrofits.
"We want the federal government to create the conditions for diesel vehicles to get hardware upgrades at the cost of manufacturers," Bouffier said on the fringes of the debate in Berlin. "That's the best way to avoid driving bans."
Other states have called for some form of burden sharing but all agree that the cost of the hardware upgrades should not fall on drivers, who have seen the resale value of diesel cars plummet following an emissions test-cheating scandal.
Volkswagen AG <VOWG_p.DE> has paid billions of dollars in fines after admitting in 2015 that it deployed software that could detect when its diesel models were undergoing emissions tests and manage engine performance to meet legal requirements.
BMW declined to comment. A spokesman for Volkswagen, which owns Audi, said: "Taking purely the technicals facts into consideration, refits are the wrong solution."
Daimler <DAIGn.DE> did not respond to a request for comment.
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(Reporting by Douglas Busvine, Gernot Heller and Hans-Edzard Busemann; Additional reporting by Christina Amann and Ilona Wissenbach; Editing by Maria Sheahan and Keith Weir)
