Germany should cut tax breaks and other subsidies on cars in order to stem the trend of rising carbon emissions in the transport industry, the Organisation for Economic Co-operation and Development said in a report.

Europe’s largest economy is among the world’s top ten emitters of carbon emissions, and transport is the country’s problem child. Emissions from cars, trucks, ships and planes rose 0.7% to 148 million tons in 2022 — the second consecutive increase after a pandemic-related dip — and are crucial in Germany’s bid to slash emissions by two thirds by 2030, compared with 1990 levels.

Germany should act “decisively” to promote environmentally-friendly mobility as part of an integrated strategy, the OECD said in its Environmental Performance Review. The country’s taxation level is far below the average of the OECD’s 38 member states, and Germany is one of the few nations that doesn’t levy a tax on vehicle purchase or registration, it said.

Traffic-related subsidies rose by about 35% to €65 billion ($71.8 billion) in the decade through 2018. The agency recommends abolishing tax breaks on company cars or distance allowances for commuters, as well as raising parking fees. Motorway tolls that are in place for trucks could also be extended to cars and light commercial vehicles. A recommendation for a wider use of speed limits is likely to find opposition from the pro-business FDP party, part of the governing coalition.