... Europe has generally allowed dirtier engines as a percentage of overall emissions but tax the crap out of larger engines, on the assumption that they can then reduce the total amount of pollutants.
That is, it's a sensible approach if your goal is to reduce the production of pollutants and/or carbon dioxide. The most effective way to do that is to burn less fuel — levy higher taxes on fuel to discourage consumption, have nastier “gas guzzler” taxes (essentially what the displacement-based taxes are meant to be, they also double as a luxury tax), and subsidize rail, where each individual uses a fraction of the energy. I think the primary reason these measures were implemented was actually to reduce Europe’s sensitivity to OPEC and/or Egypt state actions, given how badly Europe was hit by the canal crisis. That’s also why nuclear power seems to have been encouraged throughout Europe. (In addition, of course, Europe has little oil of its own, save the relatively recent North Sea fields, and importing from the Middle East via pipeline was next to impossible during the Soviet era, when these rules were created).
I'm not saying I like it or it's right, just that if you approach it from a pure public policy viewpoint, and you have that goal, then it makes sense not to punish small-diesel buyers with absurdly strict "percentage of pollutants" rules. The US’ approach has generally been to reduce the percentage, not the absolute quantity, of pollutants. We have CAFE, of course, but CAFE has always been poorly implemented, partly largely because of inertia (hard to address past errors in judgement), largely because CAFE disproportionately hurts American automakers... a self perpetuating problem because as CAFE is adjusted to help the domestics, they rely more on the lower-mileage vehicles for profits, which means CAFE has to stay adjusted to help them... when Chrysler was the only company to meet the CAFE standards, Pres. Reagan even rolled them back so GM and Ford wouldn't have to pay the relatively minor fines. Oh, Iacocca was pissed. “Well, you were the only person who studied for this test, so we'll just throw out all the scores and try again next week. Sorry you wasted all that time studying, but maybe someday it'll matter."
