German cities will be allowed to ban older diesel vehicles from some areas following a landmark court ruling.
The Federal Administrative Court in Leipzig said the cities of Stuttgart and Duesseldorf could legally ban more older, more polluting diesel cars from zones worst affected by pollution.
Both the government and the car industry have opposed the bans, which set a precedent for the whole country.
They fear diesel owners’ lives will be disrupted and vehicles will lose value.
The ruling by the country’s highest federal administrative court came after German states had appealed against bans imposed by local courts in Stuttgart and Duesseldorf, in cases brought by environmental group DUH.
It said bans were necessary after about 70 German cities exceeded European Union nitrogen oxide (NOx) levels limits last year.
Diesel emissions containing nitrogen oxide can cause respiratory disease.
Diesel vehicles have faced greater scrutiny since VW’s “dieselgate” scandal.
In September 2015, the car maker admitted it had used illegal software to cheat US emissions tests. Some 11 million cars worldwide ended up being affected by the scandal.
DUH said it hoped the bans in German cities would end the industry’s “resistance” to refitting older, more-polluting cars to meet the latest EU standards.
“This is a great day for clean air in Germany,” said DUH managing director Juergen Resch.
What happens next? Theo Leggett, Business correspondent, BBC News
The likelihood now is that the German government will rush to introduce some sort of national policy, to ensure at least some level of consistency across the country.
There may also be a move to retro-fit older cars with modern emissions control technology – potentially a very costly process.
New diesel cars won’t be affected, but that’s not really the point. Consumers are already moving away from the technology – and the prospect of city bans will only accelerate that process.
So diesel’s decline is likely to gather momentum.
That’s a problem for the industry, because while diesels produce high levels of nitrogen oxide – a major urban pollutant – they emit relatively low levels of carbon dioxide, a greenhouse gas.
So moves to control one environmental problem may end up undermining efforts to combat another – unless we all start driving electric cars very soon.
The impact on German drivers could be marked, with millions being forced to leave their cars at home on days when harmful emissions are particularly high.
Of the 15 million diesel cars on Germany’s roads, only 2.7 million meet the latest Euro-6 standards, according to data from Germany’s automotive watchdog.
Car companies could also incur huge costs to refit vehicles at a time when consumer interest in diesel is falling.
The market share for diesel vehicles in Germany fell from 48% in 2015 to around 39% last year.
Seeking to avert bans, German car makers have pledged software improvements for millions of diesel cars and offered trade-in incentives for older models.
The German government meanwhile has floated alternatives, such as making public transport free in cities suffering from poor air quality.
Paris, Madrid, Mexico City and Athens have all pledged to ban diesel vehicles from city centres by 2025, while the mayor of Copenhagen wants to ban new diesel cars from entering the city as soon as next year.
Carmakers including VW-owned Porsche and Toyota have also signalled they will move away from diesel technology.
The share of diesel cars in overall vehicle production in Europe could be cut to 27% by 2025 from 52% in 2015, Barclays forecasts.