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It's mostly due to politics rendering Diesel engines not viable for smaller cars, not just due to tight emission requirements but also due to other strategies such as limiting the traffic in certain places. At least in Spain, I'm aware there are restrictions on the traffic and parking in downtown Madrid under certain high-NOx conditions, and hybrids are excempt from such restrictions. The increasing availability of hybrids and a ressurging interest in gaseous fuels throughout Europe might also influence in this move.
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