PARIS – Not far from downtown Paris, an entrepreneurial fellow has started a drive-in bakery, not unlike the drive-in party stores one finds in the U.S.

You drive into the building, stop in front of the counter and from your front seat, you ask for your daily baguette, or a ham and cheese sandwich.

The bakery is an indirect endorsement of clean and quiet cars, and two-thirds of new cars sold in France are diesels.

French auto makers lead the world in diesel production. PSA Peugeot Citroen shares diesel development with Ford Motor Co. and made 2 million engines last year. Renault SA supplies diesel engines to Nissan Motor Co. Ltd.

Political will helps make France diesel country. Taxes are lower on diesel fuel than gasoline. Tradition is part of it. Peugeot had diesel taxis and commercial vehicles in 1936, the year that Mercedes-Benz sold the first diesel passenger car, the 260D.

Global warming also has something to do with it. The 1997 Kyoto agreement pressures all European countries to reduce carbon dioxide emissions, and diesel quickly cuts automotive CO2 by 15%. Thanks largely to the diesel, but also to speed limit enforcement, France in 2005 emitted less CO2 than in 1990.

Nelly Olin, minister of Ecology and Sustainable Development, says the country emitted 514 million tons (466 million metric tons) in 2005, and it can continue to remove 6 million to 8 million tons (5.4 million to 7.3 million metric tons) of CO2 a year.

It is a vast oversimplification, but one could say that PSA represents clean diesel and Renault is fun diesel.

PSA introduced a particle filter on its big diesel cars in 1999 that captures 99.9 % of the soot associated with diesel engines, far better than regulations permit. The filter was a marketing coup. Public pressure forced the rest of the European industry to follow suit, even when their cars already met regulations.

Now PSA is working on a hybrid diesel for 2010 aimed at reducing CO2 to less than 100 g/km in a European C-segment car such as the Peugeot 307.

Today, PSA and Ford are the only auto makers mixing a tiny amount of cerium fluid in the diesel fuel to reduce the temperature of filter regeneration, when soot trapped in the filter is burned out. PSA’s director of engine development Norbert Lartigue says in the future, PSA and Ford might inject fuel directly into the exhaust to regenerate a catalytic filter, “and we are working on ways to use the urea injection required for NOx (oxides of nitrogen) treatment to regenerate the particle filter.”

Renault, which has been emphasizing 5-star EuroNCAP safety as its marketing strategy, has put its engineering effort on performance, which helps move heavier, safer cars around. At the Geneva auto show in March, it introduced the Megane Renault Sport dCi with a 2L, 175-hp common-rail diesel. Tuning division Renault Sport had never used a diesel before.

“European customers are completely convinced by the diesel, so much so that it can replace a gasoline engine in a sporty car,” says, Jean-Luc Huet, Renault’s director of diesel development. “With these modern injection systems, we hope to convince the Americans and Japanese one day.

“People who buy luxury cars in Europe buy diesels, not because the fuel is less expensive, but because the qualities are better. They are even quieter than gasoline motors at high speed, because they don’t have to turn at 6,000 rpms; they get equivalent performance at 3,000.

“We have solved the problems of noise and vibrations. In addition, the torque is very good at low rpms, so for heavy vehicles like off-roaders, SUVs and big sedans, a diesel is more comfortable to drive,” Huet adds.

Partners of the French auto makers are working on V-8 diesel engines for their big vehicles in North America and their European luxury cars. Ford is developing a 4L V-8 based on the 3L V-6 in the Peugeot 607 and Citroen C6, and Nissan is working with companies such as Cummins Inc. as well as Renault.

The European challenge is to meet the tougher rules of the future – 130 g/km of CO2 in 2012 and hardly any NOx for Euro 6 in 2014 – without raising the cost of engines beyond affordability.

For the future, auto makers are looking at homogeneous combustion compression ignition for diesels. Valeo SA is working with its customers on camless valve control for ultimate diesel designs; and Inergy SA and its partners are working on better selective catalytic reduction systems.

There will be biofuels, compressed natural gas, hybrids and controlled auto ignition of gasoline.

“We are going to need all fuels,” Huet says.

However, diesel is likely to remain the basic French solution until hydrogen arrives. At last fall’s Paris auto show, Jean-Martin Folz, then chairman of PSA, was asked about Honda Motor Co. Ltd.’s plan to bring a diesel to the 50 U.S. states in 2008.

He quipped: “It’s good for the diesel, therefore it’s good for humanity.”