* Germany accused of breaching EU law on car refrigerants
* European Commission gives Germany two months to respond
* Daimler, Germany insist the use of their coolant is legal
By Tom Körkemeier and Ilona Wissenbach
BRUSSELS/STUTTGART, Jan 23 (Reuters) - The European Commission launched legal proceedings against Germany on Thursday over Daimler's refusal to remove a banned refrigerant from new cars, the latest in a series of clashes between Brussels and Berlin.
The EU executive's decision follows months of investigation by the Commission into the German luxury carmaker's refusal, backed by Berlin, to apply an EU law banning an air-conditioning coolant known as R134a.
In response, the German government and Daimler said they did not believe the continued use of the refrigerant amounted to a breach of EU rules.
Instead they urged EU authorities to reconsider whether a suggested substitute, known as R1234yf and manufactured by U.S. conglomerate Honeywell, really was safer.
"We are opening a procedure against Germany," EU industry commissioner Antonio Tajani told reporters, making clear that the Commission had not taken a final decision on the matter.
Germany now has two months to respond. A formal procedure for breach of EU rules is a multi-stage process which takes months. If an appeals process is unsuccessful the dispute ends up before the European Court of Justice, and could ultimately result in heavy fines.
The move is the latest in a series of clashes between the Commission and the German government. Last month, EU officials said they planned to investigate billions of euros worth of renewable energy tax exemptions that Germany grants to heavy industry.
In November, the Commission said it would look into whether Germany's persistently high current account surplus was harming the European economy as a whole.
At an energy conference in Berlin this week, German Economy and Energy Minister Sigmar Gabriel launched an unusually blunt attack on Brussels, saying Berlin would defend its interests against outside interference.
WITHDRAWAL THREAT
Daimler says its refusal to phase out R134a, a global warming agent 1,000 times more potent than carbon dioxide, is justified by safety concerns over R1234yf, a view supported by Germany's ministry of transport.
The EU "mobile air conditioning" directive 2006/40/EC bans the use of R134a in models approved for sale since the start of 2011. Vehicle types certified earlier, or their derivatives, have until 2017 to comply.
The controversy stems from the fact that some new Daimler cars were not initially approved to use R134a, but that this approval was later sought retroactively via an "extension" after concerns about the safety of the newer substance surfaced.
In a statement, the Stuttgart-based carmaker pointed out that it had won approval from the German government for the continued use of R134a while a newer generation CO2-based refrigerant is developed.
Around 130,000 Daimler cars would have to be withdrawn if the Commission's view on the coolant prevails.
The carmaker argues that R1234yf can emit toxic hydrogen fluoride gas when it burns, making it a safety hazard.
But other major carmakers, after conducting their own tests, have switched their newest models to the coolant developed by Honeywell in partnership with Dupont.
"Daimler says there is a safety problem with the new coolant, but we do not see that," Industry Commissioner Tajani said.
Germany's automobile industry association VDA said it was surprised the European Commission was taking formal steps even before tests on the safety of 1234yf had been evaluated.
The EU executive also threatened Britain, Belgium and Luxembourg with legal action, saying it suspected they had sought to circumvent the coolant rules by approving new vehicles on the basis of older technical standards.
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