How Europe's 2035 combustion car ban will be weakened

A European Parliament committee voted Nov. 4 to soften the EU’s 2030 and 2035 CO2 rules, handing automakers relief as Chinese rivals gain ground, EV adoption lags and auto market volumes remain about 20 percent below pre-2020 levels.

The existing rules were adopted in 2023. They allow only cars with zero tailpipe emissions to be sold after 2035, effectively banning internal-combustion engines, a target that automakers say cannot be reached at the current rate of electric-vehicle adoption. Automakers that miss their fleet-emissions targets face millions of euros in fines.

Automakers also use the targets as a guide for directing hundreds of billions of euros in future investments.

The 2035 zero-emissions target will most likely be eased in some form, but the extent of any changes is crucial for automakers.

The Parliament proposal, for example, would require an 87.5 percent reduction in emissions, while allowing the remaining 7.5 percent to be offset through the use of low-carbon steel. As a result, about 40 percent of cars sold after 2035 could still have internal-combustion engines, according to the green advocacy group Transport & Environment.

The committee vote reflects the position of three key parties in Parliament — the center-right European People’s Party, the center-left Socialists and the liberal Renew group, and establishes the body’s negotiating position in talks with the European Council, which represents individual countries.

EU lawmakers are debating two key pieces of legislation. The first is an automotive “rescue package” aimed at setting more realistic emissions targets for cars and vans, strengthening the EV supply chain, reducing regulation and decarbonizing corporate fleets. The second is the Industrial Accelerator Act, which ties EV incentives to European content requirements, among other measures designed to safeguard EU jobs.

What did the Environment Committee vote for?

The key provision is reducing 2035 tailpipe emissions by 87.5 percent, compared with 2021 levels, rather than 100 percent. The remaining 7.5 percent of emissions could be offset through the use of low-carbon steel produced in the EU.

For commercial vans, the 2030 target would be a 35 percent reduction, compared with 50 percent under current rules and 40 percent under the European Commission proposal. The 2035 target would be an 80 percent reduction, with a 7.5 percent green-steel offset.

Emissions would be averaged over a set period, likely 2028-32, for compliance with the 2030 standards.

Vehicles running exclusively on eligible sustainable fuels, known as VEEFs, would be considered zero-emission vehicles.

Small EVs measuring 4.2 meters or less and made in Europe would qualify for “super credits,” meaning each vehicle would count as 1.4 vehicles when calculating fleet emissions. A new provision would allow “efficient” EVs made in Europe, regardless of size, to count as 1.2 vehicles. Electric vans made in Europe would also qualify. No definition of “efficient” has yet been provided.

What is the reaction from the industry?

The automotive industry’s reaction to the Parliament proposal was largely positive.

ACEA, the automakers’ lobbying group, described the proposal as “another step towards a more pragmatic and technology-neutral framework,” including greater recognition of the role of renewable fuels and low-carbon materials.

However, ACEA said the additional flexibilities for passenger-car emissions remain “too limited in scope and duration to adequately address the industry’s concerns.”

The suppliers’ association CLEPA said it supported the proposal but called for a freeze on changes to testing procedures for plug-in hybrids that could increase their emissions.

The Italian trade group ANFIA described the vote as a “step forward in pragmatism and responsibility” but said the mandatory 7.5 percent green-steel offset “is not tenable.”

Germany’s automotive lobby group, the VDA, said the Parliament proposal contains “clear improvements over the European Commission’s proposal” but “does not go far enough to ensure the competitiveness of Europe as a manufacturing base, and thus the prospects for growth and employment in Europe.” The VDA is calling for a 90 percent reduction in emissions by 2035 without the need for offsets.

Transport & Environment said the Parliament package “puts at risk the €200 billion already invested in Europe’s EV ecosystem.” The group called for capping the number of cars running on sustainable fuels at 5 percent and limiting super credits to small cars made in the EU.

What other proposals are on the table?

France and Germany, the two largest EU auto markets, negotiated a separate compromise that could be reflected in European Council discussions. It calls for a 90 percent reduction in fleet emissions by 2035 without the need to use green steel or sustainable fuels as offsets.

The two countries linked looser emissions rules to stronger “Made in Europe” requirements. France sought stricter local-content rules to counter Chinese competition, while German automakers warned that such measures could trigger a trade war with China, a key market for BMW, Mercedes-Benz and Volkswagen Group.

Why does easing emissions targets matter?

Automakers that miss their emissions targets are subject to fines of €95 per gram of CO2 above the limit, per vehicle.

An automaker that sells 1 million cars a year in Europe and misses its target by just 1 gram per kilometer would face fines of €95 million. A miss of 10 grams would result in fines of €950 million.

To avoid penalties, automakers may pool their emissions with EV makers such as Tesla, although they must pay for the arrangement.

The rules will also influence how automakers allocate hundreds of billions in investments in the next decade and beyond. The stakes are high: Stellantis recorded a write-down of €22 billion ($26 billion) in the 2025 fiscal year alone, much of it was linked to overly optimistic forecasts about EV sales.

What comes next?

The full Parliament is expected to vote on the proposal in December. Parliament, the European Council and the European Commission will then seek to reconcile their differing positions on both the automotive package and the Industrial Accelerator Act.