European Union-based carmakers will need to comply with a 90% reduction in CO2 emissions from 2035, instead of the 100% previously set in EU law, the European Commission announced today, revoking a controversial wholesale ban on internal combustion engine (ICE) vehicles adopted in March 2023.
Manufacturers will have to compensate for the remaining 10% of emissions by using low-carbon steel produced in the EU or by using sustainable fuels such as e-fuels and biofuels.
The industry will be allowed to continue producing plug-in hybrids, range extenders, mild hybrids, and ICE vehicles beyond 2035.
Full electric vehicles (EVs) and hydrogen vehicles will also be encouraged, with car manufacturers eligible to receive “super credits” for producing small, affordable electric cars made in the EU27, the Commission said.
“We’re staying the course towards zero-emissions mobility, but introducing some flexibilities for manufacturers to meet their CO2 targets in the most cost-efficient way,” Climate Action Commissioner Wopke Hoekstra told reporters on Monday.
The new automotive package is a “win-win”, Hoekstra said, noting that carmakers will have more flexibility while creating a lead market for clean steel.
Transport Commissioner Apostolos Tzitzikostas hailed the “great decision” to reduce the 2035 target to 90%.
“This is a clear signal that other technologies than battery electric vehicles can be put on the market after 2035,” Tzitzikostas added, noting the consumers will have the freedom to decide which technology they want to drive.
Despite some calls within the automotive sector to keep the ban and invest more in electrification, the vast majority of car manufacturers have been urging the EU to rethink its policies, claiming that their businesses are dying in the face of competition from China and the United States.
Germany, Italy, and several other member states have also lobbied the EU executive to withdraw the ban, arguing that the social fabric of their economies, propped up by the automotive industry, is disappearing. They claim their automakers are struggling with high energy prices, a shortage of car components, including batteries, and insufficient consumer demand for electric vehicles (EVs).
German automotive giant Volkswagen is expected to stop manufacturing vehicles at its site in Dresden, marking the first time in the carmaker’s 88-year history that it will close production in Germany, according to recent media reports.
Bulgaria, the Czech Republic, Germany, Hungary, Italy, Poland, and Slovakia were among the EU countries that asked the Commission to reconsider the 2035 ICE ban and to consider the sale of hybrid vehicles under the law.
France and Spain wanted to keep the ban, but asked the EU executive to support domestic production.
Can flexibility and electrification go hand in hand?
Veteran lawmaker Peter Liese of the European People’s Party (EPP) welcomed the EU executive’s update, saying that technological neutrality and climate neutrality “are compatible and must be reconciled”.
“The future belongs to electromobility, and I believe that too. We mustn’t slacken our support for electromobility, especially when it comes to expanding the charging infrastructure,” said Liese.
Sigfried de Vries, secretary-general at the automotive lobby group European Automobile Manufacturers’ Association, said that “flexibility was urgent” but maintained the sector’s commitment to decarbonisation.
“Auto makers have invested hundreds of billions of euros and put over 300 electrified models on the market. There cannot be any question about their commitment,” said De Vries.
De Vries welcomed the Commission’s flexibility to enable compliance with CO2 reduction targets in the run-up to 2030 and technological neutrality beyond 2035.
Chris Heron, secretary general of E-mobility Europe, a trade association lobbying for electric mobility, regretted the Commission’s decision, saying it will create more uncertainty for investors.
“We know the future of transport is electric,” he said. “What isn’t settled is who will build it. Hesitation or mixed signals risk undermining the investment certainty battery makers, manufacturers and grids need to scale. The message for policymakers is simple: hold the line on ambition and give industry clarity.”
Changing mindsets
The decision to ban the sale of new ICE cars and vans by 2035 was part of the European Green Deal, the EU’s flagship programme to reach climate neutrality by 2050, which drove Ursula von der Leyen’s first mandate as Commission President between 2019 and 2023.
But the winds changed with the EU elections in 2024. Green lawmakers in the European Parliament suffered a significant blow, and the chamber became dominated by the centre-right EPP and the far-right, with new parties like Patriots for Europe and the Europe of Sovereign Nations increasingly influencing policymaking.
German lawmaker Manfred Weber, the EPP’s leader, has been among the many centrists opposed to the 2035 ICE ban, claiming it was too early tor the industry to adjust to the transition.
Weber recently told the German media that the EU’s intention to open up the law would send an important signal “to the entire automotive industry and secures tens of thousands of industrial jobs”.
Lars Aagaard, the Danish minister for climate, energy and utilities acting on behalf of the Danish EU Presidency, said the review of the ICE ban on cars and vans needs to be aligned with the 2040 climate target.
“We will analyse the proposal from the Commission. Then I’m looking forward to being a Dane again and we will look into what our position will be,” Aagaard said on Monday on the sidelines of the Environment Council.
The Commission proposal will now be negotiated between the European Parliament and the European Council. The incoming EU Cypriot Presidency will mediate political negotiations starting in January 2026.