Parliament negotiators agreed 87.5% EU car CO2 target for 2035

The compromise between the European People's Party, Socialists and Democrats and Renew Europe would require an 87.5% reduction in new-car CO2 against 2021 levels. Manufacturers could receive a further 7.5 percentage points of credit through the use of low-carbon steel produced in the EU, according to an agreement text seen by Reuters. The deal does not change the law. It still requires political approval within the European Parliament, followed by agreement with EU governments on the final legislation.

What the compromise would change

The regulation adopted in 2023 requires a 100% reduction in fleet-wide CO2 emissions from new cars and vans from 2035, effectively ending sales of new combustion-engine vehicles. The European Commission's December 2025 proposal would replace that with a 90% reduction in tailpipe emissions. Under that proposal, the remaining emissions would need to be compensated through EU-made low-carbon steel, e-fuels or biofuels.

The Commission said that approach would allow plug-in hybrids, range-extender vehicles, mild hybrids and conventional combustion-engine cars to retain a role beyond 2035 alongside electric and hydrogen vehicles. The parliamentary compromise would lower the required tailpipe reduction further, while providing a credit for European low-carbon steel. The percentages concern manufacturers' average fleet emissions. They do not represent a fixed allowance for the proportion of petrol, diesel or hybrid cars that could be sold.

Autocar reported that small electric cars built to new M1E regulations inside the EU would get 'super credits' towards emissions targets, and that the proposals set no end date for the sale of combustion vehicles. The Commission said carmakers that miss their targets face fines that could run into the billions.

ACEA figures cited by Motor1 put cars without combustion engines at 18.3% of EU sales in the first ten months of the year, against 34.7% for hybrids and 9.4% for plug-in hybrids. Plug-in hybrids outsold diesels over that period for the first time.

Pressure behind the change

Germany backed the rule after securing an exemption for synthetic e-fuels, mainly benefiting Porsche. German Chancellor Friedrich Merz called for abandoning the ban outright, saying the automotive industry needed a more flexible path to climate neutrality, and pledged to present his proposal at the informal EU summit in Copenhagen on 1 October, the Warsaw Business Journal reported.

Commissioner Apostolos Tzitzikostas told Handelsblatt that Merz's letter to European Commission President Ursula von der Leyen had been 'very well received in Brussels'. Autocar reported that the Commission's proposal followed intensive lobbying by national governments and by Volkswagen, Renault, Mercedes-Benz, BMW and Stellantis. Stéphane Séjourné, the Commission's executive vice-president for prosperity and industrial strategy, called the changes 'a lifeline for the European automotive industry'.

What happens next

The Parliament's transport and industry committees were due to vote on their positions on 22 October, with the lead environment committee expected in early November and a possible parliamentary vote in December. Autocar reported that the laws are expected to be brought into law quickly once they are presented to EU member states early next year.

Member states would have to set a target for a 'specific share' of new corporate car and van registrations by large corporations to be zero-emission by 2030. The share and the definition of a large corporation have not been outlined.