EU Revises 2035 Emissions Target, Allows Combustion Engines with Offsets: Reuters

The European Commission unveiled a plan on December 16 to revise its effective ban on new combustion-engine cars from 2035, according to Reuters. The proposal marks a shift in EU climate policy following pressure from the automotive sector in Germany and Italy.

Under the revised plan, EU targets would shift to a 90% cut in CO2 emissions from 2021 levels instead of the current requirement for all new cars and vans to have zero emissions from 2035. Automakers would be permitted to offset the remaining 10% of emissions by using lower-carbon steel produced in the EU and synthetic e-fuels or non-food biofuels such as agricultural waste and used cooking oil.

The proposal allows continued sales of plug-in hybrids and range extenders that burn fuel. The plan also provides automakers a three-year window from 2030 to 2032 to cut car CO2 emissions by 55% from 2021 levels, while the 2030 target for vans would be eased to 40% from 50%.

Reuters reports the move requires approval from EU governments and the European Parliament. Volkswagen, Europe's largest carmaker by volume, stated that opening the market to vehicles with combustion engines while compensating for emissions is pragmatic and in line with market conditions.

The proposal follows Ford Motor's announcement of a $19.5 billion writedown as it cancels several EV models, responding to Trump administration policies and weakening EV demand in the United States. European carmakers including Volkswagen and Stellantis have flagged soft EV demand and urged looser targets and lower fines for missing them.

The Commission also proposed plans to boost EV uptake in corporate fleets, which account for approximately 60% of new car sales in Europe. National targets for 2030 and 2035 would be set based on GDP per capita, leaving countries to determine how to meet them. The Commission proposed creating a new regulatory category for small EVs, subject to lighter rules and eligible for extra credits towards CO2 targets if manufactured in the EU.

Dominic Phinn, head of transport at Climate Group, stated that the watering down of the petrol and diesel-engine phase-out contradicts leading companies across Europe who are investing billions in electric fleets and need the stability. William Todts, executive director of clean transport advocacy group T&E, said clinging to combustion engines will not make European automakers competitive again.

Hildegard Mueller, president of German auto industry body VDA, said the moves did not go far enough to support the industry and placed new requirements on carmakers regarding green steel and renewable fuels.