Cars
Europe Announces Reversal on 2035 Combustion Engine Ban
Europe’s controversial 2035 emissions laws will be wound back to allow the sale of a limited number of hybrid vehicles using internal combustion engines under a new proposal tabled in the European Parliament.
Reports earlier this month speculating on a proposed move have been proved correct after the European Commission (EC) officially announced plans to make the changes to the laws, following pressure from automakers.
The previous emissions regulations would have effectively banned the sale of new vehicles with internal combustion engines (ICE) by mandating that all new light vehicles sold could not “emit any carbon-dioxide [tailpipe] emissions”.
While having no impact on vehicles already on the road, financial penalties would be paid by any automaker that exceeded its fleet emissions target.
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The European Union said 2035 was chosen given the typical 15-year lifespan of a vehicle in Europe, helping the broader goal of the transport sector to become carbon-neutral by 2050.
“The fleet-wide CO2 emission target for 2035 will require a 90 per cent decrease in emissions [compared with 2021], so in practice that will mean 90 per cent of vehicles will be electric, abiding by the principle of technological neutrality,” reads the proposal from the European Commission.
Emissions from the portion of ICE-powered vehicles – be they petrol, diesel, hybrid or plug-in hybrid – would be offset by other measures, such as the use of synthetic and low-emission fuel as well as ‘green steel’ production.
The plans also include incentivising small battery-electric vehicles produced in the EU with ‘super credits’, in a bid to stave off an influx of competition from China.
As reported by Automotive News, the Commission will present the changes to the European Parliament in 2026.
“We hope an agreement can be struck as quickly as possible to guarantee stability,” Commission Executive Vice President Stéphane Séjourné said.
Many automakers had pushed for a change to the proposed regulations, citing slower-than-anticipated uptake of electric vehicles (EVs) and a lack of charging infrastructure as key factors.
That’s despite EVs taking a 16.4 per cent share of new European vehicle sales to the end of October 2025 – double the 8.2 per cent share in Australia to November 30, and more than the 5.3 per cent share of US sales in November predicted by S&P Global.
While EV sales are increasing, sales momentum and growth remain with hybrid and plug-in hybrid models, making up 34.6 per cent and 9.1 per cent, respectively, of all new vehicle sales in the EU to the end of October.
As reported by the BBC, the European Automobile Manufacturers’ Association had warned the 100 per cent target would have cost the auto industry “multi-billion” penalties.
Earlier this month, Ford called for the 2035 target to include hybrid models after suffering significant losses on EVs.
Polestar CEO Michael Lohscheller has slammed the changes to emissions regulations, arguing Europe “doesn’t have a demand problem, it has a confidence problem”.
“A fossil fuel car built in 2035 could still be polluting twenty years later. Moving from a clear 100 per cent zero-emissions target to 90 per cent may seem small, but if we backtrack now, we won’t just hurt the climate, we’ll hurt Europe’s ability to compete,” he said in a statement.
“Electrification will create long-term prosperity and jobs for the decades to come.
Impact of New CO2 Targets on Automotive Industry
Embracing new CO2 targets proposed by the European Commission is crucial for the automotive industry’s future. Reversing course and extending the life of outdated industries might delay progress, but it won’t align with the global shift towards sustainability.
Larger brands like Volkswagen have welcomed the changes, recognizing the economic benefits of the proposed targets. According to a statement from Volkswagen, the support for small electric vehicles and the market’s openness to vehicles with combustion engines are positive steps in the right direction.
However, not all automakers share the same sentiment. Stellantis, which oversees brands like Jeep, Peugeot, Citroën, and Fiat, believes that the proposed changes fall short of addressing the industry’s current challenges. They argue that the package lacks a viable trajectory for the light commercial vehicles segment and the flexibility needed for passenger cars.
The proposed 2030 changes include averaging emission targets over a three-year period for each automaker, covering both passenger cars and light commercial vehicles. Stellantis chairman John Elkann has advocated for separate emission targets for light commercial vehicles, emphasizing the need for tailored regulations.
In Australia, a similar debate led to the introduction of the New Vehicle Emissions Standard (NVES), which differentiates emission limits for passenger cars and light commercial models. While the Australian Capital Territory has set a 2035 zero-emission law, the rest of the country is yet to establish such regulations.
Overall, the automotive industry is at a crossroads, balancing the need for sustainability with economic viability. Adapting to new CO2 targets is essential for long-term success and environmental stewardship.
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