In a pragmatic pivot amid industry pressures and shifting political winds, the European Commission has revised its ambitious 2035 zero-emission vehicle mandate, reducing the required CO2 reduction target for new cars and vans from 100% to 90%. Announced on December 16, 2025, this change effectively scraps the full ban on internal combustion engines (ICE), allowing manufacturers to continue selling plug-in hybrids, mild hybrids, range extenders, and even traditional petrol or diesel vehicles beyond 2035—provided they offset the remaining emissions.
This adjustment marks a significant concession to the automotive sector, which has faced mounting challenges including sluggish EV demand, supply chain disruptions, fierce Chinese competition, and high production costs. While environmental ambitions remain high, the new rules introduce “technological neutrality,” balancing climate goals with economic realities.
What the New 2035 CO2 Targets Mean for Carmakers and Buyers
Under the revised regulation:
- Fleet-average CO2 emissions from new passenger cars and vans must drop by 90% by 2035 compared to 2021 levels (down from the original 100%).
- The remaining 10% of emissions can be compensated through:
- Use of low-carbon steel produced within the EU.
- Adoption of sustainable fuels, including e-fuels (synthetic fuels) and advanced biofuels.
- This opens the market for non-zero-emission vehicles post-2035, potentially allowing 30-35% of new sales to include hybrids or ICE models running on alternative fuels.
Additional flexibilities include:
- Banking and borrowing of CO2 credits over multi-year periods (e.g., 2030-2033) to ease compliance.
- “Super credits” for manufacturers producing small, affordable electric vehicles (under 4.2 meters, priced €15,000-€20,000) made in the EU, plus incentives like reduced road tolls and charging discounts for buyers.
- Relaxed interim targets, such as lowering the 2030 van emissions reduction from 50% to 40%.
The proposal still needs approval from the European Parliament and Council, with negotiations expected under the Cypriot Presidency starting January 2026.
Why the EU Backtracked on the Full ICE Ban
The original 100% reduction target, adopted in 2023 as part of the European Green Deal, was designed to phase out new CO2-emitting vehicles entirely by 2035, pushing the bloc toward full electrification to meet 2050 climate neutrality goals.
However, intense lobbying from carmakers and several member states forced a rethink:
- Countries like Germany, Italy, Czech Republic, Hungary, Poland, Bulgaria, and Slovakia highlighted risks of factory closures, job losses, and loss of competitiveness.
- The automotive industry, represented by ACEA, warned of “no longer feasible” targets amid battery shortages, high energy prices, and weak consumer demand for EVs.
- Post-2024 European elections strengthened centre-right and conservative voices, weakening green mandates.
Commissioners described the shift as a “win-win”: maintaining decarbonization momentum while providing cost-effective compliance paths and supporting EU steel production.
Relief for Automakers, Concern from EV Advocates
- Automotive Sector Welcomes Flexibility: ACEA’s Siegfried de Vries praised the moves for enabling “technological neutrality” beyond 2035 and urgent compliance relief. Leaders like EPP’s Manfred Weber hailed it as protecting “tens of thousands of industrial jobs” and ending an “industrial policy mistake.”
- E-Mobility and Environmental Groups Criticize: Representatives from electric mobility firms expressed regret, warning of investor uncertainty, delayed grid investments, and risks to battery manufacturing. Critics argue it dilutes ambition and could slow the EV transition.
- Politicians Divided: Climate Commissioner Wopke Hoekstra called it flexible yet ambitious; Transport Commissioner Apostolos Tzitzikostas emphasized consumer choice. Some, like Czech officials, push for even further repeal.
Implications for Europe’s Car Market and Consumers
This compromise could reshape the future of motoring in the EU:
- Extended Lifeline for Hybrids and ICE: Plug-in hybrids may see renewed investment, offering a bridge for buyers hesitant about full EVs due to range anxiety or charging infrastructure gaps.
- Boost for Alternative Fuels: E-fuels and biofuels gain prominence, though scalability and cost remain challenges.
- Push for Affordable EVs: Incentives target entry-level electrics to counter Chinese dominance in budget segments.
- Job and Competitiveness Safeguards: Aims to prevent mass layoffs (e.g., recent Volkswagen plant issues) and keep production in Europe.
For car buyers, the changes mean more options post-2035, potentially lower upfront costs for non-EV models, but ongoing reliance on fuel prices unless sustainable alternatives mature quickly.
As negotiations proceed, this evolution reflects the EU’s challenge in balancing bold climate action with industrial preservation in a competitive global landscape. The road to zero-emission mobility continues—but with more lanes open than before.
