Commission kills its flagship combustion engine ban

The European Commission on Tuesday reversed its flagship ban on producing new combustion engine cars by 2035, even as it vowed to meet its ambitious climate targets.

In a major win for industry, the current requirement for automakers to reduce tailpipe emissions from new vehicles by 100 percent by 2035 is now gone. The reformed legislative proposal, published Tuesday, will now call on companies to lower these emissions by 90 percent from 2021 levels.

“This will allow for plug-in hybrids, range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full electric and hydrogen vehicles,” the Commission said in a press release unveiling its automotive package on Tuesday afternoon.

The package, which includes a new regulation on greening corporate fleets, a battery initiative and regulatory simplification measures, marks a major victory for the automotive industry and the center right, which had campaigned ahead of the 2024 European election on overturning the ban.

European People’s Party chief Manfred Weber was elated by the changes, telling media on Tuesday morning that the 90 percent target was “clearly an EPP request. We were amending this also when the legislation was first time discussed in the Parliament four years ago. So we are coming back to our original EPP positioning.”

For its part, the Commission staunchly maintains the ban is still in place but with added flexibilities for European automakers struggling with a U.S.-led trade war, lackluster car sales and stiff competition from Chinese incumbents with their glitzy electric vehicles.

All about averages

The Commission is also watering down its target of a 50 percent reduction in emissions by 2030 by allowing automakers to calculate average emissions over three years (2030 to 2032).

The change mirrors an amendment signed into law earlier this year that averaged the 2025 emissions target over three years after intense lobbying from the industry and their political allies.

Both the 2025 and 2030 targets are part of the overarching 2035 law that banned new CO2-emitting vehicles, with the interim targets intended as goalposts to keep automakers on track.

The EU executive is also altering the 2030 emissions-reduction target for light-commercial vehicles, such as delivery vans, lowering it from a 50 percent reduction to 40 percent of 2021 levels.

Creating demand

The measure for greening corporate fleets — vehicles owned or leased by companies for business purposes — sets targets for what proportion of each EU country’s fleet should be zero- or low-emission, based on their GDP.

It is hoped the regulation will create a second-hand market for EVs to foster a “swifter transition away from older combustion engine” cars, and act as a demand mechanism to complement the 2035 law.

While the targets are binding, the Commission says it is giving discretion to the capitals on how the targets should be achieved. It anticipates most will incorporate favorable tax policies for companies, pointing to Belgium as an example, which has boosted its share of EVs on the road through tax breaks.

Under the proposal, plug-in hybrids, range extenders and combustion engine vehicles would all count toward the target but with the same caveats. Under the reform, all powertrains will be available as part of the 10 percent, but the Commission is mandating that automakers offset the emissions with made-in-EU green steel and alternative fuels.

Small and mid-sized companies will be exempt from the law, a Commission official said in a media briefing Tuesday ahead of the Parliament presentation.

Smaller is better

The automotive omnibus — a regulatory red-tape cutting scheme — focuses on a small-car initiative that Commission President Ursula von der Leyen announced during her September State of the Union address. A small EV will be defined as measuring 4 meters and 20 centimeters in length, the size of a compact car.

The cars have their own regulatory category in the legislation and have been given specific concessions like subsidies and reserved parking spaces.

Companies that produce small cars would also get a coefficient of 1.3 in the emissions target calculations, meaning that if a carmaker sold 10 small EVs they would get emissions credits worth 13 cars. But the initiative will only be in place until 2034, the EU executive said.

As with corporate fleets, manufacturers will have to comply with local content requirements when manufacturing small EVs in order to get the emissions credits.

France has long demanded that any flexibilities around the ban be tied to local content requirements — a request it put forward in October alongside Spain.