The European Union’s flagship 2035 clean‑car rule has been jolted by a late‑stage rethink that many in Brussels are already calling a combustion comeback. What began in 2023 as a 100% CO2 reduction requirement for new cars and vans is now, in a December 2025 proposal, a 90% target that lets the remaining 10% be offset through low‑carbon EU steel and sustainable fuels. A Commission official defended the move as an exercise in “technology neutrality,” arguing that the new flexibility mechanism keeps climate ambition while reopening the door, slightly, to combustion engines that can prove their climate credentials.
The Original 2035 Mandate and What It Meant
The starting point for the current fight is the baseline law that set what was widely described as a 2035 ban on new combustion cars. In Regulation 2023/851, the EU required a 100% CO2 reduction for new passenger cars and light commercial vehicles from 1 January 2035, measured against a 2021 baseline. In practice, that standard meant only vehicles with zero tailpipe emissions, such as battery electric and hydrogen fuel cell models, could be sold as new after 2034, while internal combustion engines that emitted CO2 at the exhaust would fall outside the rules.
The legal text did not allow carmakers to balance out residual tailpipe emissions with offsets or supply‑chain credits, and hybrids were treated accordingly. Plug‑in or conventional hybrids that still burned petrol or diesel could not meet a 100% reduction target because they continued to emit CO2, so they were effectively excluded from the post‑2035 market for new vehicles. The regulation tied this strict approach directly to the EU Green Deal, casting it as a necessary step to align road transport with long‑term climate goals and to send a clear investment signal that only zero‑emission technologies would qualify after 2035.
What’s Changing in the 2025 Proposal
The Commission has now proposed a significant adjustment through its December 2025 automotive package, shifting from the absolute ban logic of 2023 to a more flexible architecture. In the Primary legislative proposal, the Commission recasts the 2035 requirement as a 90% tailpipe emissions reduction target for new cars and vans, again relative to 2021 levels, effective 1 January 2035. The remaining 10% of emissions would no longer be forbidden outright but could be compensated, provided manufacturers meet strict conditions on how those offsets are generated and verified.
According to the Commission’s official automotive package page, carmakers from 2035 must comply with a 90% tailpipe reduction and may cover the last 10% through the verifiable use of low‑carbon steel produced in the EU and/or certified e‑fuels and biofuels. The proposal, tabled under Article 114 TFEU as a single market measure, spells out a post‑2035 compliance system in which manufacturers document the share of EU‑made low‑carbon steel in each vehicle and the volume of sustainable fuels used over a car’s lifetime. That structure is presented by the Commission as a way to preserve climate integrity while allowing limited room for non‑zero‑emission combustion technologies that contribute to decarbonising the wider industrial chain.
Why Now? Political and Industry Pressures
The timing of the shift reflects intense political and industrial pressure that has built since the original law was agreed. Reporting on the December 2025 package describes how the Commission faced heavy lobbying from European carmakers worried about competitiveness as Chinese manufacturers, backed by domestic subsidies, ramped up exports of cheaper electric vehicles into the EU market. Industry groups argued that a rigid 100% mandate would force them into a cost race they were not ready to win, especially while they were still investing to retool factories and supply chains for batteries and software.
At the same time, the sector warned that the transition risked large job losses in combustion‑engine manufacturing regions and that charging infrastructure was not expanding fast enough to support a fully electric fleet. The European Automobile Manufacturers’ Association, or ACEA, has been cited in coverage as a prominent voice pressing for more “realistic” pathways, and one senior executive quoted by Major described the new proposal as a “climbdown” that nonetheless offered breathing room. That framing captures the political balancing act: the Commission insists it is preserving ambition, while critics see a retreat from the clarity of the original ban.
Industry and Market Reactions
Carmakers have broadly welcomed the added flexibility, even if they remain committed on paper to large‑scale electrification. Reporting on the package notes that companies such as Volkswagen expressed relief that the new 90% target keeps pressure to decarbonise but no longer makes a single technology the only possible answer. For manufacturers with significant investments in efficient combustion engines and hybrid platforms, the prospect of selling a limited share of models powered by sustainable e‑fuels after 2035 is seen as a way to manage the transition for both factories and customers.
Electric‑vehicle advocates and some climate groups, by contrast, warn that the new offset mechanism risks weakening the original signal that the era of combustion is ending. They point to the fact that battery electric cars had already reached a 14.6% market share in 2023, according to EU data cited in AP News, as evidence that the market was adjusting to the 2035 rules. The European Parliament’s own record of adopting targeted flexibility for 2025–2027, which allowed carmakers to average emissions over those years, shows that co‑legislators had already been fine‑tuning the system; the new proposal goes further by embedding structural flexibility after 2035. In its account of that earlier vote, the European Parliament described the measures as a way to smooth short‑term compliance, but climate advocates now fear a slippery slope.
Broader Implications for Europe’s EV Future
The immediate question is what this means for Europe’s electric‑vehicle trajectory. By turning a hard 100% requirement into a 90% target with offsets, the Commission has introduced uncertainty around the pace and scale of future battery investments. Analysts quoted by Useful for warn that if carmakers believe they can keep a profitable niche of combustion models alive through low‑carbon steel and sustainable fuels, they may slow or redirect capital that would otherwise build out EV platforms and gigafactories in Europe. That risk is sharpened by global competition, as manufacturers in other regions race to secure battery supply chains and software expertise.
The Commission’s own consultation process shows that it anticipated the need to revisit the balance between ambition and feasibility. In a public consultation on CO2 standards for cars and vans, Shows the Commission laid out an evidence‑gathering timeline leading toward a review of the regulation and related labelling rules by 2026. That review is meant to align vehicle policy with the EU’s broader net‑zero strategy and to account for economic and social impacts, including on the roughly 13.8 million people employed in the European automotive sector cited in Commission materials. The new 90% framework will now be judged against those benchmarks: whether it keeps Europe on track for climate goals while preserving industrial competitiveness against rivals in China and the United States.
Uncertainties and Next Steps
Despite the fanfare around the December 2025 package, several elements remain unsettled. The proposal still needs approval from the European Parliament and member states in the Council, and coverage of the file suggests that co‑legislators are expected to work toward final adoption in 2026, though the exact timeline is not yet locked. The Commission has framed the measure under Article 114 TFEU as a way to avoid a patchwork of national rules, but that legal basis could become a point of contention if governments or lawmakers argue that climate ambition is being diluted.
There are also open questions about how the offset system will function in practice. The Commission’s package page explains that the remaining 10% of emissions may be compensated only through EU‑produced low‑carbon steel and sustainable fuels, yet reporting by Adds notes that current production volumes for green steel and scalable e‑fuels are still limited, and projections about future capacity remain uncertain. The Commission itself, cited in that Evidence, has leaned on language about “technology neutrality” to justify the new approach, arguing that it should be up to industry to decide whether to meet the 90% target purely with zero‑emission vehicles or with a mix that includes compensated combustion. How strictly regulators enforce verification of offsets, and how quickly low‑carbon steel and sustainable fuels can scale, will determine whether the 2035 reversal becomes a narrow safety valve or a broader combustion comeback.
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*This article was researched with the help of AI, with human editors creating the final content.
