Europe’s decision to unwind its planned 2035 ban on new combustion engine cars has turned a once-clear regulatory finish line into a contested middle ground. Instead of a hard stop for internal combustion, the European Union is pivoting to looser emissions rules that keep engines alive longer, and that shift is exposing deep rifts between automakers, climate advocates and governments over how fast the transition to electric vehicles should really move.
What was sold as an irreversible end date for fossil-fuelled cars is now being reframed as “flexibility,” with regulators arguing that a softer approach will protect jobs and competitiveness while still cutting pollution. The result is a new phase in Europe’s clean transport story, one in which the politics of industrial strategy collide head on with the physics of climate change and the investment timelines of a global car industry already in the middle of a historic retooling.
The 2035 ban is gone, replaced by a softer emissions target
The core change is straightforward: the European Union is no longer planning a blanket prohibition on new combustion engine sales from 2035, and is instead moving to a system of tighter but not absolute emissions limits. Under Tuesday’s proposal, EU targets would shift to a 90% cut in CO2 emissions from 2021 levels for new cars by 2035, rather than the previously planned 100 percent reduction that would have effectively forced every new vehicle to be zero-emission. That shift keeps a narrow lane open for highly efficient combustion models and hybrids, provided they meet the tougher standard.
Officials have framed the reversal as a pragmatic response to market realities and political pressure, particularly from large manufacturing countries that feared losing engine plants and suppliers too quickly. The European Commission has presented the change as part of a broader package that also adjusts interim milestones, including a reduction in the 2030 target for vans to 40 percent from 50 percent, in an effort to smooth the path for companies that say the original timetable was too aggressive. In practice, the move signals that the EU is willing to trade some regulatory certainty for what it sees as a more flexible trajectory that still tightens the screws on tailpipe pollution over time.
How the “automotive omnibus” rewrites the rulebook
Behind the headlines, the legal vehicle for this shift is a sweeping legislative package informally dubbed the “automotive omnibus,” which rewires how carmakers can comply with climate rules. The European Commission has scrapped the original 2035 combustion engine ban and is instead proposing a system that allows manufacturers to keep selling engines while counting a broader mix of technologies and credits toward their fleet targets. That includes continued use of so-called “banking and borrowing” of emissions allowances until 2032, a mechanism that lets companies overperform in some years and underperform in others without immediately facing penalties.
Supporters inside the institutions argue that this omnibus approach will increase “flexibility” for the sector and reduce compliance costs, with internal estimates suggesting savings that can reach hundreds of millions of euros annually for the industry. According to one assessment, the revised framework could cut regulatory burdens by around €706 million a year, money that officials say can be redirected into electrification, software and new manufacturing lines. Critics counter that by loosening the rules and extending accounting tricks like banking and borrowing, the EU risks locking in more combustion sales in the 2030s than the climate budget can tolerate, even if the headline targets look ambitious on paper.
Germany, Italy and the political push to slow the phaseout
The policy U-turn did not emerge in a vacuum. It followed sustained lobbying from governments that host some of Europe’s biggest carmakers and engine plants, notably Germany and Italy, which warned that a hard 2035 cutoff could trigger job losses and hand market share to rivals in China and the United States. Following pressure from European leaders including Germany and Italy, the European Commission confirmed that its plan to replace the outright ban with a 90 percent tailpipe reduction target would go forward, a clear sign that industrial concerns had gained the upper hand.
For Berlin and Rome, the stakes are not abstract. Their economies are deeply tied to legacy engine technologies, from diesel powertrains to high-performance gasoline units, and their political leaders have been under pressure from unions and regional governments to avoid a cliff edge. The European Commission has argued that the revised approach will help support European carmakers by giving them more time to manage the transition and by keeping some combustion-based exports viable in markets that are moving more slowly. That argument has resonated with parts of the political spectrum that see the car industry as a strategic asset, even as it has alarmed climate advocates who view the backtracking as a capitulation to short-term lobbying.
Automakers split: BMW and peers read the new map differently
Inside the industry, the reaction has been anything but unified. Some manufacturers that have invested heavily in electric platforms see the softer rules as a risk to their business case, while others that remain more dependent on combustion engines welcome the breathing space. Here are the major reactions to the decision: BMW has described the change as an important first step because the Commission no longer presents a full ban on internal combustion engines as the only acceptable pathway, arguing that a technology-neutral approach can still deliver climate goals if synthetic fuels and efficient hybrids are counted.
Other brands, particularly those that have staked their future on rapid electrification, worry that a diluted target will slow consumer adoption of battery models and undermine the scale they need to bring costs down. Companies like Volvo Cars and Polestar, which have aligned themselves with initiatives to clean up not only tailpipe emissions but also supply chains, see regulatory clarity as a competitive advantage rather than a burden. The split underscores a deeper strategic divergence: some automakers want to stretch the life of combustion technology as far as possible, while others are betting that moving faster into electric and low-carbon materials will pay off as global rules tighten.
Climate advocates warn of “self-sabotage”
Environmental groups and climate policy experts have reacted sharply, arguing that Europe is undermining its own credibility as a leader in the clean transition. One of the most pointed critiques came from Linda Kalcher of Strategic Perspectives, a think tank that focuses on climate and industrial policy. She warned that Weakening the CO2 standards for cars is an act of self-sabotage, arguing that it will slow innovation and leave European manufacturers exposed when other regions tighten their own rules.
Climate campaigners also point out that transport remains one of the hardest sectors to decarbonize and that every extra year of high-emitting vehicle sales locks in pollution for the lifetime of those cars. Europe has already positioned itself as a pioneer in setting end dates for combustion engines, and rolling back that ambition risks sending a signal to other regions that they can delay as well. For activists who have spent years pushing for a clear, enforceable phaseout, the new 90 percent target looks like a loophole that will be exploited, not a compromise that keeps the continent on track for its climate commitments.
EV makers fear a chilling effect on investment
Electric vehicle manufacturers and their suppliers are equally worried, but for different reasons. The EV industry warned that easing emissions targets could undermine investment, including in critical charging infrastructure and battery plants, by making the future size of the electric market less certain. According to one assessment, The EV sector fears that if Europe sends mixed signals, global capital will flow instead to regions with clearer mandates and stronger incentives.
Charging operators, grid planners and battery recyclers all build their business models around expected volumes of electric cars on the road, and a softer regulatory push can ripple through those calculations. Investors who had treated the 2035 ban as a firm anchor for long-term planning now have to reassess demand curves and risk profiles. For companies that have already committed billions to gigafactories and software-defined EV platforms, the prospect of slower uptake in Europe could mean delayed returns and tougher competition from Chinese and American players that are scaling up under more predictable policy frameworks.
What the rollback means for Europe’s climate credibility
Beyond the factory gates, the reversal has raised questions about Europe’s broader role in global climate diplomacy. Europe backtracks on ban of new combustion engine cars, in a setback to tackling climate change, as one detailed account put it, noting that the move could weaken the bloc’s claim to be at the forefront of the global clean transition. The decision has been framed by critics as a symbolic retreat at a time when other major emitters are under pressure to raise their own ambitions, not lower them.
For policymakers in Brussels and national capitals, the challenge now is to convince partners and markets that the new framework still aligns with the Paris Agreement and the continent’s own net-zero targets. Europe has long used its internal rules to shape global standards, from vehicle safety to emissions, and any perception that it is going soft on cars could embolden opponents of climate regulation elsewhere. The debate is no longer just about tailpipes, it is about whether Europe can maintain a coherent narrative that reconciles industrial competitiveness with the physics of a rapidly warming planet.
ACEA, industry lobbies and the power behind the pivot
Inside the Brussels bubble, few organizations have been as influential in this debate as ACEA, the main industry association for European automakers. ACEA, formally known as the European Automobile Manufacturers Association, represents major brands including BMW, Mercedes-Benz, Volkswagen and Stellantis, and has consistently argued for more “technology-neutral” regulations that do not prescribe a single drivetrain solution. Its lobbying has focused on securing more time and flexibility for members to manage the shift without abrupt plant closures or stranded assets.
Critics of ACEA’s stance say the group has often pushed to dilute or delay climate rules, even as some of its member companies publicly embrace ambitious electrification plans. Influence trackers have documented how the association’s positions sometimes lag behind the most progressive manufacturers, reflecting the lowest common denominator among its members rather than the frontier of what is technically and economically possible. The current rollback on the 2035 ban fits that pattern, with ACEA and allied national industry groups pressing for a compromise that keeps combustion technology in play well into the 2030s.
Beyond tailpipes: cleaning up steel and supply chains
While the fight over engines dominates headlines, a quieter revolution is unfolding in the materials that go into cars, particularly steel. A similar initiative, SteelZero, a global corporate initiative led by Climate Group, has been joined by 40 businesses that commit to using low-emission steel, including automakers like Volvo Cars and Polestar. Their participation shows that some parts of the industry are looking beyond tailpipe emissions to tackle the embedded carbon in vehicle production.
These supply chain initiatives matter because even a fully electric fleet will not be climate neutral if the materials used are produced with coal and high-emitting processes. By signing up to SteelZero and similar efforts, carmakers are signaling that they expect regulators and customers to scrutinize the full lifecycle footprint of vehicles, not just what comes out of the exhaust. In that context, the EU’s decision to soften the 2035 engine rules looks even more out of step with the direction of travel in other parts of the value chain, where the trend is toward stricter standards and transparent reporting.
Europe’s long road to ending combustion cars
The reversal also needs to be seen against the backdrop of a longer policy journey. To make the end of combustion cars in Europe possible, European Union member states have created a series of incentives to support the automotive transition, from purchase subsidies for electric models to funding for charging networks and battery research. Those measures were designed to work in tandem with a clear regulatory end date for combustion, giving both consumers and companies a strong signal about where the market was heading.
By softening the 2035 rule, the EU is not scrapping that broader ecosystem of incentives, but it is changing the balance between carrots and sticks. Without a firm cutoff, subsidies and support schemes may have to work harder to shift behavior, and governments will face renewed debates over how long to keep them in place. The risk is that a drawn-out transition could prove more expensive and politically fraught than a faster, more decisive shift, especially if public budgets are strained and voters grow weary of paying to prop up a transformation that seems perpetually incomplete.
What actually changes for drivers and models on sale
For ordinary drivers, the immediate impact of the policy change is more psychological than practical. So is the ban plan completely gone? No, it is not. It is just been adjusted. Originally, the plan called for a 100 per cent cut in fleet emissions for new cars by 2035, which would have meant that models like a 2036 Volkswagen Golf or BMW 3 Series could only be sold as zero-emission versions. Under the new 90 percent target, a limited number of highly efficient combustion or hybrid variants could still be offered, especially in niches where full electrification is slower or more expensive.
In practice, most mainstream segments are still likely to go predominantly electric by the mid 2030s, simply because battery costs are falling and urban regulations are tightening. The difference is that manufacturers now have more room to keep selling specialized combustion models, from performance cars to long-haul vans, and to tailor their line-ups to markets where charging infrastructure lags. For consumers, that could mean a wider choice of powertrains for a few extra years, but also a more confusing landscape of incentives, taxes and local restrictions as cities and countries set their own rules on top of the EU framework.
The European Commission’s bet on a “balanced” approach
At the heart of the debate is a strategic bet by the European Commission that a more flexible regime can still deliver deep emissions cuts while preserving industrial strength. The European Commission has proposed reversing a ban on all new combustion engine vehicles from 2035 and replacing it with a revised rule that aims for a 90 percent reduction in CO2 emissions from new cars, arguing that this will support a balanced approach that will help support European carmakers. In its public messaging, the institution has stressed that the new target is still extremely demanding and will require a massive ramp-up in electric and low-emission vehicles.
Commission officials also point to complementary measures, such as stricter testing of real-world emissions and updated standards for pollutants other than CO2, to argue that the overall package remains robust. They insist that the goal is not to rescue combustion engines indefinitely, but to avoid a regulatory cliff that could destabilize a sector already grappling with software disruption, supply chain shocks and geopolitical tensions. Whether that bet pays off will depend on how quickly automakers continue to roll out compelling electric models and how firmly national governments implement the new rules without succumbing to further pressure for delays.
Europe’s backtrack and the global EV reset
Europe’s move comes at a moment when the global electric vehicle story is itself entering a more complex phase, with growth slowing in some markets and political backlash rising in others. Europe backtracks on ban of new combustion engine cars, in a setback to tackling climate change, just as policymakers in the United States and China are recalibrating their own incentives and industrial strategies. The EU’s decision to drop the hard 2035 ban and opt for a 90 percent target has been interpreted by some analysts as part of a broader “reset” in which governments seek to balance climate goals with voter concerns over costs and choice.
For global automakers that operate across continents, the new European stance adds another variable to an already crowded matrix of regulations, subsidies and trade tensions. Companies will have to decide whether to design their future platforms to meet the strictest rules anywhere, or to maintain multiple variants tailored to different regions, with all the complexity and cost that entails. In that sense, the EU’s retreat from a simple, binary ban may make life easier for some in the short term, but it also risks prolonging uncertainty at a time when the industry craves clear, stable signals about the road ahead.
Why the debate is far from over
Even with the new proposal on the table, the fight over Europe’s engine rules is not settled. Member states and the European Parliament still have to sign off on the changes, and climate advocates are already mobilizing to tighten the text or at least lock in safeguards that prevent the 90 percent target from being watered down further. Industry groups, for their part, are likely to keep pushing for additional flexibilities, from extended timelines to broader recognition of alternative fuels, as they test the political appetite for compromise.
What is clear is that the EU’s decision to scrap the original 2035 combustion ban has transformed a once-symbolic milestone into a more granular, contested policy space. The outcome will shape not only the mix of cars on European roads in the 2030s, but also the continent’s standing in the race to define the future of mobility. Whether the new approach is remembered as a smart recalibration or a costly detour will depend on how quickly emissions actually fall, and on whether Europe can still claim to be driving, rather than following, the global shift away from fossil-fuelled transport.
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