European Commission Revises 2035 Combustion Engine Ban Targets

The European Commission is poised to revise its 2035 ban on combustion engines, shifting from a full 100 percent reduction in emissions to a 90 percent target. This change, revealed by multiple officials familiar with the discussions, signals a significant shift in policy that is seen as a major victory for center-right political parties and the automotive industry following extensive lobbying efforts.

As negotiations continue, automakers will still be permitted to sell plug-in hybrids and range extenders post-2035, provided they offset the additional 10 percent emissions through the use of green steel and alternative fuels. The specifics of how these offsets will function, including the required percentages of fuels or steel that must be incorporated in production, are still under discussion.

The automotive sector argues that the original legislation would hinder their competitive edge, especially against Chinese manufacturers that are leading the transition to electric vehicles. The industry faces additional challenges, including ongoing trade tensions initiated by former U.S. President Donald Trump and a downturn in domestic sales.

Climate advocates are urging the Commission to maintain a strong stance. William Todts, Executive Director of the environmental organization Transport & Environment, expressed concern that diverting funds to plug-in hybrids detracts from investments in electric vehicles (EVs), allowing competitors to advance further. “Every euro diverted into plug-in hybrids is a euro not spent on EVs while China races further ahead,” he stated.

This shift in policy aligns with statements made by Manfred Weber, leader of the European People’s Party, who indicated that the 2035 target for carbon dioxide reduction had effectively been altered on December 11. The Financial Times was the first to report on this reduction in targets, bringing new scrutiny to what types of powertrains will be allowed after 2035. The current proposal suggests that range extenders, which are small combustion engines designed to enhance battery range, will be eligible for more emissions credits than conventional plug-in hybrids due to their lower CO2 emissions.

In a broader context, the 2035 reform is part of a comprehensive automotive package that the Commission plans to unveil. This package will include new regulations aimed at greening corporate fleets, which consist of vehicles owned or leased by businesses. The pooling system allows manufacturers that do not meet the 90 percent target to purchase credits from those who exceed it. This arrangement could prove lucrative for fully electric manufacturers, such as Tesla.

Another significant initiative focuses on small electric vehicles, a demand highlighted by Commission President Ursula von der Leyen during her State of the Union address in September. Manufacturers producing small EVs will receive a coefficient of 1.3 in emissions target calculations, meaning that selling ten of these vehicles would equate to emissions credits for thirteen.

In order to qualify for these credits, manufacturers will need to adhere to specific local content requirements, a demand long championed by France alongside Spain.

The draft legislation now enters a politically complex phase as it moves to the European Parliament and individual EU member states. Divisions persist among political groups regarding the extent to which the Commission should adjust its policies to support the automotive sector. While the European People’s Party is pushing to weaken the ban, Spain advocates for maintaining the original targets, and Germany is cautious about France’s push for local content requirements, fearing potential repercussions in global trade relations with the U.S. and China.

The outcome of these negotiations will shape the future of the EU automotive landscape and its commitment to reducing carbon emissions in the years leading up to 2035.