EU U-turns on petrol and diesel car ban

The European Commission has published proposals to scrap the 2035 ban on petrol and diesel vehicles, instead replacing this with a requirement to meet a 90% tailpipe emissions reduction target.

Under review is the 2035 zero emissions legislation introduced in 2023, which would have effectively banned the sale of new petrol and diesel vehicles from 2035 onwards. Now following mounting pressure from member states and car manufacturers, the European Commission has revealed a loosening of restrictions.

The proposals  state that from 2035 onwards, carmakers will need to comply with a 90% tailpipe emissions reduction target. From this the remaining 10% of emissions will need to be compensated- either by using low-carbon steel made within the European Union, or from the use of e-fuels and biofuels. The Commission notes that this will allow for plug-in hybrids (PHEV), range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full electric (EVs) and hydrogen vehicles.

The Commission has also announced plans for manufacturers to receive ‘super credits’ given in exchange for producing small, affordable, electric cars made in the European Union. The scheme will run until 2035. Lawmakers claim that this will incentivise the deployment on the market of more small EV models.

The changes follow mounting pressure from countries including Germany, Italy and the Czech Republic who have repeatedly called for revisions to the 2035 mandate.

European Commission President Ursula von der Leyen has said: “Innovation. Clean mobility. Competitiveness. This year, these were top priorities in our intense dialogues with automotive sector, civil society organisations and stakeholders. And today, we are addressing them all together. As technology rapidly transforms mobility and geopolitics reshapes global competition, Europe remains at the forefront of the global clean transition.”[i]

Commenting on the move, Europe’s biggest car maker, Volkswagen, said: "Opening up the market to vehicles with combustion engines while compensating for emissions is pragmatic and in line with market conditions."[ii]

2025: Year of the climate rollback

However, the proposals have also been met with criticism. Dominic Phinn, Head of Transport at Climate Group, said: "The watering down of the petrol and diesel-engine phase-out flies in the face of leading companies across Europe, who are investing billions in electric fleets and desperately need the stability it provides."[iii]

The changes to the zero emissions mandate follow watering-down of other key pieces of sustainability legislation. In October it was that the EU would significantly narrow the scope of both the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD), limiting their application to only the largest companies. The decision follows months of intense lobbying from business groups and mounting pressure from the EU’s largest member states, who have called for streamlined reporting obligations in a bid to bolster corporate competitiveness.

The CSDDD is regulation which will impose sustainability and human rights due diligence standards on firms operating within the EU, and the CSRD will require businesses in the EU to disclose their environmental and social impacts. Now following Monday’s vote, where both the CSDDD and CSRD had been due to apply to companies with at least 250 employees, this will now be increased:

·         CSDDD will now be limited to companies with at least 5,000 employees and €1.5 billion ($1.73 billion) in annual revenue. Businesses will also be required to ensure they have transition plans that align with EU climate law and the Paris Agreement.

·         The CSRD will only apply to companies with at least 1,000 employees and annual revenue of €450 million ($520 million) or more, though financial holdings and listed subsidiaries will be exempt.

Notably, the decision to narrow the scope of the CSDDD and CSRD comes on the heels of implementation delays for both directives, previously announced as part of the EU’s ‘Omnibus’ package earlier this year. In a vote held in April, MEPs overwhelmingly voted to support delays to the above pieces of sustainability legislation. It meant that the deadline for EU countries to enact the CSRD into national law would be pushed back by a further year, moving the deadline to July 2027. Additionally, the deadline for compliance for companies currently under the directive’s scope would also be pushed back.

References

[i] Commission takes action for clean and competitive automotive sector

[ii] EU drops 2035 combustion engine ban

[iii] EU drops 2035 combustion engine ban

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