NEWS
EU waters down 2035 car engine ban while pushing firms to buy more EVs
Brussels pitches a dual track plan of softer CO₂ rules and binding corporate fleet targets, betting that flexibility for industry can still deliver its Green Deal goals amid Chinese pressure and an energy shock. In a packed Brussels press room, European commissioners, Ms. Viola Pomili Pomili, Commissioner for Climate Action and Ms. Sara Pauro, Commissioner for Mobility and Transport, unveiled what they framed as a decisive package for the future of Europe’s auto industry and, by extension, for the credibility of the bloc’s Green Deal. The proposal lands at a politically sensitive moment. Carmakers are grappling with rising energy costs, intensifying competition from China and a slower than expected electric vehicle rollout. At the same time, climate targets are looming. At the heart of the announcement is a carefully calibrated trade-off : the Commission is softening how carmakers must comply with the bloc’s landmark 2035 CO2 standards, while simultaneously forcing large corporate fleets to switch faster to zero- and low-emission vehicles.
Officials insist the measures are “complementary” but not contradictory. However, across capitals, industry boardrooms and environmental groups, the package is likely to be read as a significant political recalibration.
What Brussels is proposing
Softer CO₂ standards, same 2035 endgame
The Commission says Europe remains on track toward a “trajectory” of 100 percent CO2 reduction for new cars by 2035. Yet in practice, manufacturers would now face a formal obligation of 90 percent emissions cuts, with the remaining 10 percent covered through compensation mechanisms. These could include the use of sustainable renewable fuels or credits tied to low-carbon steel produced in Europe. Officials stress that “every ton of CO2 is accounted for,” arguing the system offers flexibility without granting industry a free pass. To further stimulate demand and domestic production, Brussels is proposing so-called super-credits, effectively a 1.3 multiplier for small electric vehicles manufactured within the EU. The idea is to make compact EVs more affordable while supporting European supply chains. Additional flexibility would also be granted to vans and heavy-duty vehicles, allowing them to accumulate more emission credits before 2030 in recognition of slower infrastructure rollout and operational constraints in freight transport.
Binding targets for corporate fleets
On the demand side, the Commission is taking a tougher line. From 2030, member states would be required to ensure that a specific share of new corporate cars and vans are zero- or low-emission. A minimum sub-target would apply to fully zero-emission vehicles. The rules would apply only to large companies, defined as those with more than 250 employees and significant turnover, while small firms and private households would be explicitly exempted.
Although national targets would be binding, governments would retain broad discretion over how to meet them, with objectives calibrated to economic capacity and charging infrastructure availability. Public incentives, meanwhile, would increasingly be tied to vehicles “made in the EU,” linking climate policy more directly to industrial and employment goals.
Brussels’ political pitch: flexibility, not backsliding
Commission officials present the package as the “climate pillar” of a wider industrial strategy designed to keep Europe competitive while staying aligned with its legally binding goal of climate neutrality by 2050. Their argument is rooted in what they describe as a “triple challenge”: aggressive expansion by Chinese EV and battery producers, a more innovative and subsidy-heavy United States, and the escalating urgency of climate change. In that context, they say, the EU is “adjusting how compliance is achieved, not where the EU is going.” Policymakers point to the uneven, S-curve-shaped uptake of electric vehicles and warn that rigid targets risk destabilising manufacturers financially. An accompanying impact assessment suggests that additional flexibilities could spare carmakers around €7 billion in penalties, a figure Brussels uses to justify its shift in tone.
Winners, losers and the China–US shadow
Carmakers and key regions
The automotive sector remains a cornerstone of the European economy, accounting for roughly 7 percent of GDP and supporting some 13 million jobs directly and indirectly. The new flexibilities are being sold as a lifeline for regions still heavily dependent on internal combustion engine production, from parts of Romania to industrial hubs around Bratislava and Saxony. The climate measures are also paired with a broader push to define what qualifies as “made in the EU” under a forthcoming Industrial Accelerator Act, alongside elements of a planned “clean industrial deal.” These initiatives aim to channel public support toward European-produced small EVs and cleaner steel.
China, the U.S. and “strategic autonomy”
Commissioners have been unusually explicit in contrasting their approach with U.S. subsidies under the Inflation Reduction Act and China’s rapid scale-up of EV manufacturing and battery capacity. The proposed industrial rules would set content requirements so EU funding flows primarily to vehicles assembled in the bloc with significant European components. At the same time, they leave room for foreign partnerships, reflecting the reality that Europe remains dependent on third-country suppliers in key areas.
Notably, batteries would not be fully counted in certain price-ratio calculations tied to support schemes, signalling that strategic autonomy will be gradual rather than absolute.
How the package is supposed to work in practice
Demand side: why corporate fleets matter
The Commission’s logic rests heavily on fleet dynamics. Around 60 percent of new cars and nearly 90 percent of new vans in the EU are first registered by companies. Because these vehicles typically enter the second-hand market after just a few years, and roughly 60 percent of Europeans buy used cars, officials argue that tightening fleet rules today will make affordable EVs more widely available to households tomorrow. Binding national targets are also framed as a way to provide investor certainty, ensuring predictable flows of capital into clean vehicles, charging networks and grid upgrades.
Supply side: batteries, fuels and steel
On the supply front, the package is linked to a €1.8 billion battery support scheme aimed at strengthening the European ecosystem. This includes €1.5 billion in interest-free loans through a proposed “battery booster facility,” as well as €200 million earmarked for diversifying critical raw material sources. The CO2 compensation mechanisms tied to sustainable fuels and low-carbon steel are intended to spur domestic investment in green industrial technologies. Meanwhile, harmonised car labelling, including information on battery state-of-health for used EVs, is designed to reassure second-hand buyers and protect residual values.
Fault lines and unanswered questions
“Contradictory signals” on 2035
During the press conference, journalists repeatedly pressed commissioners on whether easing compliance with the 2035 standards while ramping up EV demand amounted to sending mixed signals. Officials rejected that characterisation, describing the proposals as “mutually reinforcing”: one boosting supply flexibility, the other strengthening demand. They warned that moving on only one front risked creating bottlenecks. Critics, however, are likely to argue that super-credits for small EVs could allow manufacturers to continue selling larger numbers of combustion cars into the 2030s, potentially locking in emissions for years.
Enforcement, loopholes and “regulatory arbitrage”
Another unresolved issue is enforcement. Can binding national fleet targets genuinely reshape corporate purchasing behaviour, or will companies exploit regulatory differences by shifting vehicle registrations across borders? The Commission maintains that fines and other coercive mechanisms will ensure compliance but has offered few concrete details on how oversight would work in practice. Questions also emerged about why the EU continues to regulate tailpipe emissions rather than full life-cycle emissions. Officials responded that the current file focuses on use-phase pollution and must be read alongside broader frameworks such as emissions trading and burden-sharing rules covering upstream emissions.
Geopolitics and the new energy shock
Recent tensions in the Gulf have added a geopolitical dimension to the debate. Commissioners argue that accelerating electrification, strengthening power grids and expanding renewable energy are central to reducing Europe’s dependence on imported oil. In their view, the package is as much about energy security as climate ambition, part of a wider effort to shield the continent from volatile global price swings. They also link the strategy to national policy shifts, including new nuclear investments and broader attempts to diversify Europe’s energy mix and build long-term resilience into its transport system.
What to watch next
The proposals now head into what promises to be a contentious legislative phase in the Council and European Parliament. Flashpoints are likely to include the 90 percent CO2 target, the scope of super-credits and the conditions attached to “made in EU” support. Environmental NGOs are already signalling pushback over what they see as backsliding. Some member states may resist binding fleet targets, while industry groups are expected to lobby hard on content requirements and compliance costs.
Key milestones are already clear. National fleet obligations would begin in 2030. And 2035, still the politically charged horizon for the de facto phaseout of combustion engines, now comes with considerably more wiggle room built into EU law.
TRIBUNE
March 26, 2026
In this guest opinion, representatives of the Progressive Alliance of Socialists and Democrats outline their position on the European Commission’s latest automotive proposals. While supporting limited flexibility for the industry, they warn against compromising the EU’s climate ambitions and call for a socially fair green transition that protects both workers and competitiveness.
As a massive investment mountain looms ahead, the EU would be wrong to sacrifice a socially fair green transition. For the first time since the foundational Schuman Declaration of 1950 and the creation of the ECSC, the European Union faces an unprecedented, triple transition challenge: securing our defense, mastering the digital age, and delivering the green transition. The first two are currently progressing with broad consensus. Defense budgets across Member States are surging to historic highs, with many decisively surpassing the 2% NATO (that is now a 5) baseline to adapt to new geopolitical threats. Similarly, digital investments are breaking records; we see initiatives like France’s €54 billion France 2030 plan and billions more in foreign capital pouring into European AI development every month. Yet, while these investments are largely consensual, the climate transition remains highly divisive. We cannot afford this division, because the green transition is the existential imperative of our time. The stakes are unequivocal: without drastic and immediate action, the World Bank estimates that climate change could force up to 216 million people globally to become internal climate migrants by 2050. To secure our future and mitigate these disasters, the European Commission itself has estimated that Europe needs over €620 billion in additional annual investments. This is not just an environmental necessity; it is a macroeconomic reality. Ambitiously, under the European Green Deal of 2019 and the subsequent Climate Law, the EU enshrined a binding target to reach climate neutrality by 2050. Within this framework, the automotive sector (7% of the EU’s GDP and direct and indirect provider of livelihoods for nearly 13 million Europeans) was given a clear mandate: to reach a 100% Zero Emission Vehicle (ZEV) target for new
cars by 2035. Now, the Commission is proposing a retreat, suggesting a rollback of this target from 100% to 90%. Pressured by the right, Ursula von der Leyen is also stepping back from social ambitions while regulating corporate vehicles without any plan regarding fair transition. We cannot afford an unfair green transition at a time when income inequalities are rising across all European economies. The transition must be designed for everyone, not only for those who can afford it. While it is tempting to view this merely as ceding ground to relentless industry lobbying, we must face the current geopolitical and economic realities with absolute lucidity. The European automotive industry is a crown jewel of our industrial heritage. It is a massive job provider, the backbone of countless regional economies, and operates through complex, interlinked supply chains spanning the entire Schengen Area.
Today, this vital sector is caught in a brutal vise. On one side, we face an export behemoth in China, which is flooding our markets with cheap, heavily state-subsidized electric vehicles. On the other, the United States has upended decades of free-trade consensus with the protectionist Inflation Reduction Act, aggressively drawing green investments across the Atlantic. In this context of unprecedented complexity, the S&D group is stepping up to the plate. We are prepared to support these temporal, strictly exceptional adjustments to the 2035 target. As such,we are willing to pass the incentives on low and zero emission corporate vehicles, as we undoubtedly are to support an ambitious and protective “made in Europe” criteria. We do this to afford our European industrial champions, and the millions of workers whose livelihoods depend on them, the necessary breathing room to adapt, innovate, and reclaim the road to global excellence. However, let us be absolutely clear: for the S&D, the green transition and the social adaptation are decisive, and they will never be relegated to the background. Those proposals must not be interpreted as a surrender to our climate and social goals. It will have a marginal impact on the long-term struggle the EU wages against global warming, provided we use this time wisely. We will make sure those
texts include larger social dimensions and concrete solutions for the low and middle classes to face climate change. This adjustment must serve as a powerful incentive to get Europe’s green industry back in the game, ensuring that our path to climate neutrality remains ecologically uncompromising, economically resilient, and, above all, socially just.
S&D