EU Parliament debates auto package: 87.5% instead of 100% CO2 reduction for cars by 2035?
A compromise on the car package is emerging in the European Parliament, which would loosen the de facto ban on new internal combustion engines in the EU set for 2035. The three factions of the so-called Center Platform have reached an agreement according to media reports. An initial committee vote on Thursday will show how stable the majority is.
The “Spiegel” reports that the conservative EVP, the social democratic S&D, and the liberal Renew Europe factions have agreed that manufacturers must reduce CO2 emissions from their new cars by 87.5 percent by 2035 (compared to 2021). According to these three factions, there will still be room for further registrations of internal combustion engine and hybrid vehicles after that date.
According to Spiegel, negotiators from the three mentioned factions reached an agreement on this solution in the night leading up to Tuesday. Part of the deal apparently also includes giving automakers “a strong incentive to use steel produced in an environmentally friendly manner.” Whether this compromise is viable will become clear as early as Thursday, when the Transport Committee and Industry Committee of the EU Parliament vote on the reform. The Environment Committee is set to follow, according to Spiegel, in early November, with the plenary session likely taking place in December.
To provide context: The EU Commission responded to warnings from the automotive industry at the end of 2025 with its “Auto Package,” stating that sticking to a de facto ban on new internal combustion engine vehicles by 2035 would exacerbate the industry’s crisis. This move was also made under pressure from Germany. The Commission’s proposal set a new CO2 fleet target of a 90 percent reduction compared to 2021, equivalent to an CO2 emissions level of 11 grams per kilometer — rather than zero grams. The Commission did not specify a date for achieving the 100 percent target in its draft.
Important: Brussels insisted in its draft that the remaining 10 percent be fully compensated through the use of green steel and climate-friendly fuels. While the Center Platform compromise also mentions green steel as a compensation measure, it does not go as far as the Commission’s proposal.
As is well known, Federal Chancellor Friedrich Merz and French President Emmanuel Macron recently reached an agreement on a common position regarding the phase-out of internal combustion engines. That agreement calls for a 90% reduction in CO2 emissions by 2035 — without any compensation. According to Spiegel, this compromise between Germany and France is considered “pivotal for the voting in the EU Member States Council.” The Council must vote after the Parliament, and changes are always possible during this legislative process.
Voting in the European Parliament is approaching
We recall: As early as the beginning of October, the European Parliament’s Transport Committee had postponed its vote on the “Auto Package” by two and a half weeks. The voting was originally scheduled for October 5th. At that time, the reason given was that the Center Party platform needed more time to reach an agreement.
To pass the package, the EU Parliament must approve it soon (where the EPP is the largest faction), followed by the member states in the EU Council. A simple majority is sufficient in the EU Parliament, but a so-called “qualified majority” is required in the EU Council. This means approval from at least 15 countries that together account for at least 65 percent of the EU’s population is needed.
During the consultation process, various interest groups may attempt to modify the draft in their favor. Against this backdrop, the Commission intended for the “Auto Package” to be broad from the outset in order to offer something to as many countries as possible. As is known, in addition to Germany, six other EU countries (all with a relatively low share of electric vehicles among their new registrations) advocated for weakening CO2 targets and supporting internal combustion engines. However, France, which has previously been opposed to this policy, seems to have changed sides now. Yet it did so not without demanding concessions elsewhere: reportedly, France will receive support from Germany in exchange regarding the so-called “Buy European” requirements.
Let’s take another look at the “Auto-Paket” in its basic form as presented at the end of 2025: The Commission’s approach is to slightly relax the CO2 targets as described above, thereby allowing not only the sale of plug-in hybrids and vehicles with range extenders beyond 2035 but also that of mild hybrids and conventional internal combustion engines. However, there’s a major caveat right away: The Commission tied this relaxation to conditions.
Firstly: According to the commissioners, the CO2 emissions still produced by new internal combustion engines after 2035 must be offset as mentioned above. A credit system is planned, under which manufacturers must balance out the internal combustion engines, plug-in hybrids, and range extenders they sell after 2035—through things like green steel from the European Union used in their vehicles or climate-neutral fuels such as biofuels or the controversial e-fuels. Up to three percent of the 2021 reference target (or, in other words, 30 percent of the emissions still allowed) can be credited through these clean fuels, while for green steel it is 7 percent of the reference target or 70 percent of the emissions still allowed.
It is unclear, however, exactly how strict these requirements will be in practice. Whether an automaker can actually use green steel in its cars and power them with E-fuels by 2035 depends heavily on the availability of green steel and those clean fuels in 2035, as well as their costs. And on who can afford such vehicles after 2035.
Small electric cars will be favored
The details become clearer regarding other points: The commission intends to use so-called “Super Credits” to give special support to small and affordable electric vehicles. Electric cars shorter than 4.20 meters should therefore carry more weight in calculating a manufacturer’s fleet emissions. In practical terms, a sold ID. Polo would not count as one vehicle in VW’s fleet emissions calculation but rather as 1.3 vehicles. “This will create incentives for the introduction of more small electric vehicle models,” the commission stated in December. This proposal is said to originate from Spain and France. Both countries had already advocated in the fall for maintaining the 2035 CO2 target with only slight additional flexibility, preferring to promote electric vehicles through measures like Super Credits.
As with the CO2 regulation starting in 2025, the path toward the adjusted 2035 target is also being made somewhat more flexible. Specifically, this refers to the previously fixed interim target for 2030, which is likely to be extended similar to the current regulation from 2025 to 2027. Instead of meeting fixed annual targets, manufacturers must achieve the interim targets over the period from 2030 to 2032 – if they still exceed these targets by 2030, it will not immediately result in penalty payments. There is also the option to offset any shortfall by making greater savings in subsequent years. Additionally, “extra flexibility will be granted to the truck segment, where acceptance of electric vehicles has been structurally more difficult, with the 2030 CO2 target being reduced from 50% to 40%,” according to the commission.
A new development is that the EU Commission intends to set specific requirements for the electrification of business vehicles for member states starting in 2030 – with different requirements for each country. Brussels wants to leave it up to the member states to determine how they implement these requirements. However, Belgium’s successful corporate vehicle taxation system serves as a model, having led to a sharp increase in electric car sales there.
New CO2 regulations also for electric trucks
The EU Commission also plans to allocate 1.5 billion euros for a “Battery Booster” initiative aimed at accelerating the development of a “completely EU-made battery value chain.” A call for proposals was launched in July. The measures include interest-free loans for cell manufacturers and supportive policy actions. Moreover, bureaucratic requirements are set to be adjusted not only in the battery sector but across the entire automotive industry. This is intended to reduce administrative burdens on companies, with the Commission estimating annual savings of 706 million euros.
The commission also proposes a targeted adjustment to the CO2 emission standards for heavy commercial vehicles, which would make it more flexible to meet the 2030 targets – though no specific figures have been given yet. “The targeted adjustment allows manufacturers to accumulate more emission credits in the years leading up to 2030 than under the current regulations. While current rules only permit manufacturers to receive credits if their CO2 emissions are below a linear reduction pathway, the proposal would allow them to generate credits as soon as their CO2 emissions fall below their annual target,” the commission states in its draft.
“The future is electric.”
The background to all these adjustments and regulations is clear: the European automotive industry faces not only a major technological shift but also fierce competition—“of unprecedented speed and scale,” according to the EU. “Therefore, it is extremely important to ensure the industry’s competitiveness and support it in transitioning to clean mobility and decarbonizing road transport.” The EU’s strategic dialogue with the automotive sector last year gave companies the opportunity to clarify their positions and needs in Brussels. As a result, the Commission has advanced the already agreed-upon review of the regulations by one year, offering the industry more flexibility. The Commission is deviating from its previous approach—but only slightly.
The package of measures is also referred to by the Commission as “the first industrial strategy for the automotive industry.” “It ensures climate, industrial, and economic coherence. It includes elements and prerequisites for a future-proof, clean, and competitive automotive sector and encourages manufacturers to continue investing in zero-emission vehicles,” reads a Q&A on the “Auto Package.” “It provides greater flexibility and technology neutrality regarding CO2 standards for passenger cars and light commercial vehicles, as well as targeted flexibility for heavy commercial vehicles to help us achieve our climate goals, and it supports the introduction of zero-emission and low-emission vehicles into corporate fleets. The future is electric.”