France set to follow Germany in softening CO2 targets
German Chancellor Friedrich Merz and French President Emmanuel Macron have apparently agreed on a position that could soften the EU's combustion engine ban. In return, Germany would accommodate France on so-called 'Buy European' requirements.
Bilder: BMW / Montage: electrive
According to reports from _FAZ_ and _Handelsblatt_, Macron is reportedly dropping his resistance to a softening of CO₂ limits for cars in the EU. In return, Merz is moving away from a defensive stance against overly strict ‘Made in EU’ requirements. EU diplomats are quoted as saying that the broad outlines have been agreed upon, though further details are still under negotiation.
For context: at the end of 2025, the European Commission responded to warnings from the automotive industry with its ‘Auto Package’, acknowledging that sticking to the de facto ban on combustion engine vehicles for new cars from 2035 would exacerbate the sector’s crisis. This move also came under pressure from Germany. In the Commission’s proposal, the new fleet CO₂ target is set at a 90% reduction compared to 2021, equivalent to fleet emissions of 11 grams per kilometre – instead of zero grams. The Commission no longer specifies a date for the 100 per cent target and assumes that this will result in 27 to 29 per cent of new registrations still having an internal combustion engine after 2035.
Importantly, the focus of legislation remains on the fleet CO₂ limit, i.e. the average CO₂ emissions in grams per kilometre that newly registered vehicles from a manufacturer in the EU must not exceed. This means that OEMs which fail to meet progressively increasing requirements will face financial penalties. The Commission’s draft is expected to go through the European Parliament shortly.
A give and take compromise
France and Germany have so far held differing positions on key aspects of the ‘Auto Package’, but now appear to be aligning at the highest level. Chancellor Merz and President Macron are each making concessions on a major issue while securing support for another core concern. France is reportedly willing to support a softening of the fleet CO₂ limits beyond the level proposed by the Commission. In return, Germany is conceding on the planned Industrial Accelerator Act (IAA) and supporting stricter ‘Made in Europe’ rules than originally envisaged.
_Handelsblatt_ also provides indications of how far the two countries are willing to go: “Germany and France are demanding a further ten-percentage-point softening without compensation. With compensation options, the reduction could mathematically amount to at least 80 per cent. Automakers would gain more leeway: they would be allowed to sell significantly more vehicles with internal combustion engines than under the previous Brussels plans.”
Position goes beyond Commission’s proposal
The background is that, while the Commission is willing to allow manufacturers to reduce CO₂ emissions by only 90 per cent by 2035, the remaining 10 per cent would, according to the current draft, have to be offset through low-CO₂ European steel as well as e-fuels and biofuels. This is where Merz and Macron’s position goes even further.
Furthermore, the interim target for 2030 is also reportedly part of the presumed German-French agreement. Under current EU law, new cars must reduce their CO₂ emissions by 55 per cent compared to 2021 by 2030. While the Commission wants to provide greater flexibility here without completely devaluing the target, Merz and Macron now want to extend this even further: from the proposed three to five years between 2028 and 2032. This is intended to avoid high financial penalties.
In return, France is now likely to receive German support for strict ‘Made in EU’ requirements for the automotive industry. Berlin had previously pursued a more moderate approach that would also include trading partners such as Turkey, Vietnam, or Morocco. However, Paris wants to keep the new industrial regulations narrow, although an exception could be made for the UK.
Parliamentary vote imminent
If the deal between the two major economies is confirmed, it could significantly influence the further legislative process. Just last week, the European Parliament’s Transport Committee postponed a key vote on the ‘Auto Package’. The vote was originally scheduled for 5 October. However, according to _Der Spiegel_ – which cites the office of the responsible MEP Jens Gieseke (CDU) and a spokesperson for the largest group, the EPP – this date has now been postponed by around two weeks. The reason is reportedly that parties within the so-called Centre Platform apparently still need time to reach an agreement. The plenary vote is currently planned for November.
To pass the package, the EU Parliament must approve it (where the EPP is the largest group), and the Member States in the EU Council must also give the green light. In the EU Parliament, a simple majority is sufficient, while in the EU Council, a so-called qualified majority is required. This means the approval of at least 15 countries representing at least 65 per cent of the EU population.
During the consultation process, various interest groups are likely to attempt to amend the draft in their favour. Against this backdrop, the Commission is said to have deliberately designed the Auto Package to offer something to as many countries as possible. In addition to Germany, six other EU countries (all with a relatively low share of electric cars in their new registrations) had advocated for a weakening of CO₂ targets in favour of internal combustion engines. With France, however, a previous opponent of this policy now appears to be switching sides.
Let us now revisit the Auto Package in its basic form as presented at the end of 2025: The Commission’s approach is to slightly soften the CO₂ targets as described above, thereby allowing not only the sale of plug-in hybrids and range-extender vehicles after 2035 but also mild hybrids and pure internal combustion engine vehicles. However, this comes with strings attached.
Firstly, as per the Commission’s intention, the CO₂ emissions still caused by new internal combustion engine vehicles after 2035 must be compensated for, as mentioned above. A credit system is planned, under which manufacturers must offset their internal combustion engine vehicles, plug-in hybrids, and range extenders sold after 2035 – for example, through green steel from the European Union in their cars or climate-neutral fuels such as biofuels or the controversial e-fuels. Up to 3 per cent of the 2021 reference target (or, in other words, 30 per cent of the still-permitted emissions) can be accounted for through clean fuels, while for green steel, it is 7 per cent of the reference target or 70 per cent of the still-permitted emissions.
However, it remains unclear how strict the requirements will be in practice. Whether an automaker will actually be able to use green steel in its cars and operate them with e-fuels by 2035 depends heavily on the availability of green steel and the aforementioned clean fuels in 2035 – and their cost. And, consequently, who will be able to afford such vehicles after 2035.
Small electric cars to receive preferential treatment
Other points are more concrete: so-called “Super Credits” are intended to specifically promote small and affordable electric cars. Electric cars shorter than 4.20 metres will therefore be given greater weight in the calculation of a manufacturer’s fleet emissions. In practical terms: a sold ID. Polo would count not as one vehicle but as 1.3 vehicles in Volkswagen’s fleet emissions calculation. “This will create incentives for the market introduction of more small electric vehicle models,” the Commission announced in December. This proposal is reportedly attributable to Spain and France. Both countries had already spoken out in autumn in favour of retaining the 2035 CO₂ target with only a little additional flexibility and prefer to promote electric cars through measures such as Super Credits.
As with the CO₂ regulation from 2025, the path to the adjusted 2035 target is also being made somewhat more flexible. Specifically, this concerns the previously fixed interim target for 2030, which, analogous to the current regulation from 2025 to 2027, is likely to be extended. Instead of meeting fixed annual targets, manufacturers will have to achieve the interim targets over the period from 2030 to 2032 – if they are still above the target in 2030, this will not immediately result in financial penalties. There will also be the option to offset the target shortfall through greater savings in subsequent years. Additionally: “Additional flexibility will be granted for the transporter segment, where the acceptance of electric vehicles has been structurally more difficult, with the CO₂ target for 2030 being reduced from 50 to 40 per cent,” according to the Commission.
Another new development is that, from 2030, the EU Commission wants to impose specific requirements on Member States for the electrification of company cars – with different requirements for each country. How the EU countries implement these requirements will be left to the Member States. However, the model is Belgium’s successful company car taxation, which has led to a sharp increase in electric car sales there.
New CO₂ regulation for electric trucks too
Additionally, the EU Commission wants to allocate €1.5 billion to a ‘Battery Booster’ initiative which aims to accelerate the creation of a “fully EU-manufactured battery value chain”. A corresponding funding call went live in July. Plans include interest-free loans for cell manufacturers and supportive political measures. Moreover, not only in the battery sector but for the entire automotive industry, the bureaucratic requirements are to be adjusted. This is intended to reduce the administrative burden on companies, with the Commission estimating annual savings potential at €706 million.
The Commission is also proposing a targeted amendment to the CO₂ emission standards for heavy-duty vehicles, which would make compliance with the 2030 targets more flexible – though no figures have been mentioned yet. “The targeted amendment will allow manufacturers to accumulate more emission credits in the years leading up to 2030 than under the current regulation. While the current regulation only allows manufacturers to receive credits if their CO₂ emissions are below a linear CO₂ emission reduction path, the proposal would allow them to generate credits as soon as their CO₂ emissions are below their annual CO₂ emission 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 is not only facing a major technological transformation but also intense competition – “of unprecedented speed and scale,” as the EU notes. “Therefore, it is extremely important to ensure the competitiveness of the industry and support it in the transition to clean mobility and the decarbonisation of road transport.” The EU strategic dialogue with the automotive industry last year gave companies the opportunity to clearly communicate their positions and needs in Brussels. The Commission has therefore brought forward the agreed review of the regulations by one year and is meeting the industry with a little more flexibility. However, it is only deviating slightly from its previous course.
The package of measures is also described by the Commission as “the first industrial strategy for the automotive industry”. “It ensures climate, industry, and economic coherence. It includes elements and prerequisites for a future-proof, clean, and competitive automotive industry and encourages manufacturers to continue investing in zero-emission vehicles,” states a Q&A on the Auto Package. “It offers more flexibility and technological neutrality in the CO₂ standards for passenger cars and light commercial vehicles and targeted flexibility for heavy-duty vehicles to achieve our climate goals, and supports the introduction of zero-emission and low-emission vehicles in corporate fleets. The future is electric.”
