ICCT Study: Relaxing CO2 Standards for Cars Endangers Jobs
At the EU level, there are signs of a relaxation of CO2 fleet limits for passenger cars. A recent ICCT study warns that this could cost the European automotive industry up to 185,000 jobs. This is notable because the automotive industry itself views jobs as being more threatened by the currently strict 2035 target.
Images: BMW / Editing: electrive
The International Council on Clean Transportation (ICCT) has summarized the impact of upcoming political decisions regarding CO2 regulations on employment in Europe’s automotive industry. The 58-page study is titled “Powering jobs: employment under the EU’s passenger car CO₂ standards.” The analysts conclude that maintaining the current target—meaning a de facto ban on new internal combustion engine vehicles by 2035—would preserve the current level of employment. Relaxing these rules at this time would put jobs at risk. Keeping the target in place along with additional measures such as production incentives within the EU could lead to job growth.
ICCT warns of potential net job losses
The ICCT authors argue that the currently discussed relaxation of CO2 targets for the passenger car sector by 2035 would indeed temporarily halt job losses in internal combustion engine production, but it would slow down employment growth in electric vehicle manufacturing,
battery production, recycling, and charging infrastructure development. Overall, this would result in a “net loss of jobs,” according to their forecast.
According to ICCT, maintaining current EU standards is likely to keep employment largely stable by 2035. The study authors emphasize that “growth across the entire electric vehicle supply chain would create enough jobs to offset job losses in internal combustion engine production.” Moreover, by combining these standards with additional industry measures to promote
production within the EU, this stability could even be “transformed into long-term employment growth,” as stated in the report.
Before we look at the details, a brief overview of current legislation: For the period 2025 to 2027, OEMs in the EU must achieve an average fleet emission level of 93.6 g CO2/km, which represents a 15 percent reduction from the 2021 baseline. By 2030, the target increases to a 55 percent reduction, and by 2035 it rises to 100 percent.
Currently, the European Commission has proposed easing these rules in its draft “Auto Package” by the end of 2025. Some parliamentary committees are supporting this approach. The majority of lawmakers want manufacturers to be required to reduce CO2 emissions by only 95% by 2035, allowing OEMs to fall 7.5 percentage points below this target if they use climate-friendly steel produced in Europe as a compensation in their vehicles. However, this proposal still needs to go through further committee reviews.
ICCT authors analyze three scenarios
The ICCT study aims to provide guidance on how the upcoming policy decisions will affect things. While the industry itself warns that current CO2 targets and particularly the rapid shift to electric vehicles will cost European jobs, ICCT arrives at the opposite conclusion. Sandra Wappelhorst, ICCT’s research lead and lead author of the study, comments: “Lowering CO2 standards is presented as a way to protect jobs, but our analysis shows the opposite. Instead, the EU should consider supplementing its standards with measures to strengthen domestic supply chains for electric vehicles. Persisting with an outdated technology like the internal combustion engine will not help workers in the long run.”
Specifically, the team of authors analyzed three scenarios. The baseline scenario (“Current Standards”) calculates employment patterns based on the rules in effect today. The “Policy Measures” scenario provides a model of how jobs might develop if the EU takes additional
measures to boost value creation within the EU. These could include guidelines on local value content (such as those proposed in the “Industry Accelerator Act,” along with approaches at the national level) or targeted production incentives. Importantly, the authors explain the methodology by saying, “Rather than modeling these measures individually in the analysis, we incorporate general assumptions that link them to a higher EU share of BEVs and PHEVs in production.”
In the third scenario, “Delayed Standards,” ICCT assumes a five-year delay in implementing CO2 standards, resulting in slower electrification progress (“with BEVs and PHEVs seeing modest increases by 2030, reaching 100% BEV sales in new car purchases by 2040”). ICCT itself describes the five-year delay as a “simplifying assumption,” as in practice, relaxations of regulations could take various forms.
Other impacts on employment remain unaddressed
Methodologically, it should be noted that ICCT deliberately focused the study on the effects of CO2 regulations on employment in specific industries. Other factors that could influence future employment conditions were excluded—such as advancements in automation and digitalization, or geopolitical and broader economic trends. Additionally, other relevant aspects like the need for workforce retraining were not evaluated. The focus is solely on job impacts within the context of the upcoming policy decisions.
Regarding the findings: The ICCT analysis shows that short-term employment differences under various regulatory scenarios remain relatively small by 2030. However, by 2035, a clear picture emerges according to the authors: while maintaining current CO2 standards would keep employment at a level about 2 percent below that of 2025, additional industrial measures to boost production in the EU would increase net employment by roughly 10 percent, or about 320,000 additional jobs.
The study suggests that weakening CO₂ standards would have the opposite effect: employment could drop by up to six percent below 2025 levels, which according to ICCT experts would equate to a loss of up to 185,000 jobs. “Compared to supplementing current CO₂ standards with industrial policy measures, delaying
the standards until 2035 would result in a half-million job gap, with the pace of transition to electric vehicles increasingly determining the competitiveness of the EU’s automotive sector,” the research team concludes.
The speed of the transition is crucial
ICCT adds the following: “Whether in emerging sectors such as electric vehicle production, battery manufacturing, and
The creation of new jobs through recycling and charging infrastructure depends on two factors: the pace of transitioning to electric vehicles and how much of the production associated with this transition takes place within the EU. Both are also closely linked to future political guidelines.
It is clear that automobile production accounts for the largest share of the differences among the three scenarios, while battery production/recycling and the development and maintenance of charging infrastructure will become increasingly important. Peter Mock, director of ICCT Europe, summarizes: “Battery electric vehicles are gaining traction worldwide, and EU CO2 standards will play a decisive role in determining Europe’s role in this development. Maintaining current CO2 standards will help European manufacturers stay at the forefront of the electric vehicle market.”