EU Proposes Softening Net Zero CO2 Targets for New Cars

Commission President Ursula von der Leyen is mulling giving the car industry, which faces multibillion-euro fines, three years instead of one to meet targets.

New VW ID Buzz vehicles, fully electric-driven microbus cars from Volkswagen Commercial Vehicles, are seen parked before delivery at the commercial vehicle plant of Volkswagen (VW) in Hanover, northern Germany, on Dec. 20, 2024. Ronny Hartmann / AFP via Getty Images

The European Commission has proposed softening its net zero carbon emission targets for new cars.

Starting on Jan. 1, European Union (EU) targets required a 15 percent reduction in CO2 emissions for both cars and vans from 2021 levels.

European Commission president Ursula von der Leyen said on March 4 that the EU executive arm will make a proposal later this month that gives the industry three years, rather than only one, to meet the CO2 emission targets.

“The targets stay the same. They have to fulfil the targets, but it means more breathing space for industry,” von der Leyen told a news conference.

The proposal requires approval from EU governments and the European Parliament.

Last year, the EU signaled that it would not back away from its climate legislation. When EU climate commissioner Wopke Hoekstra was asked on Dec. 12, 2024, if he would back down on CO2 rules, he said, “No. The answer is no.”

Compliance would now be based on a carmaker’s average emissions over the period 2025–27. The law still stipulates that from 2035, all new cars that come on the market cannot emit any CO2, making it illegal to sell new fossil fuel-powered vehicles in the bloc.

The industry previously estimated that about 22 percent of new car sales would have needed to be electric to reach those targets. In January, battery-electric vehicles (BEVs) made up only 15 percent of the market share of new cars sold.

The European car industry is now bracing for possible U.S. tariffs, and has urged the EC to grant relief from fines they say could rise to 15 billion euros ($15.7 billion) for 2025.

‘Primary Concern’

Last year, the European Automobile Manufacturers Association (ACEA) claimed the CO2 target requirements—which are key to von der Leyen’s European Green Deal—raised the prospect of multibillion-euro fines, threatening investment, jobs, and competitiveness.

“A continuous trend of shrinking market share for battery electric cars in the EU sends an extremely worrying signal to industry and policymakers,” stated the ACEA, which represents 15 major European automotive manufacturers, including BMW, Ford, Mercedes-Benz, and Volkswagen, among others.

Reacting to the news on Tuesday, ACEA president and CEO of Mercedes-Benz Ola Källenius said in a statement that his “primary concern” was “how do we chart the course to 2035 with the necessary flexibility and pragmatism to make this transition work”

Stellantis, Europe’s second-largest automaker said in a statement on Monday that it welcomes von der Leyen’s announcement.

Stellantis said the extended compliance period on carbon emission targets was a “meaningful step in the right direction” to preserve the auto industry’s competitiveness.

EVs

The industry is also trying to contend with weaker demand and cheap EV competition from China.

Last year, Volkswagen announced that it may close factories in Germany because of competition from cheaper Chinese EVs. The company is aiming to save $11 billion by 2026 to manage the transition to EVs.

Some of the EV issues the ACEA previously listed included problems related to charging and hydrogen refilling infrastructure, a competitive manufacturing environment, “affordable green energy,” purchase and tax incentives, and a secure supply of raw materials, hydrogen, and batteries.

It stated that “economic growth, consumer acceptance, and trust in infrastructure have not developed sufficiently either.”

“As a result, the zero-emission transition is highly challenging, with concerns about meeting the 2025 CO2 emission reduction targets for cars and vans on the rise,” the ACEA stated.

It stated that the current rules “do not account for the profound shift in the geopolitical and economic climate over the past years and the law’s inherent inability to adjust for real-world developments further erodes the competitiveness of the sector.”

The ACEA said in October 2024 that the market share of cars made in China in EU battery-electric sales has climbed from around 3 percent to more than 20 percent in the past three years.

Reuters contributed to this report.