EU CO2 Plan Gets Mixed Reception Ahead Of Parliamentary Scrutiny

The European Commission’s plans to dilute its original insistence on an electric vehicle monopoly in new car sales by 2035 hasn’t pleased everybody, and was described as disappointing for automakers and ineffective by environmental groups.

But the proposals are nowhere near being finalized and there will be months of agonizing in the European Parliament before the final edition emerges.

The European Commission conceded automakers’ top priority by ending the 2035 date for them to achieve zero carbon dioxide emissions in new cars sold, which had effectively mandated an EV monopoly. But instead of opting for a let-the-market-decide, technology-free-for-all, the Commission decided automakers should cut emissions by 90%, not 100%, compared with the base year 2021. This allows a limited number of pure internal combustion engines, as well as hybrids, plug-in hybrids, extended-range electric vehicles and hydrogen-based ICE. Other measures included incentives to build small, cheap EVs.

The Commission also allowed some tinkering with the 2030 stage of CO2 emissions, allowing them to be averaged out over two more years. There is a new corporate fleet CO2 target.

Reaction was varied.

Hildergard Mueller, president of the German auto industry’s VDA, said the proposed measures were not only inadequate, they added more negatives with an insistence on the use of some environmentally friendly steel. Mueller said the Commission had failed in its mission to create flexibility.

“Brussels has disappointed with its draft proposal,” Mueller said, according to Reuters.

Clinging to combustion engines

Brussels-based green lobby group Transport & Environment reacted to the proposals with a statement headlined “EU 2035 reversal: playing for time won’t make European carmakers great again”.

“Every euro diverted into plug-in hybrids is a euro not spent on EVs while China races further ahead. Clinging to combustion engines won’t make European automakers great again,” said T&E executive director William Todts.

Investment bank UBS described the Commission’s proposals as “moderate adjustments”.

“Given some elevated expectations about a fundamental shift of EU CO2 policies for the auto sector, we think the announced package will be seen at best as “in line” or even as a moderate disappointment,” UBS said in a report.

“The 2035 de facto ICE ban removal eliminates the tail risks of regulatory fines and therefore has a small positive impact….. especially relevant for the premium/luxury ICE car segment, but it’s also clear that the EU still wants the vast majority of new car sales to be fully electric by the middle of next decade. (manufacturers) won’t take this regulation amendment as a reason to change investment strategies,” UBS said.

“The new small affordable car category could potentially be a moderate positive for Stellantis and Renault , who are most exposed to the small affordable EV segment, followed by VW, ” according to UBS.

Reuters Breakingviews column wasn’t impressed.

Measly Christmas stocking filler

“Europe’s backsliding on electric vehicles is a measly Christmas stocking-filler for carmakers. Brussels on Tuesday abandoned plans to make battery rides account for 100% of sales by 2035. Still, the rules are tougher than American ones, meaning that Volkswagen and its European peers probably won’t slash EV plans in the way Ford Motor did. Looser targets may, however, embolden governments to slam the brakes on the green-car transition,” Breakingviews columnist Neil Unmack said.

Ford Motor announced Monday it was dropping its F-150 EV as a part of slashing its electric plans and pivoting back to hybrid and gasoline vehicles. Ford said it will take a $19.5 billion special charge in the current quarter.

Felipe Munoz, industry expert who runs the industry research platform Car Industry Analysis, thought the Commission proposals were a step in the right direction.

“It was obvious that the European industry was never prepared to meet this ambitious/unrealistic goals for 2035. And the best example is their inability to produce real affordable EVs and how they keep losing ground to the really competitive Chinese rivals,” Munoz said.

“The initial objective that was wisely modified yesterday, was basically asking the European companies to stop selling to 80%-85% of the customers that are still buying ICE/HEV/MHEV/PHEV. That is nonsense, especially when the local industry has not been able to secure the supply chain for the production of batteries.” he said.

All Chinese products are more competitive

Munoz said between January and September 2025 in Europe, Chinese car brand sales increased 91% compared to the same period of 2024. They sold 510,000 vehicles in Europe, 5.2% of the total market.

“Whether these are fully electric or not, the Chinese are increasing their presence because all of their products are more competitive,” he said.

Steve Young, managing director of British-based automotive retailing consultancy ICDP, wondered why the Commission wanted to incentivize European small cars.

“Given the well-known challenges of making a profit on small cars and the likelihood that customers will be able to buy cars from the next class up for only a modest additional monthly payment, it defeats me trying to think why this measure is seen to be helpful.” Young said.

Young said rather than struggling to meet Chinese standards he advocates a more aggressive strategy.

“The only way we can beat a low-cost competitor is by changing the game, and that requires innovation, for example, through having different batteries or different powertrains altogether rather than trying to play catch-up. That was what the Chinese did with their New Energy Vehicle policy in 2012, leapfrogging the global manufacturers’ lead in ICE engines and transmissions.” Young said in an email exchange.

The fate of the Commission’s proposals will be decided in the European Parliament. EPP (European People’s Party), is the biggest political grouping, composed of national center-right parties such as Germany’s Christian Democrats and Spain’s Popular Party.

Well-intentioned but misguided

The EPP Group described the Commission’s proposals as a more realistic, technology-neutral policy that takes climate protection and industrial competitiveness into account in equal measure. The previous approach was well-intentioned but misguided in key areas – technological openness was replaced by ideology and industrial reality by symbolic politics.

“The ban on combustion engines was a mistake that is now being corrected. The sector is facing profound structural changes and massive global competitive pressure. This is precisely why it needs technology-neutrality and reliable, long-term and internationally competitive framework conditions. The departure from the combustion engine ban is a decisive contribution to this,” said Jens Gieseke MEP, EPP Group spokesman on the automotive industry.

“We need a realistic, low-bureaucracy approach that strengthens production sites in Europe while also taking sufficient account of the international supply chains of European manufacturers. We also reject mandatory national electric car quotas for fleet operators,” said Gieseke.

“(the) proposal marks the starting point for a definitive change of course in EU climate and industry politics. The aim must be to effectively reduce CO2 emissions while securing jobs and industrial value creation in Europe. It is now important to ensure that the package presented today is made practicable in the legislative process,” Gieseke said in a statement.