EU Softens Its 2035 Car Ban

Brussels Opens the Door to Limited Combustion Engines in a Bid to Balance Climate Goals and Industrial Reality

After months of intense lobbying by influential member states such as Italy and Germany, as well as sustained pressure from the European automotive industry, the European Commission has announced a significant reversal of its landmark plan to ban the sale of internal combustion engine cars from 2035. What had become a powerful symbol of the EU Green Deal’s ambition is now being reshaped into a more flexible framework that allows a limited role for combustion-based technologies beyond that date.

The new proposal, approved by the Commission in Strasbourg after heated internal debates, replaces the previous target of a 100% reduction in vehicle emissions with a 90% reduction compared to 2021 levels. This seemingly technical change has major consequences: it creates a post-2035 market niche for vehicles equipped with internal combustion engines, plug-in hybrids, and range extenders, challenging the earlier vision of a transition based exclusively on battery electric or hydrogen vehicles.

Technology neutrality and emission credits

At the heart of the revision is the principle of “technology neutrality,” long advocated by several governments and manufacturers. To offset the remaining 10% of emissions that will be tolerated under the new rules, automakers will be required to accumulate so-called emission credits. These credits can be earned through a variety of strategies, including the use of low-carbon steel produced within the EU and the adoption of sustainable fuels such as synthetic e-fuels and advanced, non-food biofuels derived from agricultural waste or used cooking oil. Biofuels made from food crops remain excluded.

According to Commission estimates, this system could allow 30–35% of the post-2035 car market to be served by vehicles that are not fully electric. Commission President Ursula von der Leyen sought to reassure critics by stating that “Europe remains at the forefront of the global transition to a clean economy.” In contrast, Italy’s Minister for Enterprise, Adolfo Urso, hailed the move as a “breach in the wall of ideology,” claiming credit for Rome’s push for technological neutrality.

Industry reactions have been mixed. The European Automobile Manufacturers’ Association (ACEA) welcomed the shift as a step toward a more pragmatic and flexible transition, while Italy’s UNRAE argued that it was necessary given the lack of a coherent EU-wide industrial policy to support electrification. On the other hand, manufacturers focused exclusively on electric vehicles voiced strong opposition. Polestar CEO Michael Lohscheller warned that weakening the rules could harm both the climate and Europe’s long-term competitiveness.

Additional flexibilities and market support

Beyond the headline change to the emissions target, the Commission has introduced further flexibilities. Carmakers will be granted a three-year extension, from 2030 to 2032, to comply with upcoming emissions cuts. Emission reduction targets for vans by 2030 have also been lowered from 50% to 40%.

To stimulate demand for affordable electric cars produced in Europe, Brussels has launched a new “small affordable cars” category, covering electric vehicles up to 4.2 meters in length. These models will benefit from frozen regulatory requirements for ten years and, if manufactured within the EU, can be counted as “supercredits” toward fleet emission targets. In parallel, the EU has earmarked €1.8 billion to support a fully European battery supply chain, including €1.5 billion in interest-free loans starting next year.

Corporate fleets, which account for around 60% of new car sales in Europe, are another key lever. Under the proposal, Italy will be required to ensure that zero-emission vehicles make up at least 45% of company fleets by 2030 and 80% by 2035, though member states retain flexibility in how they achieve these targets.

A two-speed transition

Despite these measures, concerns remain about a “two-speed” European market. Electric vehicle adoption is heavily concentrated in northern and western Europe. Norway, though not an EU member, reached an extraordinary 94% share of electric vehicles in total sales in the first seven months of 2025, while countries like Croatia remain stuck at around 1%. Within the EU, EV penetration ranges from roughly 5% in Italy to about 10% overall during the same period.

Critics fear that relaxing emissions targets could slow investment in charging infrastructure, a cornerstone of mass EV adoption. Moreover, in countries with generous purchase incentives, such as Spain, the main beneficiaries have often been Chinese manufacturers offering cheaper models than their European rivals.

The Commission’s move outlines a new, carefully calibrated path: a compromise designed to reconcile climate ambition with industrial capacity and economic concerns. Yet the proposal still requires approval from the governments of all 27 member states and the European Parliament, where the final balance between flexibility and ambition will be fiercely contested.

Alessandro Fiorentino