France and Germany agree to ease EU car emissions rules in new deal

France and Germany reached a provisional deal to loosen EU emissions rules for carmakers. It could reshape both Europe’s automotive policy and its climate policy. Germany secured a less demanding approach to emissions, while France secured a narrower definition of “made in Europe” for cars.

The deal removes a proposed requirement that manufacturers compensate for the remaining 10 percent of emissions after cutting exhaust emissions by 90 percent. It also allows vehicles running on renewable fuels to count as “zero-emission.” In addition, “super credits” originally proposed for small affordable electric cars would cover vehicles of any size or length.

The agreement is not final. Berlin still must give its final sign-off, and the wider EU process must proceed. If confirmed, automakers would have more flexibility in meeting CO2 targets, while the bloc’s 2035 petrol and diesel policy would be reshaped rather than simply preserved.

In this agreement, “made in Europe” mainly means vehicles associated with the EU’s 27 member countries. The draft restricts the car-related scheme to those countries but creates an opt-in for a handful of others. Britain and Norway are specifically identified as possible participants under certain conditions.

This matters because the EU wants public money and investment to support manufacturing inside the bloc. The European Commission had proposed minimum thresholds for EU-made parts in products receiving public support. The Franco-German deal narrows that approach for cars, while still allowing selected non-EU partners to join.

Britain’s possible inclusion reflects the close links between British and European car production. European carmakers requested it, citing deeply integrated supply chains. The agreement remains provisional, so Britain and Norway’s inclusion is not yet guaranteed. The draft also gives France its preferred narrower approach over Germany’s broader interpretation.

The European Commission proposed replacing the EU’s planned 2035 ban on new petrol and diesel vehicle sales with a requirement for manufacturers to cut new vehicles’ exhaust emissions by 90 percent. That would have created a different route for meeting the bloc’s climate goals.

The remaining 10 percent would have needed compensation through various credits. The Commission specifically mentioned measures including the use of low-carbon steel. Under the Franco-German draft, manufacturers would no longer have to compensate for those residual emissions.

This change makes the proposed system less demanding for carmakers. They could meet the main emissions target without covering the final portion through credits or material choices. However, the agreement is provisional and awaits final sign-off from Berlin. It therefore indicates a policy direction, rather than a completed change to EU rules.

The agreement makes CO2 compliance easier by expanding which vehicles and technologies can receive favorable treatment. Cars running on renewable fuels could count as “zero-emission,” even though the proposal focuses on cutting new vehicles’ exhaust emissions. The deal also removes compensation for residual emissions.

It broadens “super credits,” a benefit the Commission had proposed for small affordable electric cars. Under the draft, those credits would apply to all vehicles, “irrespective of their size or length.” This gives manufacturers more flexibility across their vehicle ranges, rather than limiting the advantage to small electric models.

The combined effect is a more flexible route to meeting targets. Carmakers could use renewable-fuel vehicles and credits across different vehicle types, while avoiding compensation for the final 10 percent of emissions. The deal is still provisional, so these changes depend on final approval and the EU’s next steps.

Germany favored looser emissions rules because it wanted a less stringent carbon target for carmakers while Europe worked to revive its struggling auto industry. Its position was to give manufacturers more room under the bloc’s automotive and climate framework.

France took the opposite position on emissions. It pushed to preserve the EU’s climate ambitions rather than further scale them down. France also wanted the “made in Europe” public-procurement scheme restricted to EU nations. Germany wanted a broader definition that included important non-EU trade partners.

The provisional compromise split the dispute. Germany won the emissions argument, with the deal removing compensation for residual emissions and expanding compliance options. France won on procurement, with the car scheme limited to the EU’s 27 countries but allowing conditional opt-ins for a few partners. Final approval is still pending.

Britain and the EU’s automotive industries are connected because their production networks cross national borders. The article describes these supply chains as “deeply integrated,” meaning the industries depend on links between manufacturing activities in Britain and EU countries.

That connection became important in the “made in Europe” debate. The Commission wanted public money and investment to support products containing minimum amounts of EU-made parts. European carmakers asked for Britain to be included because excluding it could separate parts of one integrated automotive network from the scheme.

The draft agreement responds by allowing Britain to opt into the car-related definition under certain conditions. Norway is also named as a possible participant. The arrangement is narrower than the Commission’s March proposal, which could have included dozens of partner countries. The deal remains provisional, so Britain’s inclusion still depends on confirmation.

EU emissions standards set the environmental performance manufacturers must achieve for new vehicles. They therefore affect which technologies carmakers develop and offer. In this case, the debate covers exhaust cuts, renewable fuels, electric vehicles, and credits that can help companies meet CO2 targets.

Public-procurement rules influence where companies invest by tying access to public money to the use of EU-made parts. The Commission proposed minimum thresholds so public and foreign investment would support manufacturing inside the bloc. The Franco-German draft would limit the car scheme to the EU’s 27 countries, with conditional opt-ins.

Together, the two systems shape both products and production. Emissions rules create pressure to build lower-emission vehicles, while procurement rules encourage supply chains and factories that qualify for public support. The provisional deal would ease emissions compliance but keep a relatively narrow geographic definition for car-related procurement.