Combustion Engine Phase-Out: European Parliament Reaches Compromise on CO₂ Targets

The compromise would soften the EU’s planned 2035 combustion-engine phase-out. New-car emissions would need to fall 87.5 percent from their 2021 level, rather than reaching zero during driving. That matters because the rule would no longer effectively require every newly sold car to be electric.

The agreement was reached by negotiators from the conservative European People’s Party, the Socialists and Democrats, and Renew Europe. It would let manufacturers continue selling new combustion-engine and hybrid cars after 2035 without automatically facing billions in penalties. A separate incentive would encourage the use of climate-friendly steel.

The compromise was not yet official. The transport and industry committees were due to vote first, followed by the environment committee and then the full Parliament, probably in December. The Council of the EU must also adopt its position. Only afterward can Parliament and the Council negotiate a final law.

The phrase describes a planned tightening of emissions rules for new cars, not an immediate ban on every combustion engine already on the road. Under the original EU policy, new cars from 2035 were supposed to emit no greenhouse gases during driving. That would have effectively restricted new sales to electric cars.

The proposed compromise changes the practical result. New petrol, diesel and hybrid cars could still be sold after 2035, provided the manufacturer’s new-car fleet meets the revised emissions target. The target would be an 87.5-percent reduction compared with 2021, and companies would avoid billions in fines if they complied.

This is still only a proposed reform. Parliament’s committees and full chamber must consider it, while the Council of EU member states must adopt its own position. The two institutions would then negotiate a final agreement, so the exact rules could still change.

An 87.5-percent reduction means new-car emissions would be cut by seven-eighths compared with the 2021 baseline. It does not mean each individual car must emit exactly 87.5 percent less. The standard applies to the manufacturer’s new-car fleet, according to the proposed framework.

The difference from 90 percent is 2.5 percentage points. The European Commission had proposed a 90-percent reduction by 2035, with complete compensation through green steel and climate-friendly fuels. Germany and France also proposed a 90-percent reduction, but without requiring green-steel compensation. The Parliament compromise therefore sets a less demanding headline target.

The earlier EU policy was more stringent in practical terms. It required new cars from 2035 to emit no greenhouse gases during driving. That would have meant only new electric cars could effectively be sold. The compromise would preserve room for combustion-engine and hybrid models.

For carmakers, a looser target would reduce the immediate regulatory risk of continuing to build petrol, diesel and hybrid vehicles. They could sell those models after 2035 if their overall new-car fleet met the revised emissions standard. Avoiding billions in potential fines could be especially important while the industry faces high US import tariffs, Chinese competition and job cuts.

The key mechanism is fleet averaging. A manufacturer would compare the emissions of its new cars with the 2021 baseline, rather than having every model produce zero driving emissions. Cleaner cars and lower-carbon production could help balance higher-emitting models. The proposed compromise also offers incentives linked to climate-friendly steel.

For buyers, the direct effect would be continued access to new combustion-engine and hybrid cars beyond 2035. The transition to electric-only new sales would become less certain and potentially slower. However, the final result depends on votes in Parliament, the Council’s position and later negotiations between the institutions.

The proposed system looks beyond the exhaust or tailpipe. A car’s climate impact can also include emissions from producing materials and fuels. If a manufacturer uses steel made with fewer emissions, the credited emissions associated with its vehicles can fall. Climate-friendly fuels can serve a similar compensating role in the Commission’s proposal.

The Parliament compromise reportedly sets a 95-percent reduction for the relevant emissions, but allows another 7.5 percentage points of flexibility when manufacturers use green steel. In simple terms, cleaner material production would earn regulatory recognition. This creates a financial reason to buy steel produced with lower emissions.

The details are still unsettled. The Commission’s late-2025 proposal required complete compensation through green steel and climate-friendly fuels, while the new compromise would partly weaken that logic. Germany and France proposed a 90-percent reduction without green-steel compensation. Final rules depend on Parliament, the Council and their negotiations.

The reform is not yet approved. Parliament’s transport and industry committees were scheduled to vote first, followed by its environment committee. The full Parliament was expected to adopt its position in December. The Council of the EU, made up of member-state governments, must also approve a negotiating position.

The three institutions have different jobs. The European Commission proposes EU legislation and had proposed a 90-percent reduction in 2025. The European Parliament debates and votes on the proposal through committees and its full chamber. The Council represents national governments and must adopt its own position. Parliament and the Council then negotiate the final wording.

The article describes the Commission as the source of the earlier proposal, not as a body still awaiting a separate final approval vote. Once Parliament and the Council each approve positions by majority, institutional negotiations can begin early the following year. The reported compromise could therefore still be revised.

Car emissions matter because greenhouse gases trap heat in the atmosphere and contribute to climate change. Petrol and diesel engines burn fossil fuels, producing carbon dioxide while cars are driven. Vehicle production can also create emissions, especially through energy-intensive materials such as steel. Reducing only one part leaves a significant source untouched.

That is why the debate covers both driving emissions and production choices. The earlier EU rule targeted zero greenhouse-gas emissions during driving. The proposed compromise would also reward green steel, while the Commission’s proposal mentioned climate-friendly fuels. These measures aim to lower emissions from the vehicle’s wider life cycle, not just its exhaust.

The policy choice matters because it determines how quickly the market shifts toward lower-emission vehicles and production. The article links the debate to an industry crisis involving US import tariffs and Chinese competition. Any final reform must balance emissions cuts with the sector’s economic pressures, while Parliament and the Council continue negotiations.