What's in the European Commission's proposals to reverse 2035 combustion engine ban?

Reuters reporters

The European Commission on Tuesday made public proposals that reverse an effective ban on sales of new internal combustion engine cars from 2035, bowing to pressure from Germany, Italy and major automakers.

The delayed package follows fierce lobbying to allow transitional technologies such as plug-in hybrids and CO2-neutral fuels, while climate campaigners and EV-focused companies had pushed to keep the original target.

The revised package cuts the planned 2035 goal to a 90 per cent reduction in tailpipe emissions compared with 2021, and also introduces measures to accelerate the shift to electric vehicles while giving manufacturers more flexibility.

Here are the main changes:

C02 revisions

Under the plan, automakers will still be able to sell plug-in hybrids and range extenders beyond 2035. Those not hitting the 100 per cent CO2 emission reduction need to make up the shortfall.

CO2-neutral fuels, including advanced biofuels made from waste, such as used cooking oil and low-carbon steel will also be factored into emissions calculations, meaning automakers who produce cars with this lower carbon "green steel" made in the EU can help cut emissions figures further.

Automakers using these 'flexibilities' cannot then pool their emissions with those of EV-only brands such as Tesla and Polestar to hit the targets.

Corporate fleet

Corporate fleets, which account for about 60 per cent of new car sales in Europe, will face binding electrification targets based on member states' GDP per capita, although small and medium-sized enterprises with less than 250 employees and below 50 million euros of turnover will be exempt.

Member states will only provide financial support for clean vehicles made in the EU, a win for France, which pushed for local production incentives.

Electrifying fleets could help build a second-hand EV market, as rental firms typically keep cars for a year and leasing companies for about three years.

National market share targets are set to range 32 per cent of zero-emission cars in 2035 for Bulgaria to 100 per cent for many richer countries.

'Super Credits' for a new small EV category

The Commission will create a new category for small electric cars under 4.2 metres in length, similar to Japan's "kei cars".

These vehicles will qualify for "super-credits" in emissions targets up to 2034, with each sale counting 1.3 times, meaning 10 small EVs would be credited as 13.

This category could also be used for other targeted simplification measures from the member states as well as on the EU level.

Renault and Stellantis have been lobbying the EU for a new class of small cars, arguing that it would cut costs and make EVs more affordable.

Vans

By 2030, commercial vehicles such as vans will face a 40 per cent emissions reduction target, down from the previous 50 per cent.

Automakers will also be allowed to average compliance over a three-year period from 2030 to 2032, giving them more flexibility.

Battery booster pack

The package also includes a new battery booster pack, which will have financial support as Europe races to scale gigafactories and compete with China. The Commission will inject 1.8 billion euros to accelerate Europe's battery value chain, including 1.5 billion euros in interest-free loans for battery cell producers.

The upcoming Industrial Accelerator Act, due in January, is seen as key to the battery booster as it will include details around prioritising local content.