The European Union walked back a 2035 ban on new petrol and diesel cars, which has been seen as a milestone in the fight against climate change, on Tuesday, December 16, as the bloc pivots to bolstering its crisis-hit auto sector.

Under proposals decried by environmental groups, automakers will now have to cut new vehicles’ exhaust emissions by 90% compared to 2021 levels – down from an envisaged 100% – with the remainder being “compensated” in various ways.

The EU’s industry commissioner, Stéphane Séjourné, said the bloc’s green ambitions stood intact as he put forward the plan, which he billed as a “lifeline” for Europe’s auto industry. “The European Commission has chosen an approach that is both pragmatic and consistent with its climate objectives,” he told Agence France-Presse (AFP).

The combustion-engine ban was hailed as a major win in the struggle against climate change when it was adopted in 2023. Yet carmakers and their backers have lobbied hard over the past year for Brussels to relax it, in the face of fierce competition from China and a slower-than-expected shift to electric vehicles (EVs).

Weakening the ban is the most striking result yet of a pro-business push that has seen the EU pare back a slew of environmental laws this year – on the grounds they risk weighing on growth.

In practice, automakers will still be able to sell a limited number of polluting vehicles – from plug-in hybrids to diesel cars – past 2035. To do so, they will have to compensate for the planet-warming emissions these cars spew into the atmosphere through two types of carbon credits.

The first will be generated by the use of made-in-Europe, low-carbon steel in car manufacturing. The second will be out of the automakers’ hands, being tied to the amount of e-fuels and biofuels that energy companies put on the market every year.

A contested new target

Beset by announcements of job cuts and factory closures over the past year, Europe’s auto industry – which employs almost 14 million people and accounts for about 7% of Europe’s GDP – had maintained that the 2035 goal was no longer realistic. High upfront costs and the lack of adequate charging infrastructure in parts of the 27-nation bloc mean that consumers have been slow to warm to EVs, producers say.

Just over 16% of new vehicles sold in the first nine months of 2025 run on batteries, according to industry figures.

Manfred Weber, the conservative head of the EU parliament’s largest group, welcomed the new target, saying that “forbidding technologies” would be a gift to far-right populists.

Critics, including Spain, France and the Nordic countries, had warned that ditching the ban risked slowing the shift to EVs, undermining the EU’s green agenda and deterring investments in electrification.

Measure to boost the auto sector

The Commission also unveiled a slew of additional measures to support the auto sector, as part of a package that needs approval from the EU Parliament and member states.

In the run-up to 2035, carmakers will benefit from “super credits” for small “affordable” electric cars made in the EU, in an accounting trick that would make reaching emission targets easier. This would mean that sales of electric cars that measure under 4.2 metres in length would be counted 1.3 times, thus artificially boosting the share of zero-emission cars in an automaker’s fleet.

The Commission also proposed reducing the interim 2030 emission target for vans from 50% to 40%, and granting truck manufacturers more time to meet their own 2030 target, in line with a previous concession to automakers. The EU will provide €1.5 billion to support European battery producers through interest-free loans.

Green fleets

To boost EV sales, medium and large firms, which currently account for about 60% of new car sales in Europe, will be required to switch to greener car fleets. At least 30% of new vehicles bought by companies will need to be zero- or low-emission, under targets that will differ from country to country, with the bar set higher for richer nations.

Road transport accounts for about 20% of total planet-warming emissions in Europe, and 61% of those come from cars’ exhaust pipes, according to the EU.