EU compromise could keep new petrol and diesel cars on sale after 2035

The end of new petrol and diesel cars in the EU has moved further away politically. Negotiators from the conservative European People’s Party (EPP), the Socialists and Democrats (S&D) and the liberal Renew Europe group reached a compromise overnight into Tuesday, 20 October, on CO₂ targets for new cars. Their proposal would allow combustion-engine and hybrid cars beyond 2035. The groups must still review the agreement: no binding decision has been taken.

At its heart is a relaxation of the existing target. Rather than cutting new passenger cars’ CO₂ emissions on the road to zero by 2035, a reduction of 87.5 per cent against 2021 levels could suffice under certain conditions. A centrist parliamentary majority is taking shape. For Europe’s struggling car industry, that would mean more flexibility; for climate policy, a departure from the course already agreed.

How the compromise would work

The agreement links exhaust emissions to vehicle manufacturing. As a basic requirement, new-car CO₂ emissions would have to fall by 95 per cent against the 2021 baseline by 2035. Manufacturers using steel produced with lower emissions could deviate from that target by a further 7.5 percentage points, bringing the required reduction to 87.5 per cent.

Green steel would thus give manufacturers additional room over their new cars’ emissions. The approach is intended to encourage them to make not only vehicle propulsion but also the materials they use more climate-friendly. The political agreement does not yet settle precisely how that mechanism would operate or be checked.

The distinction between a fleet target and an individual vehicle matters. These CO₂ requirements concern the average emissions of a manufacturer’s new-car fleet. An 87.5 per cent reduction would not mean every new car must cut its emissions by exactly that amount. Nor does it directly establish what proportion of sales could be combustion-engine or hybrid vehicles after 2035. That would depend on the fleet’s composition and the final accounting rules.

A majority without the far right

The negotiators’ agreement is politically significant because another route to a majority had been under discussion. The EPP, which includes Germany’s CDU and CSU parties, could have sought support from far-right MEPs to ease the rules. Instead, an agreement within the so-called centre platform is emerging.

That majority is not yet secure. All three groups must first consider the outcome. Only then will it become clear whether the negotiated balance between stricter basic requirements and exemptions for green steel can survive parliamentary votes.

Economic pressure is substantial. Europe’s car industry is in deep crisis, with high US import tariffs and fierce competition from China weighing on manufacturers. Companies are cutting numerous jobs to reduce costs. The 2035 debate therefore concerns not only climate protection but also investment decisions, production locations and the future direction of European carmakers.

The existing rules require new cars to emit no greenhouse gases on the road from 2035, effectively ending sales of new petrol and diesel cars. At the end of 2025, the European Commission proposed easing this to a 90 per cent CO₂ reduction. However, it required the remaining emissions to be fully offset through green steel and lower-emission fuels.

What it means for Switzerland

For Switzerland, the implications run primarily through the car market. European manufacturers also shape the range available here. Their long-term decisions about which powertrains to develop and which models to retain affect Swiss buyers’ choices, as well as business for importers and garages.

A softer EU target could encourage manufacturers to keep combustion-engine and hybrid cars in their ranges for longer. That guarantees neither the survival of particular models nor anything about future prices. Even under less stringent requirements, cutting fleet emissions by at least 87.5 per cent would still demand a far-reaching transformation compared with 2021.

The legal distinction is equally important: Switzerland is not an EU member, and a European decision does not automatically change Swiss rules. Switzerland has its own CO₂ requirements for new cars, aligned with the European regulatory framework. Whether and how it would follow an EU reform would require a separate decision.

For owners of vehicles already registered, the debate is not about a general driving ban. It concerns requirements for new cars. Any longer-term effect on the Swiss market must therefore be distinguished from the rules governing vehicles already on the road.

The final decision is still ahead

The European Parliament’s transport and industry committees are next due to adopt their opinions on the reform on Thursday, 22 October. The environment committee, which leads the parliamentary work, is expected to follow in early November. Parliament’s overall position is expected in December.

In parallel, EU member states must agree their position in the Council. German Chancellor Friedrich Merz and French President Emmanuel Macron have already settled on a joint approach: a 90 per cent reduction, without the proposed offset through green steel. Their position therefore differs from the parliamentary negotiators’ compromise on a central point.

Once Parliament and the Council have adopted their positions, negotiations on the final legislation could begin in early 2027. The present compromise opens a possible route towards that process, rather than settling its outcome. Which CO₂ limit will ultimately apply from 2035, and what role green steel will play, remain open questions.