Gutting the EU’s car CO2 rules would not just remove a key pillar of the European Green Deal, it would consign Europe’s carmakers to the car museum as well
Listening to Ursula von der Leyen over these last weeks has been simultaneously reassuring and confusing. I was in New York when the European Commission president told world leaders, Europe is holding the line on climate. A week before she told the European Parliament that “the future is electric”. Yet, she also promised a rushed review of the car CO2 standards during a closed door ‘strategic dialogue’ with the car CEOs.
The Commission is under immense pressure to weaken all of its environmental rules. One by one, iconic rules agreed during the Green Deal either get postponed, like the deforestation regulation (twice now), weakened like the 2025 car CO2 rules, or gutted like the Corporate Sustainability Reporting Directive.
The Commission’s approach seems to be a variation on ‘bend, don’t break’. This might seem like a wise strategy at first glance. Better give something than lose it all. The trouble is once corporate lobbies smell weakness, they keep coming back for more.
Take the car standards. Flexibility can be a good thing. The EU’s car standards’ five-year cycles are rigid. Banking and borrowing would provide flexibility without meaningfully reducing ambition. But if not handled carefully, loopholes dressed up as flexibilities could turn the regulation into a swiss cheese, diluting the investment certainty the CO2 regulation currently provides to hundreds of companies in the mobility and electricity industry.
Let’s have a look at the ‘flexibilities’ that carmakers are promoting
Incentives for small electric cars
Stellantis, Renault and Volkswagen support supercredits or multipliers for small EVs. ‘Supercredits’ are an old car industry trick to allow for higher sales of combustion cars – nicely explained in this T&E briefing way back in 2014. Depending on whether your definition of ‘small’ includes just segment A cars (Fiat500, Toyota Aygo) or also B (Dacia Sandero, Toyota Yaris), and whether the multiplier is 1.2 or 2 (equivalent to having small BEVs emitting -10g/km or -50g/km), the weakening of 2035 BEV sales share could be anywhere between 0.4% and 15%.
Plug-ins powered by ‘clean’ fuels
Carmakers argue plug-in hybrids (PHEVs) should be allowed after 2035, claiming they are low-emission vehicles. In reality PHEVs emit on average 139g CO2 per km. Range extended cars – EVs with a petrol generator – promise lower emissions and are compatible with BEV platforms, but of course they are not emissions free. The only way to theoretically offset those emissions is by fueling plug-ins with so-called ‘carbon neutral fuels’ (CNF). Depending on who you talk to, the allowance for CNF powered plug-ins could be anywhere between 2 and 20% of car sales after 2035. Of course many “CNFs” are actually worse for the climate than fossil fuels (eg HVO100 is often palmoil) so the climate impact is worse in reality.
LCA or Clean Material Credits
Some carmakers want to completely overhaul the regulation, changing the way emissions are measured from tailpipe to life cycle assessment, including the production and use phase of the car. This would be extremely complex and won’t happen. Others argue for eco-innovation credits for clean materials like green batteries or green steel. Eco-innovation credits could be worth up to 2-4g of CO2 per kilometer, or a 2-3% weakening of BEV sales. Whether the credits are worth anything will depend on how clean materials are defined and whether factories actually have to run on clean energy or they can purchase credits (e.g. Power Purchase Agreement, and Guarantee of Origin).
Local content
There’s a growing chorus of industry voices (mostly suppliers) pleading for ‘local content’ or ‘buy European’ clauses in key regulations. Some argue the CO2 standards should include supercredits to incentivise cars with domestically-produced batteries. Assuming 40% ‘truly local’ EVs – how to define this is worth a blog in itself – and a supercredit of 1.2 or 2 (equivalent having local BEVs emitting -10g/km or -50g/km), 2035 BEV sales share would be weakened by 3-15%.
Starting to sound complex? That’s because it is. In a world where European industry is calling out for more simplicity, this collection of carve-outs will turn Europe’s car rules into a byzantine mess. Take away the simplicity and the certainty that investors need will go too.
Taken together, these flexibilities could reduce the number of pure electric cars sold in 2035 by 7 to 38%.
Any weakening would be a blow to the EV transition and will lock carmakers into combustion engine platforms and models. This will make it hard to meet Europe’s climate goals, be they the contested 2040 or 2050 targets.
But of course there is a world of difference between limited, well defined ‘flexibility’ (e.g. green steel, a small allowance for EREVs) and the kind of free for all, let’s-destroy-the-CO2-regulation approach proposed by Germany’s auto lobby, the VDA.
A bit of bending could still see Europe broadly on track. But bend anything too far and the line will eventually break. Gutting the EU’s car CO2 rules would not just remove a key pillar of the European Green Deal, it would consign Europe’s carmakers to the car museum as well.
German Chancellor will ask EU leaders for loophole to sell ‘extended range’ EVs, a technology that China already dominates.
Joint letter calling on removing Dieselgate cars
A coalition of signatories ask for fixes or scrappage of high-emitting cars at the expense of manufacturers
10 years after Dieselgate, another scandal comes
Manufacturers want to kill off EU rules that would better reflect pollution from plug-in hybrid vehicles