Position paper on the revision of the EU car CO2 standards

The EU risks losing ground in the global EV race and falling behind global competition. While the EU is discussing the 2035 target, global markets are going electric fast: Turkey (18% EVs) has caught up with the EU while some markets have already surpassed the EU (in the first half of 2025): Thailand (24%), China (30%), Vietnam (42%). If the EU automotive industry doesn’t transform fast, it will lose to its international competition, with consequences for the workers and the EU sovereignty.

T&E assesses that based on the Commission proposal, cars would emit an additional 720 MtCO₂e between 2025 and 2050, 10% more than under the current regulatory scenario. Indeed, EV transition will be slower and compensation mechanisms in place don’t save additional CO₂ emissions, since they are already counted under other legislations (i.e steel sector in ETS1 and fuels under RED).This change will make it hard to reach our climate goals (2030, 2040 and 2050). It will also be more expensive to reach those targets given that in comparison to other sectors, car electrification is one of the most mature and affordable decarbonisation pathways.

Allowing plug-in hybrids and cars running on biofuels and e-fuels to be sold after 2035, is also bad news for consumers: a slower uptake of electric cars will delay the purchase price parity point (when electric cars get cheaper than conventional models) and locks drivers into more expensive mobility.

Plug-in hybrids sell for around €55,000 on average and cost up to an extra €0.92 per litre for third-hand vehicle drivers compared to a petrol car. Synthetic fuels would cost €6 to €8 per litre. Advanced biofuels would also remain costly due to their scarce supply. By contrast, electric cars are already cheaper to run in most cases thanks to much lower operating costs (up tothree times cheaper per kilometer when charged at home or at work), and are expected to be cheaper to buy than petrol cars by 2030 at the latest.

Over 200 CEOs and business leaders from tomorrow’s electric mobility industry have called on the EU to preserve the 2035 target in order to protect their investment and much needed guarantee market certainty for technology deployment (‘Take Charge’ coalition). This call is supported by T&E analysis, which shows that Europe must urgently establish global electric car leadership to sustain economic value and create new jobs across its automotive value chain and surrounding industries, such as batteries and charging. A scenario where the EU walks back from its 2035 goal and fails to deliver adequate industrial policy action would result in a sharp decline in car and battery production (including the loss of two-thirds of planned domestic battery capacity), employment (up to one million jobs), and economic value (a €90 billion drop in automotive value added). Weakening local EV deployment directly allows foreign car and battery manufacturers to extend their technological lead and increase exports to Europe.

The 2035 zero-emission target for new cars and vans has been significantly undermined through the introduction of a Carbon Correction Mechanism (CCM). This mechanism allows for a 3% weakening of the CO₂ targets (equivalent to 3.3 gCO₂/km), provided that sufficient quantities of renewable fuels, i.e e-fuels and advanced biofuels derived from waste and residues (including biogas), are placed on the market to compensate for the added emissions. This a “free lunch” for the industry as it rewards them for action from fuel suppliers (which are covered under the RED).

As shown many times already by T&E, biofuels are a dead end for cars. Allowing e-fuels and advanced biofuels in cars will only increase the costs for decarbonisation, especially for consumers (see above) and slow down the transition towards affordable electric mobility.

In particular, advanced biofuels (animal fat, used cooking oil) are expensive, largely imported and highly prone to fraud (often relabelled virgin palm oil). A car running on animal fats would require the equivalent of 120 pigs a year while a car running on used cooking oil would need 25 kg of fries per day.

In addition, advanced biofuels are severely limited in terms of domestic supply and would be better prioritised for hard-to-abate sectors such as aviation and shipping. Diverting these fuels to cars would jeopardise the decarbonisation of those sectors.

The Commission proposal includes an averaging of the 2030 target which means carmakers will be allowed to average their emissions over 3 years, rather than achieve their objectives in 2030. As a consequence carmakers can under perform in 2030 as long as they compensate with over performance in 2031-2032.

T&E analysis estimates BEV sales would fall to 47% in 2030 instead of 57% under the current regulation.

By limiting the averaging to 2 years (2030-2031) or adding a 5% borrowing cap, BEV sales would represent around 50% in 2030, ensuring the sufficient BEV momentum and mass market adoption. On the contrary, a 5 years averaging (2028-2032) would be disastrous, limiting BEV sales to 39%.

In the Commission proposal, the 2035 target is weakened by 7% (i.e. cap at 7.7 g CO₂/km), providing carmakers compensate for the additional emissions by using low carbon steel in their cars.

T&E is in favour of supporting and strengthening the EU production of green steel and if done right, low-carbon credits could establish a lead market for green steel at very little cost for the consumers, only adding a maximum of 100 euros to car prices. However, the effectiveness of these credits as well as their potential impact depends on future outcomes of the Industrial Accelerator Act (IAA) and the delegated act.

Under the revised CO₂ standards, carmakers can count each small “Made-in-EU” BEV (up to 4.2 meters in length) as 1.3 cars when calculating their CO₂ compliance between 2030 and 2034. The new vehicle category, designated as M1E in the Auto Omnibus regulation, is intended by the Commission to capture BEVs priced below €25,000.

The supercredits for small “Made-in-Europe”effectively allows manufacturers to sell fewer electric vehicles overall while still meeting their regulatory targets.

T&E calculated that the Commission proposal will reduce BEV sales by 1.5% in 2030. The 4.2-meter threshold captures all A-segment BEVs, which regroups small compact urban cars, 71% of B-segment models, and only 1% of C-segment vehicles, meaning roughly 25% of BEVs sold in 2030 are expected to be below the 4.2m threshold. Assuming that a two third of small BEVs meet the made-in-EU criteria (to be defined in the IAA), this would lead to 17% of the BEV sold in 2030 to earn supercredits.

Raising the length threshold expands eligibility and further weakens the CO₂ target. At 4.3m with a 1.5 multiplier, BEV sales fall by 2.4% in 2030, while a 4.1 m threshold with a 1.2 multiplier limits the impact to 0.9%.