EU Parliament negotiators agree softer 2035 car CO2 target, easing combustion-engine ban

An overnight compromise

Negotiators from the centre-right European People's Party (EPP), the Socialists and Democrats (S&D) and the liberal Renew group agreed a compromise overnight into Tuesday, 20 October 2026. Under the draft, fleets of new cars would have to cut CO2 emissions by 95% by 2035 compared with 2021. If the cars use low-carbon steel produced in the EU, the requirement drops to 87.5%. A Reuters-cited draft frames the same arrangement as an 87.5% cut plus a further 7.5 points that can be offset with EU-made steel. Under the original 2022 rule, a 100% cut by 2035 would have meant the end of new combustion-engine cars, and petrol and hybrid cars would now remain on sale after 2035.

How the targets moved

Germany and France proposed a 90% target without a steel offset in the week of 12 October 2026. The Commission had already proposed 90% in December 2025, with the remaining 10% to be offset through low-carbon steel and sustainable fuels. The three groups together hold 398 of the Parliament's 719 seats, a majority that could open the way to an EU-wide decision on the rules. German carmakers had pushed for a deeper softening, because electric car sales were not growing fast enough to end combustion cars by 2035. Sales are now picking up strongly in many EU states thanks to state subsidies.

Reactions in Parliament

Manfred Weber, the EPP group leader, has promised voters for more than two years to scrap the rule, and he now sees the moment to announce it. He says the compromise settles the matter.

The unspeakable combustion engine ban is now off the table.

Iratxe García Pérez, leader of the S&D group, said the Socialists had not yet settled on a common position and that the issue still needed debate within the group. She added that it may only become clear in the coming months whether an agreement is possible. Tiemo Wölken, an SPD member of the Parliament who helped negotiate the deal, argues that the goal remains a shift to electric mobility, with hybrids kept as an option during a transition phase. The Greens' Michael Bloss takes the opposite view of the deal.

This is now chaos instead of planning security.

Polish MEP Dariusz Joński told RMF FM that the deal gives consumers more freedom in choosing a drive technology.

What comes next

The compromise keeps the 2030 interim target at 55% below 2021, in line with the Commission proposal, and lets carmakers meet the 2030 requirement on the average of 2029 to 2031. For vans, the 2030 target falls to 35% from 40%, and vans must cut 80% by 2035. Vehicles running on renewable fuels would count as emission-free, and small affordable electric cars or highly efficient electric vehicles could earn super-credits to help meet targets. The transport and industry committees vote on Thursday, 22 October 2026, and the environment committee follows in early November. The full Parliament is expected to set its position in December, after which Parliament and member states must agree a common legal text.

Market backdrop

European car stocks are the weakest performers on the continent's stock market this year. Bloomberg puts the sector index down more than 19% so far, more than twice the fall in the next weakest segment, building materials. Only Ferrari, with a gain of 10%, has risen among European carmakers this year. The sector has also faced stronger competition from Chinese producers and a thin range of affordable electric models, according to the same report.