The European Commission is signaling potential flexibility on its planned 2035 ban on new combustion engine vehicle sales, as automakers push to ease regulations on CO2 penalties and extend the role of plug-in hybrid vehicles (PHEVs).
According to a report by German publication Der Spiegel, EU officials have not ruled out allowing the sale of PHEVs beyond 2035. A recently published EU strategy paper suggests that regulators will “examine possible flexibilities to ensure that our industry remains competitive without lowering the overall ambition of the 2025 targets.” The document also acknowledges that a “technology-neutral approach” may be required to meet climate neutrality goals, which could include e-fuels through a targeted amendment to existing regulations.
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The European automotive industry has been actively lobbying to shape these discussions. Eckart von Klaeden, head of external affairs at Mercedes-Benz, emphasized the need for regulatory openness to various technologies. “Regulation must be permanently open to technology in such a way that it continues to enable the authorisation of climate-friendly products such as plug-in hybrids and range extenders,” he told Der Spiegel. Mercedes-Benz supports decarbonization but believes the market, rather than penalties, should determine the path forward.
EU Commission President Ursula von der Leyen has tasked Transport Commissioner Apostolos Tzitzikostas with drafting an action plan for the auto sector, expected to be presented on March 5. The plan will likely address industry concerns about the financial impact of CO2 penalties and the feasibility of achieving stricter emissions targets without undermining competitiveness.
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The ongoing negotiations reflect broader tensions between climate policy goals and economic interests. Some industry representatives argue that strict emissions regulations could lead to plant closures, job losses, and reduced investment in future technologies. Potential policy changes under discussion include postponing CO2 penalties, offsetting them with future emissions reductions, or softening the 2035 ban by allowing continued registration of PHEVs.
While industry advocates argue that regulatory adjustments are necessary for a stable transition, critics warn that relaxing the 2035 deadline could slow the shift to electric vehicles.
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Der Spiegel cautions that removing CO2 penalties could allow manufacturers to maintain high EV prices, dampening demand. The impact of such pressures is already evident, with Volkswagen’s ID.3 electric car currently being offered at a lower lease rate than the Golf in response to market conditions.
The EU’s final decision on potential regulatory adjustments remains uncertain, but the discussions indicate that the 2035 ban may not be as definitive as originally planned.