Negotiators from the three mainstream political groups in the European Parliament have struck an overnight compromise to ease the European Union’s planned 2035 phase-out of internal combustion engines.
Under the provisional agreement brokered between the centrist European People’s Party (EPP), the Socialists and Democrats (S&D) and the liberal Renew Europe group, carmakers would be required to reduce carbon dioxide emissions from new vehicles by 87.5 per cent by 2035 compared with 2021 levels, German weekly Der Spiegel first reported.
A well-placed source has confirmed the outline of the deal to Brussels Signal.
The arrangement departs from the EU’s previously envisaged 100 per cent tailpipe emissions cut, ensuring that new cars equipped with internal combustion engines and hybrid powertrains can still be registered and sold across the bloc beyond 2035.
That 100 per cent target has stood in EU law since 2023. The European Commission had already proposed watering it down to 90 per cent in December 2025, with the remaining tenth to be offset through low-carbon steel, e-fuels or biofuels.
The compromise introduces dedicated mechanisms designed to grant car manufacturers additional leeway in meeting their fleet emissions targets.
Chief among these is a provision incentivising the automotive supply chain’s use of climate-friendly, low-carbon “green steel” produced within the EU.
On paper the negotiators retained a 95 per cent reduction requirement, with green steel accounting for the distance down to 87.5 per cent.
Green steel refers to steel manufactured with near-zero greenhouse gas emissions, bypassing the traditional fossil-heavy blast furnace method.
It relies on low-carbon alternatives such as interim natural gas or green hydrogen produced through renewable water electrolysis.
Green steel is currently one of the most heavily subsidised industrial sectors in Europe and worldwide. The technology remains commercially unviable against conventional coal-based steel without public support.
Under the proposal, the use of green steel would allow carmakers to offset up to 7.5 percentage points against their vehicle fleet obligations, easing direct tailpipe reduction pressures on manufacturers.
That formula, though, leaves a 5 per cent gap below the EU’s original 100 per cent zero-emission target.
The shortfall ensures a permanent volume carve-out for combustion and hybrid vehicles post-2035, a concession described by parliamentary insiders as a bitter pill for left-leaning and environmental moderates.
Had they turned it down, the alternative on the table was a right-wing majority prepared to scrap the phase-out altogether.
The parliamentary deal arrives four days after Berlin and Paris signalled alignment on reforming EU automotive standards to safeguard European industrial competitiveness amid intensifying pressure from Chinese electric vehicle imports.
The compromise has so far been negotiated solely among representatives of Parliament’s “centrist platform” and must clear further procedural hurdles before becoming EU law.
The three groups must formally adopt the position within their respective parliamentary delegations before the text goes to committee review and a full plenary vote.
Once Parliament formally adopts its stance, it will enter inter-institutional trilogue negotiations with the Council of the European Union and the European Commission to hammer out the final regulation.
