EU Relaxes Emission Targets For Carmakers Till 2027

In a significant development for the European automotive sector, the European Council has officially adopted amendments to the EU’s CO₂ emissions regulations for new passenger cars and vans, effectively granting automakers more flexibility in meeting their climate obligations. The amended regulation provides car manufacturers with a longer timeline to comply with stringent CO₂ emission targets, easing the pressure of hefty penalties that were set to begin this year.

Originally introduced as part of the EU’s broader clean mobility strategy in 2023, the regulation aimed to drastically cut carbon emissions from new vehicles, requiring a 100% reduction in CO₂ emissions from all new cars and vans registered in the EU by 2035. The law also set ambitious interim targets, with steep fines for manufacturers who failed to comply annually. These measures were intended to accelerate the transition to electric vehicles (EVs) and promote sustainable transportation solutions in alignment with the EU’s climate goals.

However, the transition to electric mobility has not progressed as rapidly as anticipated. Industry leaders have voiced growing concerns about the pace of EV adoption, citing a range of challenges from supply chain disruptions and high production costs to slow infrastructure development and lukewarm consumer demand. These hurdles have threatened to leave automakers unable to meet their yearly CO₂ targets, placing them at risk of incurring massive financial penalties.

In response to these concerns, the European Commission introduced a proposal earlier this year to modify the implementation of the regulation, acknowledging what Commission President Ursula von der Leyen described as a “clear demand for more flexibility on CO₂ targets” from industry stakeholders. As part of the Commission’s new Industrial Action Plan for the automotive sector, the amendments are designed to provide temporary relief while still maintaining the overall goal of a carbon-neutral future for European mobility.

The centerpiece of the amendment is a change in how automakers’ emissions are calculated for the years 2025 through 2027. Instead of assessing CO₂ emissions compliance on a yearly basis, the revised rules allow manufacturers to average their emissions performance over the three-year period. This shift means that automakers will be able to offset higher emissions in one year with lower emissions in another, offering a more balanced and forgiving approach to regulation during a period of transition.

This adjustment is particularly timely, as several major carmakers had warned of significant financial consequences under the original regulation. German auto giant Volkswagen, for instance, recently alerted investors that it was facing over $1.5 billion in penalties for 2025 alone if the rules were not relaxed. Such fines could have strained the financial stability of automakers already navigating an expensive and complex pivot to electrification.

The European Parliament gave its green light to the amendments earlier this month, and the European Council’s approval marks the final legislative step in the process. The amended regulation is now set to come into effect 20 days after its publication in the EU’s Official Journal, offering immediate clarity and relief for the automotive industry.

While the updated rules provide short-term flexibility, the EU remains firm on its long-term objective of eliminating emissions from new vehicles by 2035. Environmental advocates have expressed cautious support for the changes, recognizing the need to support the industry through a difficult transition, but warning against any long-term dilution of climate targets. The balance between industrial competitiveness and environmental responsibility will likely continue to be a key challenge for European policymakers in the coming years.

Ultimately, the amended regulation represents a pragmatic compromise: allowing the automotive industry some breathing room to catch up with electrification demands, while maintaining pressure to move toward a zero-emissions future. As the rule enters into force, all eyes will be on how automakers respond—whether they use this flexibility to accelerate innovation and investment in EVs, or merely delay more difficult decisions. The coming years will reveal whether the European Union’s gamble on a more gradual path to emissions reductions pays off for both the climate and the economy.