Carmakers welcome proposed EU delay on emissions reduction targets

The European Commission has responded to “clear demand for more flexibility on CO2 targets” by proposing a two-year delay on its CO2 Standards Regulation – a decision that has been welcomed by European carmakers.

Part of a raft of reforms aimed at improving the competitiveness of European manufacturing, the Strategic Dialogue on the Future of the European Automotive Industry aims to provide more financial support for the electric vehicle transition while relaxing the rules on CO2 emissions reduction.

Speaking at a press conference this week, EU Commission President Ursula von der Leyen said: “We need to listen to the voices of the stakeholders that ask for more pragmatism in these difficult times, and for technology neutrality. Especially when it comes to the 2025 targets and related penalties in case of non-compliance. To address this in a balanced manner, I will propose a focused amendment to the CO2 Standards Regulation this month. Instead of annual compliance, companies will get three years.”

She added that the “targeted amendment” should be agreed swiftly by the European Parliament and Council – which are also due to review the Commission’s Omnibus proposal for the simplification of sustainability reporting rules.

Stellantis reacts to EU Commission announcement

In response to the announcement, Stellantis – which owns a number of European brands including Opel, Peugeot and  Fiat – said the amendment is “​​a meaningful first step in the right direction to preserve the competitiveness of our sector while remaining faithful to the targets and committed to electrification”.

“This initiative, together with further support to targeted purchase and fiscal incentives, cheaper (green) energy and investment into charging infrastructure, can be a real accelerator in the ramp up towards electrification,” the group added.

Automakers across Europe had been increasingly worried about the EU’s upcoming requirement to reduce their vehicles’ emissions intensity by 15% this year – or pay fines of €95 per gram of CO2 above the threshold.

Volkswagen, for example, estimated in January that it would have to pay a fine of €1.5 billion for failing to meet this reduction target this year.

Carmakers’ ‘lack of commitment’ to the energy transition

Car manufacturers have long argued that the slow transition to electric vehicles is due to limited demand from consumers, but think tanks have accused them of not investing enough in the development of the EV supply chain. 

A December 2024 analysis by the World Benchmarking Alliance showed that only 23% of the world’s top 30 automotive manufacturers have promised to increase future spending on low-carbon technology.

The current level of commitment would bring the proportion of electric vehicles in overall sales to just 40% by 2035 – far below the 100% needed to meet the 1.5°C climate target.

Financial support for battery supply chain

Recent shifts in trade dynamics have also hindered progress, according to some manufacturers. Volvo reduced its 2030 electrification target from 100% to 90% last September, citing slower-than-expected charging infrastructure developments, the withdrawal of government incentives in certain markets and recent US tariffs on EVs.

To reduce reliance on foreign components subject to potential trade restrictions, Europe has been developing its own battery supply chain – and the Strategic Dialogue on the Future of the European Automotive Industry also includes a €1.8 billion fund to create “a secure and competitive supply chain for battery raw materials”.