A recent analysis suggests that the European Union’s decision to amend its 2035 zero-emissions vehicle target, replacing a complete phaseout of internal combustion engines (ICE) with a 90 percent reduction in CO₂ emissions, could introduce significant market uncertainty. This shift may lead to a substantial decline, potentially as much as 50 percent, in battery electric vehicle (BEV) sales.
EU Commission Proposes Emission Standard Revisions
In December, the European Commission unveiled proposed revisions to the CO₂ emission standards for cars and vans. While the Commission described these changes as “ambitious” and aimed at achieving “2050 climate neutrality and strategic independence,” critics argue that eliminating the firm 2035 phaseout of ICE vehicles represents a downgrade. The Commission stated the revisions maintain “a strong market signal for zero-emission vehicles (ZEV) while giving the industry more flexibility to achieve CO2 targets.”
This revision follows intense lobbying from European automotive and fuel industries. The European Union’s move appears to contradict evidence indicating the electric vehicle (EV) transition was gaining momentum.
Analysis Highlights Market Uncertainty and Investment Risks
A new analysis from Transport & Environment (T&E), a European advocacy group for clean transport and energy, indicates that the proposed revisions could create considerable uncertainty in the region’s EV market. T&E forecasts that the EV market share in 2035 could potentially fall from an anticipated 85 percent to as low as 50 percent.
Lucien Mathieu, cars director at T&E, commented, “It’s like hedging your bets when there’s only one horse in the race.” He added, “The world is going electric, but the EU proposal would divert investment into other technologies that won’t deliver for the climate or the economy. The current 2035 target provides the investment certainty Europe needs to scale up EV production and compete globally.”
Mathieu further stated, “The proposed changes would mean keeping the combustion engine and hybrid alive and rewarding the laggards.”
Revised Targets and Potential Loopholes
The European Commission’s proposed revisions replace the original 2035 zero-emissions target with a requirement for a 90 percent reduction in CO₂ emissions. The remaining 10 percent is intended to be offset through the use of locally sourced low-carbon steel or alternative fuels like e-fuels and biofuels. Specifically, this 10 percent can be accounted for by up to 3 percent in alternative fuels and up to 7 percent with low-carbon steel.
T&E points out that this structure could allow carmakers to continue selling vehicles with various powertrains, including hybrids and ICE vehicles, after 2035.
Impact on BEV Market Share
The reduction in the 2035 CO₂ reduction target from 100 percent to 90 percent is projected to decrease the share of BEVs by 15 percent, from a potential 100 percent to 85 percent. However, T&E’s analysis suggests that abandoning a complete transition to net-zero emissions opens the door for carmakers to have more flexibility in their sales mix. Depending on the specific sales strategies and average CO₂ emissions of their fleets, carmakers could end up selling anywhere from 5 percent to 50 percent non-BEVs by 2035.
This creates substantial uncertainty for manufacturers and the broader transition, potentially hindering Europe’s investment in electrification and its global competitiveness against China. BEV sales, while potentially reaching 95 percent, could also drop to a low of 50 percent.
Changes to 2030 Targets and Overall Emissions
The Commission’s proposals also include adjustments to the 2030 targets. The target for vans has been reduced by 10 percentage points, and the 2030 target for cars will be averaged over a three-year period (2030-2032) instead of being a firm deadline for 2030.
Collectively, T&E estimates these changes could lead to an increase in car emissions of approximately 720 million tonnes of CO₂ equivalent (MtCO₂e) between 2025 and 2050, representing about a 10 percent rise.
Future Outlook and Potential Further Weakening
There is a possibility that the European Commission may further adjust its 2035 targets under continued pressure from the automotive and fuel industries. Any additional weakening of these targets could further decelerate BEV sales. Projections suggest that under such scenarios, BEV sales in 2030 could fall to a market share of 32 percent, down from the 57 percent anticipated under existing legislation, and reach only 70 percent in 2035, instead of the original 100 percent target.
T&E’s comprehensive analysis is available for review.