In Focus
June 2023

EU countries approve 2035 phase-out of CO2-emitting cars, overcoming last minute opposition by Germany

In this short version of our In Focus newsletter, we would like to bring our readers' attention to the latest developments surrounding the EU climate strategy and its attempt to accelerate the decarbonisation of the fuel market.  The European Union faced a setback in early March when Germany unexpectedly opposed a previously agreed plan to phase out carbon-emitting cars by 2035, leading to tensions among member states. However, by the end of March 2023, the EU reached a significant milestone by approving a ground-breaking law that will ban the sale of new CO2-emitting cars by 2035, with an exemption for e-fuel-powered vehicles secured by Germany. This law, which aims to achieve a 55% reduction in CO2 emissions by 2030 compared to 2021 levels, is designed to facilitate the rapid decarbonisation of new car fleets in Europe.

However, the European Commission has pledged to create a legal pathway for the sale of new cars that run exclusively on e-fuels to continue beyond 2035, after Germany demanded that exemption in early March. This was seen in Europe as a highly unusual move to block or amend a directive so late in the legislative process. Germany's last-minute opposition provoked irritation and sharp reactions from some EU member states, while others, including Poland, Italy, Romania and Bulgaria, also expressed concerns about the draft that had been prepared.  

In 2022 and after months of negotiations, the European Parliament, the Commission and EU member states agreed to the zero CO2-emission law, effectively prohibiting the sale of combustion engine cars starting in 2035.

In early March German Transport Minister Volker Wissing demanded the continued use of synthetic fuels, or e-fuels after the 2035 deadline, expressing dissatisfaction with the European Commission's delayed proposal on this matter. "We want climate-neutral mobility", and to do so means being open to all conceivable technologies, he told a news conference at the time.

Currently, the EU directive contains a non-binding section stating that the Commission will propose a plan for selling vehicles running on CO2-neutral fuels after 2035, provided it aligns with climate goals and only after the 2035 objectives have been ratified. However, Germany is demanding clearer assurances.

The EU Commission intends to propose how sales of cars running on e-fuels can continue after 2035, but this is not expected until after the summer holiday break in 2023.. The proposal is meant to include technical details on how to prevent these vehicles from starting when fuelled with conventional petrol or diesel.

The German transport minister said the e-fuels agreement would "open up important options for the population towards climate-neutral and affordable mobility", to which EU climate policy chief Frans Timmermans commented: "The direction of travel is clear: in 2035, new cars and vans must have zero emissions."

E-fuels are considered carbon neutral because they are made from captured CO2 emissions, which proponents say offset the CO2 released when the fuel is burned in an engine. E-fuels are made by synthesizing captured CO2 emissions and hydrogen generated using zero-carbon electricity. E-fuels are till date not manufactured on a large scale.

Car makers Porsche and Ferrari are among the proponents of e-fuels, seeing them as a way to avoid burdening their vehicles with heavy batteries, while other automakers, including Volkswagen, Mercedes-Benz and Ford, are embracing battery-electric vehicles to meet decarbonisation objectives.

While Germany's late intervention annoyed some EU diplomats and stoked concerns that governments may try to block other carefully and previously-negotiated deals on climate policies, EU energy ministers will also need to tackle a dispute over whether nuclear energy should count towards EU renewable energy targets. This question has already split countries in the European Union and is threatening to delay the EU's main renewables policy further.

The issue of climate change in the European Union has moved into the political spotlight in recent months after demonstrations in many EU member states and extreme measures by activists led to widespread unrest. Images and videos of blocked land routes went viral and also showed protesters glued to the asphalt or destroying national works of art and heritage, prompting outraged reactions from others.

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