EU ministers reach agreement on climate bills, zero emission cars by 2035

EU member states have approved the end of fossil fuelled passenger cars in 2035 and found compromises on emissions trading and a “Social Climate Fund”. The fund will be used  to cushion the impacts of a new price on CO2 in the transport and heating sector and for investments in more efficient buildings and lower-emission mobility. The proposals now have to be negotiated with the European Parliament. It took the 27 energy and environment ministers late into the night to come to an agreement, with Italy, Portugal, Slovakia, Bulgaria and Romania arguing for a delay of the car target to 2040. Germany complicated matters by introducing the option that e-fuel driven cars should be considered possible in the climate-neutral 2035 car fleet. As a compromise, the 2035 combustion engine ban was kept – and agreed to by the EU Council – but the ministers asked the European Commission to assess in 2026 whether CO2-neutral fuels could also comply with EU law. “The EU Member States have voted by an overwhelming majority that from 2035 only cars and light commercial vehicles that do not emit CO2 will be registered. They give the car industry the planning security it needs," said Germany’s environment minister Steffi Lemke. European climate commissioner Frans Timmermans said: “We are technology neutral. What we want are zero-emission cars,” Euractiv reports.

The pro-business FDP, which is part of Germany’s government coalition and had lobbied hard for including e-fuels in the CO2-free car plan of the EU, celebrated the compromise as a success, whilst other commentators highlighted the inconclusive language of the assignment to the Commission. Industry association BDI said the compromise was "a highly problematic decision" that only seems to guarantee an open approach to all CO2 neutral technologies. "It de facto means the end of the internal combustion engine, because only electric drives may continue to be counted in the EU car fleet regulation," BDI president Siegfried Russwurm said. "It makes no sense to block the potential of synthetic fuels from the outset. No one can predict today with absolute certainty what will be technologically possible and the best solution in 203," he added.

Greenpeace Germany commented that “the pipe dream of e-fuels is slowing down the upcoming restructuring of the car industry, misleading consumers and setting back climate protection”, saying that it was “annoying that the EU must now continue to deal with the bogus solution of inefficient and expensive e-fuels, which have no place in the passenger car market”.

For the European Emissions Trading System (EU ETS) the council of ministers decided to reduce the quantity of allowances by 61 percent by 2030 (previously 43%) and phase-out free allocation of allowances to certain industrial sectors and the aviation sector. The new ETS for emissions in the transport and heating sector will be introduced in 2027 and reduced the covered emissions by 43 percent by 2030 compared to 2005. The Social Climate Fund has a total size of 59 billion euros over the period of 2027-2032 and will be financed from revenues of the new ETS for buildings and road transport.

NGO Germanwatch called the outcome of the meeting “somewhat disappointing” and said that Germany had contributed to watering down the EU climate package in several parts. Giving industrial companies free emission allowances up till 2035 was showing lack of ambition on the parts of the environment ministers, policy director Christoph Bals said.

After having agreed on their position, the energy and environment Councils will continue negotiations together with the European Parliament in a trilogue procedure with the European Commission. The final adoption of the climate protection rules of the Fit for 55 package is scheduled for the second half of 2022.