EU Grants Automakers Breathing Room on CO2 Emission Targets

The European Commission has announced a significant change in its carbon emission policy on March 3, giving automakers three years instead of just one to meet new CO2 targets for cars and vans. This adjustment comes after mounting pressure from European car manufacturers, who warned that the original timeline could lead to severe financial penalties and disrupt the industry’s transition to electric vehicles (EVs).

Under the EU’s stricter emissions cap introduced this year, automakers must ensure that at least 20% of their vehicle sales are electric to avoid steep fines. The ultimate goal remains zero emissions by 2035, but this new three-year compliance window (2025-2027) offers companies a bit more flexibility.

European carmakers have been struggling to keep up with their Chinese and U.S. counterparts in the EV market, so the news brought some relief. Shares in companies like Volkswagen, Renault, BMW, and Mercedes-Benz rose between 1.5% and 4% following the announcement.

While the targets themselves aren’t changing, the extended timeline provides what Commission President Ursula von der Leyen described as "more breathing space" for the industry. However, the proposal still needs approval from EU member states and the European Parliament.

The reaction from the automotive sector was mixed. Companies like Volkswagen and Renault welcomed the flexibility, saying it allows them to introduce more affordable EV models and boost consumer demand. But some industry leaders and environmental groups argued that delaying strict enforcement could weaken Europe’s competitiveness against faster-moving rivals in China.