EU Relaxes 2035 Car Emissions Ban, Testing Climate Goals and Oil Demand

Enerdealers Editorial

The European Union’s decision to soften its landmark 2035 ban on new petrol and diesel cars has intensified debate not only over climate ambition but also over the future of Europe’s hydrocarbon industry, which faces long-term decline under the bloc’s decarbonisation plans.

Under existing EU law, all new cars sold after 2035 were required to produce zero CO₂ emissions, effectively ending the sale of internal combustion engine vehicles. This week, European officials agreed to revise that target, lowering the requirement to a 90 per cent reduction in tailpipe emissions after sustained pressure from member states and automotive manufacturers.

European Commission vice-president Stéphane Séjourné described the move as a “lifeline” for Europe’s automotive sector, while maintaining that climate neutrality by 2050 remains achievable. “All potential further emissions generated have to be fully offset upstream,” he said, pointing to measures including low-carbon steel production and alternative fuels.

However, critics argue the rollback also offers a temporary reprieve to Europe’s hydrocarbon industry by extending demand for petrol, diesel and gas-based fuels beyond 2035—at a time when oil refiners and fuel suppliers had been preparing for a structural decline in road transport consumption.

French environment minister Monique Barbut said France would do “all we can” to block the proposal when it is submitted for approval, warning that it risks weakening climate certainty for both industry and energy markets.

Transport emissions and oil demand

Transport remains the EU’s most problematic emissions sector, with greenhouse gas output rising over the past three decades. Cars account for more than 60 per cent of transport-related emissions, according to the European Environment Agency, and are also one of the largest sources of oil demand in Europe.

Analysts say the revised target delays the anticipated peak and decline of European road-fuel consumption, easing pressure on refiners and fuel distributors already grappling with shrinking margins, refinery closures and the costly transition to low-carbon alternatives.

While the EU insists overall emissions reductions remain intact, the new framework allows continued sales of petrol and diesel cars, plug-in hybrids and range-extender vehicles after 2035, provided emissions are offset. This prolongs the relevance of hydrocarbons in the passenger car market, albeit at reduced volumes.

Manufacturers may offset the remaining emissions through low-carbon steel or through fuels such as e-fuels and advanced biofuels—options that energy companies, including oil majors, have been actively lobbying to scale up as a way to preserve a role for liquid fuels in a decarbonising economy.

Industry criticism and fuel-sector concerns

Clean transport groups warn that the policy introduces uncertainty that benefits incumbent fossil fuel interests while slowing electrification.

“The EU has chosen complexity over clarity,” said William Todts, executive director of Transport & Environment (T&E). “Every euro diverted into plug-in hybrids is a euro not spent on EVs, while oil consumption is effectively being locked in for longer.”

T&E estimates the rollback could lead to up to 25 per cent fewer battery electric vehicles on the road in 2035 than under the original plan, dampening the expected fall in petrol and diesel demand. The group also questions the climate value of advanced biofuels, warning that limited supply and sustainability concerns could increase Europe’s reliance on imports such as used cooking oil and animal fats—markets already vulnerable to fraud.

Chris Heron, secretary general of E-Mobility Europe, said changing the rules risks slowing investment not only in electric vehicles but also in charging infrastructure, reinforcing continued dependence on oil-based transport fuels.

“Hesitation is not a strategy,” he said. “It delays the inevitable transition and prolongs uncertainty for energy and automotive investors alike.”

A divided automotive and energy landscape

The easing of the ban reflects mounting pressure from automotive suppliers and manufacturers, many of whom argue that the pace of electrification has outstripped infrastructure and supply chain readiness. In August, industry groups CLEPA and ACEA warned that a 100 per cent emissions reduction by 2035 was “no longer feasible,” citing reliance on Asian battery supply chains and rising costs.

Oil and gas companies have echoed these concerns more quietly, viewing transitional technologies such as plug-in hybrids and synthetic fuels as a way to maintain fuel demand while adapting refineries and distribution networks to new products.

By contrast, more than 150 executives from Europe’s electric vehicle industry urged the EU earlier this month to stick to the original target, warning that policy backtracking would slow the decline of fossil fuel use in transport and hand a competitive advantage to China.

“Every delay in Europe only widens the gap with China,” the letter said, noting that China’s rapid EV adoption is already reshaping global oil demand growth.

In this context, the easing of the rules gives the hydrocarbon sector additional breathing space to adapt in an orderly way to the energy transition. By preserving a role for liquid fuels and transitional technologies, the EU creates room for innovation in e-fuels, advanced biofuels and lower-carbon industrial processes. Rather than a setback, the adjustment could offer the sector an opportunity to redefine its place in an increasingly decarbonised economy.