The EU's 87.5% CO2 target for 2035 is a ban with an escape hatch

Is a ban still a ban if it comes with a 12.5-point gap between 100% and 87.5%? That is the question Brussels handed the car industry this week, and we don't think the answer is as comforting as either side claims.

On Wednesday, Parliament's Environment Committee adopted its proposal for revised CO2 targets for new cars and vans, by 48 votes to 30 with two abstentions. For cars, the 2035 fleet-wide emissions cut would drop from 100% to 87.5%. According to Repubblica's finance desk, carmakers would have to offset a 7.5% cap, measured against the 2021 reference target, to get to 95%, using credits for low-carbon steel produced in the EU.

This is a committee vote, not final law. Everything below is our reading of where it points.

It's a softer ban, not the end of the ban

Headlines speak of the "taboo" falling and the EU opening to combustion engines. That's fair politically, but the arithmetic matters. Going from 100% to 87.5% does not mean one in eight cars can be a plain petrol model. The steel-credit mechanism, as described, is a way to bridge part of the gap, and the 95% figure reported in the same coverage suggests the direction of travel is still strongly toward very low emissions. Note, though, that part of that 95% would come from steel credits rather than from the tailpipe.

So we'd call it a ban with a margin. The signal to investors in batteries and charging probably remains: the fleet is still expected to get very clean. What changes is that nobody can say for sure how that last stretch will be filled.

Carmakers get wiggle room; buyers get a fog

The business lobbies' reaction is telling. Confindustria and Germany's BDI called Parliament's position a step forward but said more flexibility is needed. When industry says a concession is not enough, we read it as a sign that the concession is real and the appetite is bigger.

For manufacturers, flexibility is a gift: it lets them keep hedging, with a bit of everything in the lineup. For buyers, it is the opposite. A target that depends on credits, fuel definitions and fleet averages doesn't translate into a simple message at the dealership. Will a combustion car bought in 2034 be worth anything? Will plug-in hybrids stay attractive? Nothing in the coverage answers that, and we'd be wary of anyone who claims to know. Used-car values and financing are the kind of thing that hates ambiguity.

Our view: a clear date, even a harsh one, is easier to plan around than a negotiated percentage with footnotes. This compromise is the footnotes.

Hybrids smile, and Chinese rivals probably do too

The clear beneficiary of a looser 2035 is, in our view, the hybrid. Coverage describes the deal as opening room for hybrid and combustion cars and for renewable and low-carbon fuels. If you sell well-engineered hybrids today, you just received a longer runway. That favors incumbents with deep combustion know-how.

The less obvious winners, in our opinion, are Chinese manufacturers. Nothing in the coverage says so, so take this as a prediction: uncertainty in Europe rewards whoever can offer both electric and hybrid models at competitive cost and adapt fast. Meanwhile, European brands that have bet heavily on electric platforms are being told the finish line has moved, which could ease the pressure to make EVs cheaper. Less pressure on price is exactly the opening a challenger wants.

There is also an industrial-policy twist. The package ties incentives to clean vehicles made in the EU and credits to EU-produced low-carbon steel. That looks to us like a protectionist instinct wrapped in a climate rule, and it may help local suppliers, though we'd wait for the final text before judging how much.

Our verdict

The compromise is the classic European one: loosened enough to claim a win, tight enough that nobody is truly happy. Environmentalists will probably see a retreat, industry says it sees too little, and drivers are left with a rule they can't easily read.

If you're a buyer, don't treat this as permission to ignore electrification: on paper the target is still 95%, per the reported mechanism. If you're considering a hybrid, it looks like a safe middle path for now. And if you're a policymaker, the best thing you could do is finalize quickly and keep it simple. The worst outcome isn't a stricter or looser target. It's years of a moving one.