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Carmakers secure a three-year compliance window, with new rules pushing savings towards zero-emission technologies and workforce transition.

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The EU has agreed a compromise on car emissions rules that preserves climate targets while giving manufacturers more flexibility to meet them — but at the cost of a more complex regulatory framework.

At the heart of the deal is a shift from annual to three-year compliance for the 2025–2027 period, allowing carmakers to offset weaker performance in one year with stronger results in others. The change, originally proposed by the European Commission, remains intact, offering the industry short-term breathing space as it navigates the transition to zero-emission vehicles.

But the final agreement goes significantly further than the initial proposal, layering that flexibility with stricter monitoring, reporting and accountability requirements.

Manufacturers will now face enhanced annual reporting obligations, including detailed disclosures on emissions performance, use of flexibility mechanisms and, in some cases, transition-related investments. The Commission will publish aggregated data, including the composition and performance of manufacturer pools, increasing transparency in a system often criticised for opacity.

Crucially, the compromise attempts to prevent flexibility from diluting environmental ambition. Compliance will still be assessed against unchanged CO₂ targets, and new safeguards — such as conditions on pooling and the possibility of corrective measures — aim to ensure that flexibility does not become a substitute for actual emissions reductions.

The economic dimension of the agreement is more pronounced than in the original proposal. Manufacturers benefiting from flexibility will be expected to channel a “significant share” of the resulting economic gains into clean technologies, including zero-emission vehicle development and production. At the same time, revenues from penalties are earmarked — at least in principle — for supporting a just transition in the automotive sector, including workforce reskilling and regional support.

For industry, the outcome offers a mixed picture. The extended compliance window provides operational relief and planning certainty, particularly for manufacturers struggling with the pace of electrification. However, this is offset by increased administrative obligations and a clearer expectation that financial gains from regulatory flexibility be reinvested into the transition.

For policymakers, the agreement reflects a familiar Brussels trade-off: flexibility in exchange for control. The inclusion of multiple review clauses — in 2026, 2027 and 2028 — as well as a broader assessment of infrastructure, affordability and industrial capacity, leaves the door open for further adjustments, including a potential extension of the flexibility period.

The deal also signals a more interventionist approach to shaping demand. A future legislative proposal on the electrification of large corporate fleets by 2026 points to a shift from purely supply-side regulation towards measures aimed at accelerating market uptake.

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Taken together, the compromise does not alter the EU’s long-term climate trajectory, but it reshapes how the transition will be managed — placing greater emphasis on transparency, conditional flexibility and economic redistribution within the sector.

In doing so, it underlines a broader reality: decarbonisation in Europe is no longer just an environmental project, but an increasingly complex exercise in industrial policy.

Several EU member state officials have voiced concerns over the outcome of recent trilogue negotiations, arguing that the compromise fails to deliver meaningful changes while increasing regulatory complexity.

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In private remarks, officials from the Council indicated that some delegations had initially shown flexibility during negotiations after being warned that rejecting elements of the European Parliament’s position could jeopardise the entire agreement.

However, following the conclusion of the talks, those same officials expressed frustration that the final text did not sufficiently reflect their priorities, with some questioning whether the concessions made had been justified.

Criticism focused in particular on the perceived lack of substantive change in the proposal, with concerns that the agreed framework risks adding administrative burdens without clear policy gains.

Some officials also pointed to internal divisions within the Council, suggesting that the Presidency had come under significant pressure during the final stages of the negotiations. They described the process as politically sensitive, with competing national and sectoral interests shaping the outcome.

Despite the criticism, the agreement was ultimately reached as part of a broader effort to secure progress on the file and avoid a breakdown in negotiations.

Milica Stankić, a member of the European Parliament from the EPP, said corporate fleet electrification, stricter oversight and balanced funding are central to the EU’s approach to zero-emission mobility.

On corporate fleets electrification (EP10): is the Parliament prepared to impose binding obligations on large companies, and how do you expect industry to respond?

“As a member of the EPP, I am very satisfied with how EP10 has been shaped. The call for a legislative proposal by the end of 2026 mandating phased electrification of large corporate fleets (for companies with over 250 employees) reflects exactly the kind of forward-looking, demand-side policy we support. Corporate fleets are a key lever—they renew quickly and can drive large-scale adoption of zero-emission vehicles. Parliament’s proactive approach shows both ambition and political courage, and we look forward to the proposal being delivered on time.”

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Some amendments tighten oversight (annual reporting, penalties, weighting future evaluations). Are you concerned this could discourage investment or innovation?

“I am very pleased with the balance Parliament has achieved. These measures are not punitive, but essential for ensuring the credibility and environmental integrity of the flexibility mechanism. Without transparency and accountability, flexibility could turn into a loophole. The EPP has always emphasized that ambition must go hand in hand with predictability, and clear, consistently monitored rules provide exactly the certainty industry needs.”

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The proposal includes allocating revenues to a just transition programme. How realistic is it to ring-fence these funds at EU level?

“Regarding the just transition revenue allocation under EP9, I want to be diplomatic but also honest. Our colleagues in the Council of the EU found themselves in a somewhat confusing position when engaging with this provision. There appears to have been a degree of mix-up in how they interpreted some of the objections being raised, and at certain points their concerns seemed directed at a version of the Parliament’s proposal that did not quite reflect what we had actually put on the table.

From our side, we worked in good faith with all institutions and made every possible effort to align our positions and find the maximum common ground available. I am happy to say that after further reflection, the Council also came to recognise this, and I think we all understand that in complex multilateral negotiations of this kind, these things happen. It is human to make mistakes, and what matters is that we course-correct together and move forward constructively toward a text that works for workers, regions, and the climate alike.”

Statement by the European Commission on the trilogue outcome.

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“As we often say in Brussels, ‘The Union is built on compromise, but never at the expense of its principles.’ Today, those principles have prevailed.”

The European Commission welcomes the successful conclusion of the trilogue negotiations on the proposal amending Regulation (EU) 2019/631.

The provisional agreement reached today reflects a balanced and constructive outcome, preserving the environmental ambition of the proposal while ensuring legal coherence, practical implementability, and a fair transition for the European automotive sector. This agreement marks a decisive step towards our climate goals.

The Commission is particularly pleased that the final text maintains the integrity of the CO₂ emissions framework, strengthens transparency and monitoring, and provides a workable basis for manufacturers and Member States to implement the new provisions effectively.

Throughout this process, the Commission has remained steadfast in its role as the Guardian of the Treaties. Despite numerous obstacles, procedural challenges, and fundamental disagreements encountered during the negotiations, the Commission successfully preserved the integrity of the regulation, ensuring it remains fully aligned with the Union’s legal framework and primary law.

“Our focus has always been, and remains, on the citizens and the integrity of the Union,” stated the Commission’s lead negotiator. “We have overcome significant hurdles to deliver a deal that is not only ambitious but also legally resilient. We are pleased that the Council and the Parliament had ultimately recognized the necessity of our legal guidance, moving away from confrontation towards a shared European vision.”

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This agreement demonstrates that it is possible to combine climate ambition with regulatory stability and industrial predictability. It also confirms the importance of a structured dialogue between the European Parliament, the Council, and the Commission in delivering legislation that is both effective and credible.

The Commission now looks forward to the formal steps required for the adoption of the agreement and remains committed to supporting its smooth implementation across the Union.

EU member states have proposed softening plans to allocate a fixed share of emissions penalty revenues to a just transition fund, citing uncertainty over how much money will be raised.

In a note to members of the European Parliament, the Council said that setting a fixed 50 per cent share could be impractical if revenues turn out to be low or zero. It suggested replacing it with a “substantial share” to be allocated once the final amount is known, while maintaining support for workforce reskilling, affected regions and investment in zero-emission technologies.

The change highlights broader concerns among member states over linking social spending to uncertain revenue streams, and points to a preference for flexibility over fixed funding commitments.

It also reflects a gap with the European Parliament, which has pushed for more clearly defined support for a just transition.

Tijana Lazarevic, stakeholder liaison, said a comprehensive agreement had been reached in the final trilogue negotiations, while raising concerns over an incident involving the Council presidency during the talks.

The Commission’s full statement follows below.

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Brussels, April 2026 – Following the intense final rounds of trilogue negotiations on the [2019/631], the European Commission issues the following statement regarding the conclusion of the legislative process:

“We are pleased to announce that a comprehensive agreement has been reached on all outstanding issues. This outcome ensures a robust legal framework that aligns with the Union’s strategic goals while strictly upholding the fundamental rights of all stakeholders. However, the path to this agreement was marred by a regrettable incident during the proceedings. The Commission notes with concern the decision by the Swedish Chair of the Council to briefly exclude most part of our representatives from the negotiating table. This moment of uncollegial behavior by the Council Presidency was an unfortunate departure from the spirit of loyal cooperation mandated by the Treaties.

In the interest of the European citizens and despite this unprecedented friction, the Commission demonstrated its unwavering commitment to dialogue and we accepted call back from the Chair and Presidency. By re-entering the discussions with good will and technical precision, we ensured that the negotiation remained on track. We are satisfied that the Council ultimately incorporated our legal guidance, recognizing that the Commission’s role is not to act as an obstacle, but as a guardian of legal certainty and the Treaties.

We wish to extend our particular gratitude to the European Parliament. Their delegation’s exceptional professionalism, transparency, and collaborative spirit were instrumental in securing this balanced result. The Parliament has once again proven to be a steadfast partner in the democratic legislative process.

The Commission remains dedicated to ensuring that EU law remains fair, proportionate, and legally sound as we move toward the implementation phase of this vital regulation.”

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The Commission said it had returned to the talks after the incident to keep negotiations on track, maintaining its focus on legal consistency and cooperation. It also pointed to the European Parliament’s role in helping secure the final agreement. The statement was delivered by Tijana Lazarevic, stakeholder liaison.

The European Commission said it remains committed to an ambitious and balanced outcome in the ongoing trilogue negotiations, while raising concerns over the legal compatibility of certain proposals with existing EU law.

The Commission’s full statement follows below.

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The European Commission remains fully committed to achieving an ambitious and balanced outcome in the ongoing trilogue negotiations, in line with the Union’s climate objectives and the principles of legal certainty and regulatory coherence. At this stage, however, the Commission must underline that certain elements introduced during negotiations raise substantial concerns in relation to their compatibility with existing Union law, notably the framework established under Regulation (EU) 2019/631 and Regulation (EU) 2023/1542, as well as the broader legislative context, including Directive (EU) 2018/2001.

In particular, proposals seeking to treat synthetic fuels as equivalent to zero-emission technologies raise fundamental methodological and legal challenges. The current Union framework for vehicle emissions is based on tailpipe emissions, as defined in Regulation (EU) 2019/631. Any departure from this approach, notably through the integration of lifecycle-based accounting for fuels, would constitute a structural modification of the compliance system, which cannot be addressed within the scope of the present file without undermining legal clarity and consistency across the acquis.

RED III cannot be used to label synthetic fuels as zero-emission, as it is based on lifecycle accounting, not the tailpipe framework of Regulation (EU) 2019/631.

Furthermore, the absence of a fully operational and harmonized methodology for lifecycle emissions — including criteria on additionally, traceability, and upstream emissions — as foreseen under the Renewable Energy Directive, creates significant risks in terms of verification, enforcement, and environmental integrity. Without such safeguards, there is a tangible risk of regulatory inconsistencies and unintended loopholes. Similarly, the introduction of additional binding provisions on battery sustainability within this Regulation raises concerns regarding overlap and duplication with Regulation (EU) 2023/1542, which already establishes a comprehensive framework covering carbon footprint, circularity, due diligence, and supply chain requirements.

The Commission considers that parallel obligations in this file could lead to legal uncertainty, increased administrative burden, and potential conflicts in implementation, particularly for manufacturers operating across multiple regulatory regimes. The Commission remains fully engaged in the negotiations and is actively tabling targeted compromise solutions, including the use of review clauses and monitoring mechanisms, which allow for the consideration of emerging technologies such as CO₂-neutral fuels without disrupting the current regulatory architecture.

At the same time, it is important to recall that, under Article 17 of the Treaty on European Union, the Commission retains its right of initiative, including the prerogative to amend or, where necessary, withdraw its proposal if the legislative outcome risks undermining its objectives or coherence within the Union legal framework.

The Commission will therefore continue to engage in good faith with both co-legislators to ensure that the final outcome delivers on climate ambition while preserving the integrity, predictability, and enforceability of EU law.

EU negotiators said the latest trilogue had been productive, despite differences over technical provisions and definitions, as the three institutions signalled readiness to compromise and move towards a joint position.

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Sabina Sali, the European Parliament’s rapporteur from the EPP, described the discussions as challenging but constructive, highlighting ongoing efforts to align the text with EU principles and existing law.

“I am not going to pretend that it wasn’t a difficult discussion,” she said, noting that a number of issues remain under debate, particularly around technical provisions and definitions. However, she indicated that these are part of a broader process of refining the legislation rather than fundamental obstacles.

Sali stressed that any eventual agreement must be in line with EU law, underlining the importance of legal certainty before the Parliament can support the final text. At the same time, she pointed to the need for balanced solutions, including flexibility mechanisms for manufacturers operating in the European market to meet their obligations.

She added that the Parliament’s key positions, including such mechanisms alongside annual requirements, remain unchanged as negotiations continue.

The European Parliament has adopted a broad set of amendments to the EU’s car CO₂ framework, blending limited flexibility for manufacturers with stricter oversight, social safeguards and a cautious opening to synthetic fuels.

What emerged from the vote is less a victory for any single political group than a negotiated middle ground. Elements from the EPP, S&D, Renew, Greens, The Left and PfE all made it into the final text, though often tempered through compromise.

At the core, lawmakers retained the three-year compliance window for 2025–2027, but moved to contain its potential downsides. A safeguard backed by Renew makes clear that the flexibility mechanism cannot be used to weaken overall climate ambition or delay the transition, while obliging the Commission to report annually on its impact.

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Several amendments tighten how that flexibility will work in practice. Manufacturers that exceed emissions targets over the three-year period will face closer scrutiny in subsequent years, with future assessments weighted annually. At the same time, all manufacturers—including those benefiting from derogations, will now have to report on their performance every year.

Pooling rules, often criticised as a loophole, were also narrowed. Companies can still form pools until the end of 2027, but each participant must now meet at least 95 % of its own emissions target, limiting the extent to which weaker performers can rely on stronger partners.

A strong social thread runs through the package. Parliament agreed that at least 50 % of revenues from excess emissions penalties should be channelled into programmes supporting a “just transition”, including worker retraining, regional support and job creation linked to zero-emission technologies. In addition, access to certain flexibilities, such as super-credits, will now depend on manufacturers submitting workforce plans with commitments on reskilling and job security.

Lawmakers also addressed the practical constraints of the transition. The Commission will be required to assess by 2030 whether charging and hydrogen infrastructure is sufficiently developed, a provision that could shape future policy adjustments. Separate amendments emphasise the affordability of low-emission vehicles and call for simpler administrative procedures to reduce regulatory burden.

One of the more contested outcomes is the inclusion of synthetic fuels. Parliament backed a requirement for the Commission to establish a framework by 2027 for vehicles running exclusively on CO₂-neutral e-fuels, allowing them to be treated as zero-emission under the 2035 targets. This is coupled with an EU-wide definition and certification system based on lifecycle emissions and third-party verification.

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Finally, the Parliament signalled a more proactive role in shaping demand. The Commission is now expected to propose legislation by the end of 2026 to phase in the electrification of large corporate fleets, targeting companies with more than 250 employees.

Taken together, the adopted amendments do not overturn the EU’s climate targets, but they do reshape how the transition will unfold, making it more conditional, more socially anchored and, inevitably, more complex.

Amendments tabled by The Left group would tighten the conditions attached to the EU’s proposed car CO₂ framework, adding requirements on investment, labour protection and transparency to the Commission’s draft rules.

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While the Commission proposal already allows manufacturers to use a three-year compliance period for CO₂ targets between 2025 and 2027, The Left wants to make that flexibility conditional on clearer and more binding commitments.

Carmakers choosing the multi-year compliance option would have to submit a binding transition plan to the Commission, setting out concrete annual investments in zero-emission vehicle technologies over the 2025–2027 period. The intention is to ensure that regulatory flexibility is paired with verifiable progress on electrification rather than simply easing compliance pressure.

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The amendments also introduce a labour safeguard. Companies using the three-year compliance period would be required to present workforce protection plans guaranteeing no compulsory redundancies among production workers directly affected by the shift to zero-emission vehicles. It reflects The Left’s broader effort to link industrial transition policy more directly with job security.

On enforcement, the group proposes a tougher approach to penalties. Under their amendment, excess emissions payments over the three-year period could not fall below the level that would have been charged under annual compliance for each year individually. In other words, flexibility would not be allowed to reduce the overall financial burden.

A further proposal would direct at least 25 % of excess emissions revenues into a dedicated Just Transition Fund. The money would go towards retraining programmes and income support for workers in the automotive sector affected by the shift to electric mobility.

The group also pushes for greater transparency in how manufacturers cooperate. Pooling agreements would have to be published on a publicly accessible Commission platform within 30 days, allowing citizens and civil society to see how companies are sharing or offsetting emissions performance.

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Taken together, the amendments leave the EU’s core CO₂ targets untouched, but significantly tighten the conditions around flexibility mechanisms, with a stronger emphasis on labour protection, accountability and public oversight of the transition.