EU, Germany Reach Car Emissions Deal That Makes Room for E-Fuels

(Bloomberg) -- Germany reached an agreement with the European Union on a landmark regulation that requires new cars to be carbon neutral by 2035, resolving a dispute that threatened to undermine the bloc’s ambitious blueprint to reduce greenhouse gas emissions.

The government in Berlin said it won key assurances that the EU’s rules would be technology-neutral that would leave space for so-called e-fuels to be used in a zero-emissions framework.

“This paves the way for vehicles with combustion engines that only use CO2-neutral fuels to be newly registered after 2035,” German Transport Minister Volker Wissing said Saturday in a statement. 

The breakthrough came after weeks of talks with the European Commission and pressure from Germany’s EU partners irritated at a last-minute move by the government in Berlin to block the legislation.

“We will work now on getting the CO-2 standards for cars regulations adopted as soon as possible,” EU climate chief Frans Timmermans said on Twitter, adding that the EU’s executive arm will follow up swiftly with the necessary legal steps to implement a provision that allows classifying cars run on e-fuels as carbon neutral.

The deal means that Germany can formally approve an agreement reached in October that requires new cars to be zero-emissions, a key pillar in the EU’s plans to reach climate neutrality by 2050. A vote this month, which was expected to be a simple procedure, was delayed due to objections from Wissing’s pro-business FDP party, the junior member of Chancellor Olaf Scholz’s governing alliance.

That vote, which is now expected to take place on Tuesday when energy ministers meet in Brussels, should pass with Germany’s backing as the countries opposing will be unable to reach a sufficient enough minority to block the progress. Italy wanted further assurances, including how cars using biofuels could also be exempted.

The deal with Germany doesn’t change the text of the regulation that was agreed between representatives of member states and the European Parliament last year. After ministers sign off on it, the commission will provide more details on the next steps to implement the provision on e-fuels, according to an EU official.

“The battle on tech neutrality has been won, which is the precondition for the recognition of biofuels,” Italian Prime Minister Giorgia Meloni told reporters Friday after a summit of EU leaders. “We are also showing that biofuels are zero-emission, hence there’s no need to go into the technical details. If the technology hits the target, then you can use it.”

Germany’s concerns had centered on an element already included in the draft regulation that stipulated the commission should make a proposal on e-fuels, made using renewable electricity and carbon dioxide captured from the atmosphere, after consulting with stakeholders. The deal announced Saturday offers Germany more details on how the EU plans to implement the provision on e-fuels.

A scheduled review in 2026 on how the bloc was progressing on zero-emission vehicles was seen as too late for some of the country’s carmakers. Porsche AG, for example, praised the government’s stance.

But environmental activists were angered by Germany’s decision to hold up the emissions plan and warned against changes that could distract from progress toward broader use of electric and other zero-emissions vehicles.

Pascal Canfin, the head of the European Parliament’s environment committee, called on the commission to make sure the upcoming rules on e-fuels respect the agreement reached last year on car-emissions standards. Even though the parliament’s role in the process going forward is limited, it could still block the future regulation.

“The automotive sector has wholeheartedly embraced electric cars, rendering the previous debate on the matter absurd and damaging Germany’s credibility,” Michael Bloss, a German Green member of the European Parliament, said Saturday. “It is now time to make reparations.”

--With assistance from and .

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