Three major European Parliament groups have drafted a deal that would ease the EU’s 2035 car-emissions target and let automakers count low-carbon EU steel toward part of it.
How the steel credits would work
The draft would require carmakers to cut average emissions from new cars by 87.5% from 2021 levels in 2035, with up to 7.5 percentage points of compliance credit for using low-carbon steel made in the EU. The European Commission’s proposal calls for a 90% cut in tailpipe emissions and compensation for the remaining 10%.
The EU adopted a 100% emissions-reduction target for new cars and vans from 2035 in 2023, as part of its “Fit for 55” climate package. This is a standard for manufacturers’ average emissions from new vehicles sold, not a ban on owning or driving existing petrol and diesel cars. The Commission’s 2025 proposal began loosening the standard, opening the door to some new hybrids and combustion-engine vehicles after 2035.
Steel credits would change how manufacturers meet the fleet target, not the exhaust emissions of an individual car. They could give carmakers more room to sell some higher-emitting models while meeting the standard across their fleet, and could reward them for choosing cleaner materials.
Why lawmakers are revisiting the rule
Carmakers and their political allies say the shift to electric cars is uneven and strict rules could bring costs or penalties before enough customers are ready to switch. A European Parliament research briefing cites electric cars’ higher upfront prices and concerns about resale value, as well as the industry’s exposure to global competition and supply-chain risks. Politico reported that, before the Commission’s 2025 proposal, climate officials warned internally that it was too early to conclude manufacturers could not meet the existing target.
France and Germany, both with major car industries, agreed last week on a 2035 target of a 90% emissions cut without requiring compensating measures. That is a different approach to flexibility from steel credits. The Commission has described its proposal as a way to give manufacturers flexibility while keeping a market signal for electrification.
The climate and industry trade-offs
Steelmakers could benefit if credits create steady demand for cleaner steel and support investment in new production methods. EUROFER reports that EU steel production fell to a record low in 2025, while imports reached about 30% of EU steel consumption.
The International Council on Clean Transportation warns that steel emissions are already covered by the EU Emissions Trading System, so extra emissions from cars may not be matched by additional cuts in steelmaking. It says credits could still support investment if they are limited to genuinely fossil-free production.
The credits could encourage automakers to buy lower-emission materials, but also let them meet less of the target through tailpipe reductions—the original rule’s focus. Critics warn that repeated changes could make investment plans less certain for companies building electric cars and related supply chains. Whether the flexibility protects European industry or slows its transition is not settled.
What must happen next
The three political groups must still approve their compromise as Parliament’s position. Parliament and EU governments then have to agree on a common text before the law can change. The proposal is listed as awaiting a committee decision, with 23 November given as an indicative plenary date, not a guaranteed one. Until a revised regulation is adopted, the existing 100% target remains in force.