The European Council announced today that it has adopted amendments to a regulation on CO2 emissions standards for new passenger cars and vans, giving car manufacturers more time to comply with CO2 targets, avoiding significant penalties that are slated to start this year.

The EU adopted a series of clean mobility regulations in 2023, including a requirement for a 100% reduction in CO2 emissions from new cars and vans registered in the EU from 2035, as well as interim emissions reduction targets for new vehicles on the path to the 2035 goal, with penalties for exceeding the emissions targets for each new vehicle registered in a given year.

The EU Commission, however, announced plans to amend the regulations earlier this year, as one of the initiatives announced by Commission President Ursula von der Leyen as part of the new the Industrial Action Plan for the European automotive sector. Von der Leyen said that the amendments were proposed in light of “a clear demand for more flexibility on CO2 targets” from industry leaders, with slower than expected EV uptake exposing automakers to significant fines under the current rules. Volkswagen, for example, had warned analysts that it would likely be required to pay over $1.5 billion in penalties in 2025 under the current regulation.

Under the amended rules, automotive manufacturers will be able to meet their emissions obligations for 2025, 2026 and 2027 by averaging their performance over the three-year period, rather than each individual year, effectively enabling them to balance excess emissions in one year by outperforming in a subsequent year.

The Council’s approval marked the last legislative step in the adoption of the amended regulation, following the adoption of the amendments earlier this month by the European Parliament, with the regulation now set to come into force 20 days following its publication in the EU Official Journal.