When the European Union first announced its intention to ban the sale of new internal combustion engine vehicles from 2035, the regulation seemed straightforward: after that date, all new cars sold in the EU must produce zero tailpipe emissions. Three years and significant industry lobbying later, the reality is considerably more nuanced.
The latest amendments, agreed upon in a contentious European Council session in February 2026, introduce three significant carve-outs that dilute the original regulation while maintaining its headline date. Understanding these amendments is essential for anyone following the automotive industry's trajectory.
Amendment 1: The Synthetic Fuels Exemption
Under sustained pressure from Germany—home to Porsche, BMW, and Mercedes-Benz, all of whom have invested heavily in e-fuel technology—the Council agreed to exempt vehicles powered exclusively by certified carbon-neutral synthetic fuels from the 2035 ban. The caveat: the fuels must demonstrate a net-zero lifecycle carbon footprint through an EU-approved certification scheme that does not yet exist.
In practical terms, this means manufacturers can continue to sell internal combustion engines after 2035 provided they are designed to run only on synthetic fuels and are equipped with sensors that prevent the use of conventional fossil fuels. Porsche has already announced that its next-generation flat-six engine family will be "e-fuel compatible," and BMW's Neue Klasse platform includes provisions for an e-fuel-only variant.
Amendment 2: Small Volume Manufacturer Exemption
Manufacturers producing fewer than 10,000 vehicles per year—a threshold that captures brands like Aston Martin, McLaren, Lotus, and several Italian specialists—have been granted a five-year extension to 2040. This "niche car-maker" exemption recognises that low-volume manufacturers lack the economies of scale to develop bespoke electric platforms and would face existential threats under the original timeline.
Amendment 3: Carbon Credit Trading
Perhaps the most consequential amendment allows manufacturers to meet fleet-average emissions targets through carbon credit trading with other industries. In practice, this means a manufacturer could continue selling a limited number of ICE vehicles post-2035 by purchasing carbon credits from, say, a renewable energy provider—effectively paying for the right to emit.
Environmental groups have condemned this amendment as a "loophole factory" that undermines the regulation's fundamental purpose. Industry groups counter that it provides the flexibility needed to manage a transition of unprecedented scale without destroying jobs and industrial capacity.
What This Means
The 2035 ban remains the most significant automotive regulation in European history. But the latest amendments confirm what many analysts predicted: the transition from internal combustion to electric will not be a clean break but a messy, politically mediated gradient. For consumers, this likely means a wider variety of powertrain options remaining available for longer than originally expected. For manufacturers, it means continued investment in both electric and combustion technology—a dual-track strategy that is expensive but increasingly appears unavoidable.