New Emissions Rules for US Car Manufacturers: What This 180-Degree Turn Means for Drivers

Emission regulations have been one of the most controversial topics of the last few years in he automotive world. After they were set by the European Commission they transformed the landscape of automation by forcing the entire industry to pivot to electric vehicles in order to comply with the new CO2 rules for car manufacturers. 

But this year there has been a change, consumers are not as on board with the policy as manufacturers and legislators expected and so the European Commission had to pivot too.

According to the original timeline, Euro 7, the legislation that governs the rules that automakers have to follow, kicks in July 2025. This piece of legislation covers hybrids, electric vehicles and every other type of vehicle available and tells automakers what they are and are not allowed to produce. It is accompanied by the CAFE regulation, which also informs manufacturers of the amount of new CO2 that they are allowed to emit in their lineups. This amount has been lowered considerably through the years and now the target was set at 93.6 grams of CO2 per kilometer for 2025. This was a steep drop from the 115.1 grams allowed in 2024, and since many companies are swapping their electric vehicles for hybrids due to customer demands, it would have damaged a lot of companies that are already struggling to compete.

The impact of the new emissions revision

The penalties for missing the target are steep, every gram over the limit would cost manufacturers €95 per car sold and when you are selling hundreds of thousands of vehicles, those fines add up fast. For some brands, this could have easily meant paying billions in penalties. The European Automobile Manufacturers’ Association (ACEA) did the math and found that these new limits could drain anywhere from €10 billion to €16 billion from the industry, which made automakers step up and ask for an extension on the new limits to give the market (and consumers) time to catch up.

This was not easy, as at first the EU was unwilling to move the timeline, but after a lot of lobbying and pressure, they relented and granted the extension. European Commission President Ursula von der Leyen announced that the EU will “give the industry more flexibility and clarity, without changing the agreed targets.”

What this means for the industry is that, instead of hitting companies with fines immediately in 2025, the EU will average emissions across 2025, 2026, and 2027 and then will start issuing fines to the companies that do not comply. If this agreement manages to get signed off in in March 2025, as part of a bigger plan tied to battery production and the shift to electric cars, the new timeline will be set. If it does not, the old agreement will continue to stand and fines will start sooner rather than later.

Even though this delay helps automakers for now, the long-term goals have not changed. The delay is a lifeline for many manufacturers, especially the ones still leaning heavily on combustion engines, and a reprieve for others that have started the process but have been unable to complete it in time, but the EU is still dead set on banning new combustion engine cars by 2035 and all this does is buy car companies some time to get their electric vehicle strategies in order.

With the deadline pushed back, these companies have a chance to roll out more electric models before they start racking up fines, and considering the issues that European and Japanese automakers have been having with Chinese imports, not having to spend their innovation budget in fines might help them keep their head out of water.