Flexibility and Targets: The Latest Developments in EU and UK Vehicle Emissions Policy
April 2025 saw regulatory developments on vehicle emissions standards in both the European Union ("EU") and the United Kingdom ("UK"). These changes will be of significant interest to vehicle manufacturers, as well as users and purchasers of vehicles more generally.
EU Update
On April 1, 2025, the European Commission proposed an amendment to Regulation (EU) 2019/631 to introduce additional flexibility in calculating manufacturers' compliance with CO2 emissions performance standards for new passenger cars and new light commercial vehicles for calendar years 2025 to 2027.
This proposal was announced as part of the European Commission's Industrial Action Plan for the European automotive sector, which was adopted on March 5, 2025, following the Strategic Dialogue on the Future of the Automotive Industry. It responds to stakeholders' requests for more flexibility regarding CO2 targets during the period from 2025 to 2027.
The proposed flexibility enables manufacturers to meet CO₂ targets for 2025, 2026, and 2027 by averaging their emissions performance over the full three-year period, instead of being evaluated on a year-by-year basis. This approach enables manufacturers to offset excessive emissions in one year by outperforming the target in the remaining year(s): penalties (95 euros per g/km) will apply only if a manufacturer exceeds its specific emissions target over the entire 2025-2027 period, rather than annually during these years.
The proposed amendments (subject to approval by the European Parliament and the Council of the EU) will provide manufacturers with the necessary flexibility to meet CO2 targets during a crucial transition period (2025-2027), while maintaining the EU's climate commitments.
UK Update
In the UK, there have also been developments in respect of the transition to zero emissions vehicles ("ZEVs"). On April 7, 2025, the UK's Department for Transport published the government response to its consultation on phasing out the sale of new petrol and diesel cars from 2030 and supporting the ZEV transition.
Phase Out of Internal Combustion Engine Vehicles. Following consideration of the extensive stakeholder responses, the UK government has confirmed it remains committed to the phasing out of the sale of new internal combustion engine ("ICE") cars by 2030. As such, from 2030 all new cars will need to be hybridized or be zero emission.
The sale of new hybrid electric vehicles ("HEVs") and plug-in hybrid vehicles ("PHEVs") will be allowed until 2035, and the sale of new ICE, HEV, and PHEV vans will be allowed until 2035. All new cars and vans are to be fully zero emission by 2035.
ZEV Mandate. The response confirms that a series of flexibilities will be introduced to enable multiple pathways to support manufacturers in the transition to ZEV. These amendments are technical in nature, but the government's intention is for these changes to have a significant impact on manufacturers' ability to decarbonize in a manner that is sustainable.
The ZEV mandate requires manufacturers to meet certain targets of ZEV every year from 2024, through the vehicle emissions trading schemes. The new pathways that manufacturers will have open to them include extending the borrowing of allowances and the ability to transfer CO₂ savings from non-ZEV to ZEVs out to 2029, with new caps proposed for 2027 to 2029. The 2025 and 2026 caps will also be increased to provide additional short-term flexibilities.
The government has confirmed it will bring forward regulations to implement the policy changes proposed to the ZEV mandate promptly and will engage relevant stakeholders on the draft regulations as soon as possible. As of yet, no timeframes have been provided for these new regulations.
