The European Commission has proposed adjustments to the EU’s CO2 standards, offering car manufacturers a more flexible three-year period to meet emissions targets instead of adhering to strict annual compliance. The amendment would allow carmakers to balance emissions reductions across 2025-2027 rather than meeting a single-year target in 2025, providing additional time while maintaining overall emission reduction goals. Despite the proposed flexibility, the EU remains committed to its objective of ensuring that all new cars and vans sold in the bloc by 2035 produce zero CO2 emissions. The proposal follows discussions at the ‘Strategic Dialogue on the Future of the European Automotive Industry,’ where industry representatives called for regulatory adjustments to avoid penalties and enhance competitiveness. A key feature of the amendment is a “banking and borrowing” system, enabling manufacturers that exceed emission limits in one year to compensate by selling more low-emission vehicles in subsequent years. Currently, regulations mandate a 15% emissions reduction by 2025 from a 2021 baseline, with noncompliant carmakers facing fines of €95 per gram of carbon dioxide per kilometre over the target for each vehicle sold. Industry groups, including the European Automobile Manufacturers’ Association (ACEA), have expressed concerns that maintaining the original targets without adjustments could lead to penalties of up to €15 billion. A slowdown in electric vehicle (EV) sales in 2024 has added to the industry’s challenges, raising doubts about the feasibility of meeting strict annual emissions reductions. Environmental organisations have strongly opposed the proposed changes, arguing that they benefit manufacturers that failed to invest in clean technology and could hinder the transition to zero-emission mobility. They highlight that CO2 emissions from new passenger cars have already declined by -28% between 2019 and 2023, largely due to increased EV adoption, with most automakers on track to meet existing annual targets. The European Commission has defended the amendment, emphasizing the need for predictability and fairness in emissions regulations while ensuring continued investment in decarbonisation efforts. The proposal aims to strike a balance between environmental commitments and the economic realities facing the automotive industry.