True or Apparent Technology Neutrality?

Dr. Wolfers, the slogan “end of combustion engines in 2035” is dominating the headlines. You have studied the EU Commission's draft proposals in great detail. How much of a future will combustion engines actually have beyond 2035?

Dr. Benedikt Wolfers: The slogan “the end of the combustion engine” is unfortunate. It gives the wrong impression. I would analyze the planned change to the fleet limit regulation, which the Commission presented on December 16, 2025, as follows: 

At first glance, it appears as if the target of 0 g CO₂ emissions for all newly registered vehicles from 2035 onwards is being relaxed. The package provides for the reduction of the 2035 target from the previous 100% to 90% (compared to the 2021 target value). This means that from 2035, the new car fleet will be allowed to emit an average of 11g CO₂/km from the exhaust. This will allow the use of combustion engine vehicles, such as plug-in hybrids and electric vehicles with range extenders, even after 2035. 

However, manufacturers must offset the remaining CO₂ exhaust emissions of their fleet, up to a maximum of 11g CO2/km, through so-called “Sustainable Renewable Fuel Credits” or “Low-Carbon Steel Credits”. In effect, therefore, nothing changes in terms of the CO₂ reduction target for 2035. From a climate protection perspective, this is the right approach for now. 
 

But isn't the perspective changing in the package? Don't fossil fuels now play a role in reducing CO₂ emissions? 

Dr. Benedikt Wolfers: Yes. The perspective changes in the Commission's proposal. But so minimally, in such small homeopathic doses, that even after these proposals, nothing would probably change in practical terms with regard to the current combustion engine phase-out.
 

Why do you think that?

Dr. Benedikt Wolfers: Current regulations equate a 100% reduction in greenhouse gas emissions in the transport sector with low or zero CO₂ emissions measured at the vehicle's exhaust pipe. This narrow view has always been a distortion of reality. This is because CO₂ emissions in the transport sector arise throughout the entire life cycle, from the production of the vehicle and the generation of energy to the operation of the vehicle and its disposal. Anything that is produced or saved in terms of CO₂ emissions outside of exhaust emissions during the life of a vehicle is currently ignored. 

Even the previous regulation considered this to be too narrow. It tasked the Commission with publishing a report by the end of 2025 that would enable a method for assessing and uniformly reporting CO₂ emissions throughout the entire life cycle. 

However, this has not happened. And the new automotive package does little to change this. This is because CO₂ emissions savings through the use of non-fossil fuels are capped at a maximum of 3%, and through the use of green steel at 7%, both only from 2035 onwards. For the remaining 90%, the narrow focus on CO₂ emissions measured at the exhaust remains. The Commission's core objective is the “zero-emission vehicle”. However, this is defined as a vehicle with exhaust emissions of 0 g CO₂/km. 
 

You mention the crediting mechanisms. The Commission emphasizes flexibility and technology neutrality. Is this reflected in the details?

Dr. Benedikt Wolfers: The Commission's package sets out the goals of “flexibility” and “technology neutrality.” But when you open the package and take a closer look, things look different. Compensation with green steel and renewable fuels is limited to 10%. For renewable and CO₂-neutral fuels, which should actually be a core component for the existing fleet and technological alternatives for CO₂-neutral combustion vehicles, a minimal window of 3% is opened. In practice, that is almost nothing.

The picture becomes even clearer when you look at further details, such as the incompatibility rule: If, as a manufacturer, you build a vehicle that runs on renewable fuel and this vehicle is also made from green steel – which would be desirable in terms of holistic CO₂ reduction – then only the CO₂ reduction from the renewable fuels can be counted, not that from the use of green steel. 
 

That sounds counterproductive. So a manufacturer is penalized if it makes adjustments in both areas?

Dr. Benedikt Wolfers: In any case, it does not benefit from reducing CO₂ emissions twice, firstly by using non-fossil fuel and secondly by using green steel. These narrow, bureaucratic regulatory restrictions are not consistent with the overarching goal of reducing the overall carbon footprint as much as possible. Technological openness looks different.
 

In your presentation, you will address another key aspect: the regulation of corporate fleets. How explosive is this topic?

Dr. Benedikt Wolfers: The Commission's proposal for regulating company fleets shows even more clearly that the automotive package is only seemingly open to all technologies. The fleet business is probably the most important market for the automotive industry. Company vehicles account for a significant proportion of new registrations; approximately 60% of registrations for passenger cars and approximately 90% for light commercial vehicles are company vehicles. This means that, in practical terms, the requirements for company fleets could override and dominate the general requirements for passenger cars and light commercial vehicles. 
 

And what are the requirements for company fleets?

Dr. Benedikt Wolfers: For Germany, for example, it is stipulated that the proportion of zero-emission vehicles in company fleets must be 54% in 2030 and 95% in 2035. 
 

Which brings us back to the definition of “emission-free.” Do e-fuels or HVO100 count as emission-free?

Dr. Benedikt Wolfers: No, they are not included. Here, too, the Commission remains stuck in the old, narrow tailpipe approach. Here, too, zero emissions means that no CO₂ emissions are allowed to come out of the exhaust pipe. 

So if you use HVO100 fuel or a synthetic fuel in your company fleet that has been produced in a completely CO₂-neutral manner throughout its life cycle, then driving such company vehicles does not actually lead to an increase in greenhouse gas emissions in the atmosphere; you are operating the vehicle in a CO₂-neutral manner. But legally, the vehicles are treated as if they were emitting new greenhouse gases. This is due to the narrow tailpipe approach. Because the Commission only wants to measure whether CO₂ is coming out of the exhaust pipe.
 

Conversely, that would mean that even if we had enough green fuels, the market for combustion engines in corporate fleets would effectively be dead?

Dr. Benedikt Wolfers: Ultimately, this is a business decision. However, if regulations require 95% of company fleets of passenger cars and light commercial vehicles to be operated without CO₂ exhaust emissions, i.e., effectively battery-electric or hydrogen fuel cell vehicles, there will likely not be much room left for climate-neutral combustion engines. 

From a purely regulatory perspective, the Commission's proposals to date, under the guise of flexibility and technology neutrality, are in fact still pursuing the industrial policy goal of focusing technology in passenger cars and light commercial vehicles on battery-electric drives and displacing combustion engine technology, regardless of whether it can be operated in a CO₂-neutral manner or not. This is only apparent technological neutrality. 

The following is important here: Of course, it is possible to pursue the political and commercial goal of completely converting the drive technology of passenger cars and light commercial vehicles to battery-electric drive. That is a question of different political or commercial standpoints. But what is not acceptable is to pull the wool over the public's eyes. To pretend to be flexible and open to technology when in fact this is not the case.
 

Does the regulation on company fleets interfere with entrepreneurial freedom to such an extent that it is legally questionable?

Dr. Benedikt Wolfers: That would need to be examined. The Commission bases its restriction of greenhouse gas emissions on its competence in environmental protection. However, one might ask whether the goal of reducing greenhouse gas emissions in the transport sector is compatible with the instrument of achieving this goal solely by measuring exhaust emissions. There is already a considerable discrepancy between the regulatory objective and the regulatory instrument. However, intervention is only permissible if the instrument is suitable and necessary to achieve the objective. If there are several equally possible instruments, then regulation that severely restricts rights must not be limited to a narrow path, but must also allow for other, milder means that can also achieve the objective.

But let's not kid ourselves: the core discussion must be a political one. We need to be honest and open about reconciling the goals of climate protection, technological openness, and competitiveness. In my opinion, the Commission's current proposal does not achieve this. It does contain important flexibilities in the three-year extensions, which now cover the years 2025 and 2027 as well as 2030 to 2032, and minimal openings for the use of non-fossil fuels. However, on the key issues for long-term production, namely the 2035 fleet regulations and the new proposal on company fleets, my impression is that the Commission is not offering technological openness, but is instead further cementing the move away from combustion engine technology, even if it is CO₂-neutral. 
 

Let's return to the topic of CO₂ accounting. For years, many industry voices have criticized the fact that the focus on exhaust emissions ignores upstream emissions, such as those from battery production or the electricity mix. Does this play a role in the legal assessment?

Dr. Benedikt Wolfers: It would have to play a role if we were honest. If the new regulation now differentiates between fuels for combustion engines and introduces a general calculation model to determine whether or not they contribute to CO₂ reduction, the question inevitably arises as to why this is not also done for the electricity used to power electric drives. Electricity from a coal-fired power plant has a different carbon footprint than electricity from renewable energies. It would only be logical to consider the CO2 contribution of the energy used as a whole, i.e., both for fuels obtained from renewable sources and for electricity obtained from renewable sources. The result is open. Depending on the electricity mix, for example, it could go one way or the other. But it is not logical to take the origin of the energy used into account for fuel but not for electricity. 
 

What is the current status of the proceedings? Do you still see any chance of changes to the CO₂ fleet legislation?

Dr. Benedikt Wolfers: The Transport Committee (TRAN) and the Environment Committee (ENVI) of the European Parliament had been arguing over who should take the lead on CO₂ fleet limits. According to the latest information, the Environment Committee has prevailed. This suggests that there will be no changes that would be technology-neutral and promote competition. The Transport Committee and the Environment Committee will have equal say in the Commission's proposal on company fleets. In any case, there will be an open discussion there about whether the proposals really are as technology-neutral as they claim to be. I myself am looking forward to the discussions at the International Engine Congress. How do the participants, technicians, economists, scientists, and industry representatives view the current EU plans?