What happens to the supposed ban on new ICE vehicles following the 2025 German election?

The car industry is considered Germany’s key industry. Following the EU’s decision in the spring of 2023 to gradually lower the fleet-wide CO₂ emissions targets – often dubbed a “ban on ICE vehicles” by the public given the 2035 target – this has triggered correspondingly strong reactions by German politicians.

In the public debate in Germany this rule is usually called a “ban” on petrol and diesel cars, which legally speaking isn’t entirely correct (see A). This rule also had a big part to play in the campaigning for the federal election. Some parties highlighted the “ban” as a campaign issue (a key one in some cases), while others supported the EU provision. But could Germany really scrap the ban? National politics has limited influence here, since the so-called ban is based on a European arrangement which can only be changed by the EU legislative bodies. The EU Commission recently announced on 3 March 2025 that it is willing to give carmakers more flexibility in fulfilling their emissions targets, although this currently appears to apply “only” to the targets from 2025 onwards (see B and C).

In this edition of Insights we look at this issue and predict future political developments following the German election.

A. Legal backdrop

I. Fleet-wide CO₂ emissions targets

The legal basis for the “ban” is Regulation (EU) 2019/631 which, after much wrangling, was significantly amended by Regulation (EU) 2023/851 of 19 April 2023. The aim is to achieve the European Union’s ambitious climate targets. These measures are linked to the Fit for 55 package aimed at making the European Union’s economy climate-neutral by 2050.

Article 1 of Regulation 2019/631 defines pan-EU fleet-wide targets which are lowered in stages from 2020 to 2035. This fleet-wide targets determine the maximum CO₂ the entire fleet of a carmaker’s newly registered cars is permitted to emit in one year. The aim is to reduce the CO₂ emissions of newly registered cars in the EU step by step. Article 1(5a) sets the fleet-wide target at zero from 1 January 2035.

However, exceeding emissions targets does not lead to a formal ban on placing cars on the market, registering cars or any other obligations to desist from certain conduct; for that reason alone, talking of a “ban” on ICE vehicles is legally inaccurate: instead, under Article 8, OEMs which fail to reach their fleet-wide targets have to pay a charge.

In contrast, EU type-approval law for cars contains bans on registering vehicles based on the (Framework) Regulation (EU) 2018/858 and the related legal acts: in the type-approval procedure the OEMs have to adhere to certain emissions limits for every vehicle type; otherwise they cannot obtain type-approval and are not allowed to place their vehicles on the market. However, type-approval law does not specify a CO₂ threshold. This applies especially in view of the new Euro 7 emission standard (Regulation (EU) 2024/1257), which applies to more and more vehicles step by step from 29 November 2026 and sets emissions limits for particular matter and nitrous oxide for example but still sets no limits on CO₂ emissions (more on Euro 7 in our dedicated Insight article).

However, Regulation 2019/631 with a zero fleet-wide target from 2035 will act as a de facto ban on registering ICE vehicles, because from 2035 at the latest, a profitable business selling petrol or diesel cars will no longer be feasible. Used cars are not affected in any case: they can still be sold and filled up with fossil fuels. As the average car is estimated to run for around 15 years, the zero fleet-wide target from 2035 is necessary to actually achieve a broadly CO₂-neutral car fleet in the EU by 2050.

II. What about e-fuels?

Regulation 2019/631 does not refer only to traditional internal combustion engines with standard fuels. Instead, when calculating the fleet-wide limit, what is decisive is the amount of CO₂ emitted through the exhaust pipe by the engine used. The type of drive train or fuel used is not relevant to this calculation; on the other hand, CO₂ emissions that occur (or do not occur) in car production are not taken into account.

However, according to the current state of the art, it is not possible to operate a combustion engine without CO₂ emissions. Using e-fuels also leads to CO₂ emissions during operation; the manufacturing process for e-fuels does not lead to climate neutrality. In the current regulatory framework, from 2035 (at the latest) new registrations of ICE cars operating on e-fuels will be barely profitable from an economic perspective.

B. Possible political developments following the German election

Even within the existing German government, formed by the SPD and the Greens, there was the political goal of at least making the CO₂ fleet-wide targets more flexible. On 12 December 2024, the Federal Ministry for Economic Affairs and Climate Action presented a package of measures that did not question the fundamental course taken in the car industry. The phaseout of fossil fuel combustion engines in cars from 2035 and the agreed fleet-wide targets were maintained. However, the penalties for non-compliance with the fleet-wide targets were to be made more flexible such that breaches in 2025 could be offset against over-fulfilment in 2026 and 2027 (for more details, see our Insight).

After the general election on 23 February 2025, a coalition between the CDU/CSU and the SPD is currently the most likely political grouping. Therefore, until a coalition agreement is signed, it is worth taking a look at the election manifestos of these parties to make political assessment of the next four years:

The CDU/CSU aims to maintain the car industry as the leading industry and to preserve its position as a central pillar of industry. To this end, the following measures are to be taken (Political Change for Germany: CDU/CSU election manifesto, p72 onwards):

• The planned restrictions on combustion engines are to be lifted.
• The fleet limits are to be reviewed and financial penalties avoided.
• To achieve the climate targets, technology neutrality are to be promoted by supporting various technological approaches, in particular by including e-fuels, hydrogen and sustainable biofuels.

These demands were also reiterated by the CSU, the CDU’s Bavarian counterpart, in its Bavaria Agenda (Getting Germany Back on Track: Our Bavarian Agenda for the 2025 General Election, p7).

The SPD, on the other hand, attaches particular importance to strong support for electric mobility as a prioritised sustainable solution for the future of the car industry. It regards combustion engines powered by e-fuels in the car industry only as a niche product for high earners and considers the use of e-fuels to be central primarily in aviation and shipping. The fundamental EU targets are to be maintained, but current penalty payments in the context of EU fleet-wide limits are to be avoided (More for You. Better for Germany.: SPD government programme for the 2025 general election, p7 and p36 onwards).

To summarise these positions, there are differences in how they see the “ban” on combustion engines. First of all, a possible end to the combustion engine “ban” can be interpreted differently. While some interpret it as the removal of all future restrictions on combustion engines, others might refer only to exemptions for e-fuels. The CDU/CSU position is not clear in this regard when it states that “[...] the combustion engine ban must be reversed.”

A general end to restrictions on combustion engines that run on fossil fuels is likely to be difficult to reconcile with the SPD’s position. The SPD is already critical of exemptions for e-fuels. However, a compromise could possibly be found. By contrast, it should be easier to reach an agreement on eliminating the fleet-wide limits or at least making them and/or the penalties more flexible, as this is being demanded by all parties involved, albeit to varying degrees. However, the focus is primarily on the next few years and not on the long-term period including 2035.

However, it is worth remembering that this is simply the future position of a new German government. From a regulatory perspective, the fleet-wide limits are anchored in European secondary legislation, which the German government can only influence to a limited extent. What is decisive is the decision-making process at EU level.

C. Legal and political developments at EU level

The starting point for changing secondary legislation is the European Commission, as it is the only EU institution with the right of initiative in the legislative process under Article 294(2) TFEU. Only then does the decision-making process begin in the two European legislative bodies, the European Parliament and the Council of the European Union.

In the discussions on making the fleet-wide targets more flexible, the European Commission always reacted negatively and repeatedly rejected a postponement of the climate targets. However, on 3 March 2025, Commission President von der Leyen announced that the Commission wanted to give manufacturers more flexibility in meeting the fleet-wide targets (see press statement of 3 March 2025). Initially, this apparently only affects the – equally strict – fleet-wide targets from 2025; the Commission intends to put forward a proposal to amend Regulation 2019/631, under which the targets will remain the same overall, but will no longer have to be met annually, but cumulatively every three years instead, according to the principle of banking and borrowing. It remains to be seen how this will be implemented in detail.

At the same time, the Commission President announced that the 2025 strategy would also be reviewed, with “full technology neutrality as a core principle”. This specifically addresses e-fuels: when the CO₂ fleet-wide limit of zero was introduced by Regulation 2023/851, it was already politically agreed that e-fuels should also be made feasible. However, the legal basis for this has yet to be established. For the time being, recital 11 of Regulation 2023/851 calls on the European Commission, outside the scope of the fleet target values and in line with the EU’s goal of climate neutrality, to submit a proposal for registering vehicles that will run exclusively on CO₂-neutral fuels from 2035 onwards; this is aimed specifically at the registration of cars that run on e-fuels.

However, the legal construct for how passenger cars using e-fuels could be registered in the future under the regulatory framework remains unclear. While recital 11 of Regulation 2023/851 provides for an arrangement outside of Regulation 2019/631, an arrangement within Regulation 2019/631 has been called for by politicians, especially by the German Federal Ministry of Transport and Digital Infrastructure. The technical discussions include the dyeing of synthetic fuels and/or installing shut-off devices in cars with internal combustion engines. With regard to the regulation of e-fuels, the President of the European Commission has also referred to the review of the Regulation in 2026 as provided for in Article 15 of Regulation 2019/631 (see Europe’s Choice: Political Guidelines for the Next Commission 2024-2029, p11).

In addition, there are some exciting new developments for the car industry which cannot yet be clearly foreseen. On 30 January 2025, the EU Commission launched a Strategic Dialogue on the Future of the European Automotive Industry, involving the European automotive industry, employee/employer associations and other stakeholders. On 5 March 2025, an initial Action Plan for the automotive industry is to be published as part of the Green Industrial Deal. The exact content is not yet known. This could also have an impact on the approval of e-fuels and on greater flexibility in fleet-wide limits and penalties.

D. Outlook

The future position of Germany and the EU as well as the subsequent legal developments regarding the provisions in the context of CO₂ fleet-wide targets are currently still somewhat unclear. At the outset, a future German federal government consisting of the CDU/CSU and SPD is likely to agree at least on the fact that it wants to push ahead with making the fleet-wide targets more flexible at the EU level. Whether and how the EU legislative bodies (in particular the EU Commission, which is entitled to initiate legislation) will act is an unanswered question, especially given the divergent interests within the car industry and the Member States. However, a complete abandonment of the EU climate targets and a repeal of the general ban on the registration of new non-climate-neutral cars from 2035 onwards seems hardly conceivable politically, both at the German and, in particular, at the European level.

In any case, with regard to e-fuels, a proposal for a regulation is pending at the European level, although it is still unclear how this is to be technically implemented and whether a new regulation, which now seems likely, will be issued under Regulation 2019/631. The new German government’s position on this issue is not yet clear.

In particular, the Commission’s Action Plan announced for 5 March will have to be awaited with great interest. We will, of course, continue to follow these highly topical developments for you and report on them.