EU backtracking on its Green Deal

The European Commission is preparing to scale back one of its most ambitious climate pledges as it seeks to relieve pressure on its lacklustre economy. The commission announced this week that it will drop plans for a complete ban on the sale of new internal combustion engine vehicles from 2035.

The shift reflects growing concern among governments and industry that targets agreed in the early 2020s are colliding with economic, geopolitical and competitiveness realities — a dynamic increasingly visible not only in the ongoing deindustrialisation  that started in Germany, but is now spreading to the agriculture sector.

The ban on combustion engines law, adopted in 2022, stipulated that from 2035 all new passenger cars and vans sold in the EU must produce zero carbon dioxide emissions. In practice, this amounted to a ban on new petrol and diesel vehicles and a requirement for a full transition to battery electric or hydrogen fuel cell models, a cornerstone of the bloc’s plan to achieve climate neutrality by 2050.

Agriculture, which was expected to deliver parallel emissions reductions through lower fertiliser use, pesticide cuts and land-use changes, has been subject to similarly rigid targets under the Green Deal that has been the signature initiative for the last decade.

Climate rules softened

Despite the roll back, Brussels insists it is not abandoning its climate goals. According to reports by the Financial Times and Reuters, the Commission is instead preparing to adjust the mechanism underpinning the car ban, that the industry hated.

Under revised proposals, carmakers would no longer be required to eliminate CO₂  emissions entirely. Residual emissions of up to 10% of 2021 levels could be permitted, provided strict conditions are met. A comparable shift has already taken place in farming, where the Commission has eased environmental conditions attached to Common Agricultural Policy subsidies and withdrawn a proposal to halve pesticide use by 2030 following widespread opposition.

“Farmers are not against sustainability, but the pace and scale of these targets are disconnected from economic reality,” said Pekka Pesonen, Secretary General of Copa-Cogeca, which represents EU farmers and cooperatives, in comments reported by Reuters. “If policies are not adjusted, production will simply move outside Europe.”

People familiar with the automotive discussions say the new conditions would include the use of low-carbon materials, particularly green steel, and the production of extended-range electric vehicles, which rely primarily on batteries but include a small internal combustion engine as a backup power source. Reuters has also reported that officials are discussing extending the effective ban by five years or softening it indefinitely, a move that would mark the EU’s most significant retreat from its climate agenda in recent years.

In agriculture, farmer groups argue that similar flexibility is needed on fertiliser use and crop rotation rules, warning that rigid mandates risk undermining food security.

In March, the Commission had already granted automakers a three-year grace period to meet separate CO₂  reduction targets originally due by 2025, signalling a broader willingness to introduce flexibility. That decision followed months of protests by farmers across France, Germany, Poland, Italy and Belgium, where growers blocked roads and borders to demand relief from environmental regulations, they said were being implemented faster than markets and technology could adapt.

“We are being asked to do more with less, while competing with imports that do not follow the same rules,” Arnaud Rousseau, head of France’s FNSEA farm union, told Reuters during protests earlier this year. “This is not a rejection of environmental goals, but a demand for fairness.”

“It is a geopolitical moment and a complicated context,” said Sara Aagesen, Spain’s minister for the ecological transition. “The Commission itself has already introduced flexibilities in the past.”

Under the emerging automotive framework, tailpipe emissions would be required to fall by 90% by the middle of the next decade rather than the current target of a 100% reduction, according to people briefed on the talks. Carmakers would also need to compensate for additional pollution by using low-carbon or renewable fuels or locally produced green steel.

Agricultural policymakers are pursuing similar offset-style approaches, emphasising soil carbon storage, precision farming and lower-emission fertilisers rather than blanket cuts to production.

“We believe that we must continue with that roadmap that was drawn up with the goal of ending the commercialization of combustion vehicles in 2035,” Aagesen said. “It is important to meet the commitments that have been defined in order to provide stability to investors and also to citizens.”

The Commission declined to comment, but the proposal is expected to be adopted by EU commissioners this week before being sent to the European Parliament and the EU Council. Farm policy revisions, including changes to CAP conditionality, are also moving through the same legislative channels, with member states pressing for greater national discretion.

Global green policy pullback

The policy rethink comes amid a wider global pullback from green transition targets, as governments confront the economic costs of rapid decarbonisation. In Europe, rising trade tensions with both the US and China have sharpened concerns about industrial competitiveness, highlighted by the report from former Italian Prime Minister and ex-European Central Bank boss Mario Draghi last year.

In agriculture, farmers have warned that EU producers face stricter environmental rules than overseas rivals, while imports produced under looser standards continue to enter the bloc.

Germany has played a pivotal role in pushing for changes to the car ban. Chancellor Friedrich Merz has argued that a blanket prohibition on internal combustion engines from 2035 does not reflect market realities and has called for a “technology-neutral” approach, echoing the calls from the industry, including plug-in hybrids, synthetic fuels and advanced biofuels.

Berlin has taken a similar stance in agriculture, backing demands for flexibility on fertiliser limits and land-use requirements. Italy and Poland supported Germany in a joint letter urging Brussels to abandon the outright automotive ban, with several central and eastern European countries also opposing it.

The automotive industry has added to the pressure. Electric vehicle sales in the EU are rebounding this year after a difficult 2024. According to industry body ACEA, EV sales rose by 38.6% between January and October, while hybrid sales increased by 9.4%. By contrast, agricultural producers continue to grapple with high input costs, particularly for fertilisers, where prices surged after Russia’s invasion of Ukraine and remain volatile.

The recovery in car sales has been supported by more affordable models and new subsidy programmes, already in place in France and recently launched in Germany. Even so, automakers argue that the transition remains slower and less profitable than expected. Farmers make a similar case, saying sustainable practices often carry higher upfront costs without guaranteed returns, particularly as voluntary carbon credit schemes struggle to gain traction.

Environmental groups warn that easing the rules risks creating loopholes that weaken Europe’s climate ambitions. They have voiced the same concern in agriculture, arguing that rolling back pesticide and fertiliser targets could lock in emissions and biodiversity loss for decades.

“Weakening Green Deal measures in agriculture sends the wrong signal at the worst possible moment,” Greenpeace EU said in a statement cited by Reuters, warning that delays could undermine the bloc’s credibility on climate leadership.

The electric vehicle race is increasingly global. A third of the 39 countries where EVs account for more than 10% of new car sales in 2025 are now outside Europe, according to energy think-tank Ember. Agricultural markets are equally globalised, with food companies warning that unilateral EU standards risk shifting production — and emissions — abroad rather than eliminating them.

Even so, the prospect of a 2035 ban triggered intense lobbying from groups including Stellantis NV and Mercedes-Benz Group AG. Farming organisations have mounted comparable campaigns, pressing Brussels to prioritise economic resilience and food security alongside climate objectives.

Automakers worldwide are struggling to make the transition pay. Ford Motor Co this week announced it would take $19.5bn in charges linked to a sweeping overhaul of its electric vehicle business. Across agriculture, governments are increasingly acknowledging similar trade-offs, as producers push for a slower, more flexible transition that mirrors the recalibration now under way in Europe’s car industry.