France and Germany have agreed to a provisional deal that lowers EU car emissions targets and includes Britain in a 'made in Europe' scheme, pending final approval.
France and Germany have reached a provisional agreement to relax European Union emissions regulations for car manufacturers and to include Britain in a "made in Europe" industrial scheme. The deal, confirmed by diplomatic sources on Thursday, represents a compromise between Berlin’s push for less stringent carbon targets and Paris’s desire to protect EU-centric procurement rules.
The agreement addresses the EU’s planned ban on new petrol and diesel vehicles in 2035. The European Commission had previously proposed replacing the outright ban with a requirement for manufacturers to cut new vehicle exhaust emissions by 90 percent. Under the original proposal, the remaining 10 percent of emissions would have needed to be compensated through credits, such as those obtained by using low-carbon steel.
According to the draft document outlining the pact, the Franco-German deal scraps this compensation requirement. It states that residual emissions "should not have to be compensated by manufacturers." Additionally, the agreement opens the door for cars running on renewable fuels to count as "zero-emission," making it easier for automakers to meet CO2 targets. The deal also extends "super credits" for small electric cars to all vehicles "irrespective of their size or length."
A key component of the deal involves the definition of "made in Europe" for public procurement and subsidy schemes. France had pushed to keep this definition restricted to EU nations, while Germany sought a broader interpretation to include key non-EU trade partners.
The provisional agreement restricts the application of the "made in Europe" label for cars to the EU’s 27 countries, with an opt-in for a handful of others, notably Britain and Norway, under certain conditions. This is a narrower definition than the one proposed by the European Commission in March, which could have included dozens of partner countries with existing EU trade deals.
The inclusion of Britain is contingent on specific conditions. According to a report by Reuters, cited by Mezha, Britain’s inclusion would depend on an agreement on "full reciprocity," as well as "dynamic alignment with EU conditions for investment from third countries and with EU trade protection measures." This could require Britain to adopt EU measures to limit imports of Chinese-built hybrid and battery electric vehicles.
The deal is provisional and requires final sign-off from Berlin, as well as approval from the European Parliament and other EU member states. German Chancellor Friedrich Merz and French President Emmanuel Macron have agreed in principle to the changes, according to reports from Handelsblatt.
London welcomed the potential inclusion of Britain in the scheme. The office of Prime Minister Andy Burnham stated that if confirmed, the move "would be good news for the British automotive industry and the jobs and investment it supports across the UK."
However, the agreement faces political hurdles. In Germany, the Social Democrats’ environment minister has suggested a target of 95% emissions reduction, with a further five-percentage-point reduction offset through low-carbon steel, differing from the 90% target without compensation agreed upon in the Franco-German draft. Furthermore, some lawmakers from the center-right European People’s Party, particularly from the German delegation, are seeking to reject or substantially weaken the proposal, according to Politico Europe.
This provisional deal signals a shift in EU industrial policy, prioritizing the competitiveness of the automotive sector over stricter climate mandates. By easing emissions rules and expanding the "made in Europe" definition to include Britain, the agreement aims to support struggling carmakers and integrated supply chains. However, the need for final approval from the European Parliament and other member states means the policy landscape remains uncertain, with potential conflicts between climate goals and industrial protectionism still unresolved.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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