In March 2023, the European Union (EU) set into law 2035 as the year in which all new passenger cars and vans will have to produce zero tailpipe greenhouse gas emissions. In practice this means that as of this date, no new internal combustion engine vehicles (ICEVs) can be registered in the EU – only battery electric vehicles (BEVs). However, following intense political pressure, the European Commission in December 2025 published a proposal to amend this legislation and prolong the lifetime of ICEVs beyond 2035. This regulation was already amended in early 2025 to introduce additional flexibility for manufacturers when it comes to meeting CO2 emission reduction targets. The latest proposal, if approved, would not put in place a date for an end to the sale of ICEVs in the EU and instead of the 100% CO2 reduction target for manufacturers from 2035 onwards, there would be a 90% reduction target. If a sufficient quantity of alternative fuels such as e-fuels are supplied to the EU market, manufacturers will be permitted to continue producing ICEVs within certain limits.
This FCA Standpoint assesses the feasibility of e-fuels for road transport by comparing them to conventional vehicles and BEVs when used in cars. A holistic look at e-fuels for road transport reveals that this decarbonization pathway is less efficient, more expensive, and provides lower emissions savings compared to electric vehicles. While e-fuels have the strong appeal of leveraging existing technology and infrastructure for road transport, they come with a significant energy penalty for the EU, as well as concerns over the deployment of subsidies or taxpayers’ money to make them economically competitive. This brief will also assess the impact of incentivizing the supply of scarce energy resources such as e-fuels and biofuels to road transport, instead of prioritizing them in hard-to-abate sectors such as aviation and shipping. Finally, while the proposed changes are seemingly intended to improve the competitiveness of the EU’s automotive industry, a shift away from full electrification may in fact undermine EU competitiveness in the BEV market.
