The European Commission is set to water down the EU’s 2035 de facto combustion engine ban by requiring automakers to lower their emissions by 90 percent instead of the original 100 percent, multiple officials with knowledge of the discussions told POLITICO. The change effectively marks the end of the ban, giving the center-right political parties and the automotive sector a massive win after months of heavy lobbying. Under the deal, which is still being negotiated at the time of publication, automakers can sell plug-in hybrids and range extenders after 2035. But those flexibilities will be tied to automakers “offsetting” the 10 percent extra emissions by using green steel and alternative fuels. How the offsets will work and what percentage of fuels or steel will need to be consumed in production is still being negotiated. The industry argues the law banning the new sale of CO2-emitting vehicles cuts them off at the knees and makes them less able to compete against Chinese incumbents that are ahead of them on electric vehicles.  Automakers are facing further headwinds courtesy of a trade war launched by U.S. President Donald Trump and sluggish sales at home. Climate advocates say the Commission needs to stay the course.  “The EU is playing for time when the next game has already started. Every euro diverted into plug-in hybrids is a euro not spent on EVs while China races further ahead,” said William Todts, executive director of green NGO Transport & Environment. The deal mirrors one announced by Manfred Weber, head of the European People’s Party, on Dec. 11. He told German media that the combustion engine ban had been overturned, with the 2035 target of 100 percent CO2 reduction cut to only 90 percent. The Financial Times was the first to report the 10 percent reduction. New details are emerging, however, about what powertrains will be allowed after 2035. In the current plan, range extenders — small combustion engines that give batteries more range — will count for a further emissions reduction than plug-in hybrids, which have both a combustion engine and an electric motor. Essentially, the scheme would give automakers more emission credits for range extenders than plug-in hybrids because they emit less CO2 than the hybrids, two officials said. The 2035 reform is part of a broader automotive package being put forward by the Commission on Tuesday that will include a new regulation on greening corporate fleets — vehicles owned or leased by companies for business purposes — and an automotive omnibus that was obtained by POLITICO. Essentially, the scheme would give automakers more emission credits for range extenders than plug-in hybrids because they emit less CO2 than the hybrids, two officials said. | Lorenzo Di Cola | Getty Images For the 2035 legislation, automakers will be allowed to pool, meaning that a brand that doesn’t meet the 90 percent target can buy credits from an automaker that over delivers. The pooling scheme is a lucrative business for all-electric manufacturers like Tesla. A separate initiative will focus on boosting small electric vehicles — a demand put forward by Commission President Ursula von der Leyen in her State of the Union address in September. Companies that produce the small cars would get a coefficient of 1.3 in the target calculations. So if a carmaker sold 10 of the small EVs, they would get the emissions credit of 13 cars. Manufacturers will have to comply with yet-to-be-defined local content requirements when creating the small EVs in order for the automaker to get the emission credit. France has long demanded that any flexibilities around the ban be tied to local content requirements — a request it put forward in October alongside Spain. The draft marks the first step in a long, politically fraught journey to becoming law. It will now go to Parliament and the EU capitals, where political groups remain divided over how far the Commission should go to rescue the automotive sector. The EPP has pushed hard to overturn the ban and the far right has campaigned on the issue, too, which could prompt yet another alliance between the two in Parliament to push to further weaken the law. EU capitals also have competing ideas. Spain wants the target to remain unchanged, while Germany is balking at France’s push for “Buy European” requirements, over fears it will spark a global trade war with the U.S. and China.

BRUSSELS ― As usual, a summit of the European Union looks like a summit of European disunity. What’s different is that this time it’s not just the usual suspects threatening to throw a spanner into Brussels’ well-oiled machine, which usually tries to prioritize consensus over everything else. From how to use frozen Russian assets to finance Ukraine to questioning the EU’s climate targets, the agenda is packed with potential flashpoints. Here’s a look at the leaders who are sharpening their elbows and readying their vetoes.  SLOVAK PRIME MINISTER ROBERT FICO  The Slovak strongman has already signaled his intent to derail Thursday’s summit, announcing on X that he is “not interested in dealing with new sanctions packages” against Russia unless the EU comes up with a plan to help Slovakia’s struggling automotive sector. Leaders are expected to finally approve the 19th package, announced last month, at the summit. Fico is among the most Kremlin-friendly leaders in the EU, visiting Moscow last December and again in May, and has raised objections to sanctions before, though he has ultimately always backed down from his repeated threats to block each new package. It’s likely he will do so again, perhaps after extracting some concessions for Bratislava’s car industry.   HUNGARIAN PRIME MINISTER VIKTOR ORBÁN  The EU’s agitator-in-chief is, as always, expected to cause a ruckus. Orbán has stood in the way of unanimity at previous summits, especially on the subject of funneling financial and military aid to Ukraine, forcing the other 26 EU member countries to put out a joint statement without his signature. He could do so again. He has also repeatedly spoken out against a plan to seize Russian assets, arguing it could harm Budapest’s relations with Moscow. As a result, the EU is working on a way to legally sidestep his veto — which, if the bloc can pull it off, is sure to rile the typically pugnacious Hungarian leader. Orbán’s foreign minister,  Péter Szijjártó, denied Hungary would block the 19th package of sanctions. Unusually, Orbán is expected to skip much of the summit due to a national holiday commemorating the Hungarian Revolution of 1956. He will arrive later in the day (though his presence is still sure to loom over the proceedings) and be represented at the discussions in the meantime by Fico.  BELGIAN PRIME MINISTER BART DE WEVER  Who’d have thought that compromise-obsessed Belgium would become the one to throw its weight around at a European Council? It’s certainly not a role the Belgians have been used to playing. But that’s before they elected a right-wing Flemish nationalist steeped in the politics of upsetting the status quo as prime minister. The issue that’s concerning him is niche but affects Belgium in a unique way. The EU has warmed to the previously unthinkable idea of seizing €140 billion in Russian assets to fund a big new tranche of aid for Ukraine. (The plan that everyone had agreed on in the past was just to use the interest those assets were accruing.) The problem for de Wever is that most of these assets are housed in Belgium, at the Brussels financial depository Euroclear. The Belgian government is worried that it could bear the brunt of Moscow’s legal and financial retaliation if the EU breaks open the piggy bank.  After days of tension, Belgium has signaled it won’t stand in the way, but wants some legal assurances that the bloc will share the risks before signing onto any proposal. Other leaders, including Orbán, but also Luxembourg’s Prime Minister Luc Frieden and Croatian Prime Minister Andrej Plenković, have voiced similar concerns about the legal complexity of the plan. GERMAN CHANCELLOR FRIEDRICH MERZ  Merz has one thing on his mind going into Thursday’s EUCO: the fate of Germany’s automotive sector.  Ahead of the last leaders’ summit in Copenhagen, he vowed to put a “stick in the wheels” of the EU’s “legislative machine,” and now he is urging the European Commission to overturn its de facto combustion engine ban, co-signing a letter with Italy earlier this month calling for a radical overhaul of the legislation.   Berlin is backed by Slovakia, the Czech Republic and Poland — all of whom have a strong automotive supplier industry — and Austria. France is also open to giving automakers concessions on the 2035 zero emissions target if they include a certain percentage of European components in their vehicles. With the Commission putting forward a revision of the legislation by the end of the year, it’s a question of how many concessions Merz can extract. Scrapping the 2035 deadline outright remains politically difficult, but Merz is pushing for tweaks — notably “technological neutrality,” code for allowing alternative fuels into the mix and, in practice, keeping the combustion engine alive well beyond 2035.   Jordyn Dahl contributed to this report. 

LIVERPOOL, England — Gary Smith, the general secretary of the GMB union, has urged Labour to rethink its energy policy, or risk losing support among working class communities. Speaking in the POLITICO Pub at Labour conference Tuesday, Smith said the government was not “in the right place” on its energy policy as he warned the approach could alienate swathes of its working class supporters. “Moving to net zero is not cheap. It’s not going to be easy, and if you get it wrong it has huge consequences for the economy and for working people,” he said. “The truth is that at the moment, the whole green thing, the net nero thing, is switching working class communities off. People are not buying it.” His comments come ahead of a decision on Labour’s plans for the North Sea after the government proposed a ban on new oil drilling licenses. But Smith urged Labour not to “fudge” the policy, warning that its approach was already costing the party support ahead of crunch Scottish Parliament elections next year. “If they don’t listen to us, they’re going to face some harsh realities,” the union boss warned. The GMB general secretary also hit out at plans to increase the use of electric heating options as “just rubbish,” adding they would not be possible to roll out on a large scale. And ministers, he argued, were still “misunderstanding” the prospect of the alternative fuel approach being an effective way to reduce the U.K.’s reliance on gas. “I’m pragmatic and a realist. We’re going to need oil and gas for a long time to come. This nonsense that we’re moving to electric heat anytime soon is rubbish,” he said. “The number of people connecting to the gas grid is going up. The AI data centers are going to need gas for energy. That’s the truth.” And Smith said there were lessons to be learnt from U.S. President Donald Trump and Vice President J.D. Vance’s ability to connect with working class communities who feel “angry” about being abandoned by the mainstream political system. “There is stuff we need to learn from that, and that’s about listening to working class people’s concerns. People are not voting for cheap TVs and cheap training shoes anymore… People want jobs back. They want opportunity back. They want the standard of living to be rising again,” he said. “So, does the prime minister learn a lot from Trump? No, but what we do need to get better at is connecting and listening to working class people.”