The European Union will enforce stricter auto emission regulations starting January 1, 2025, as part of its broader plan to achieve climate neutrality by 2050. Under the new rules, the average carbon dioxide (CO₂) emissions for new cars must not exceed 93.6 grams per kilometer, a 19% reduction compared to the current target of 116 g/km, according to consultancy Dataforce.
Specific targets will be assigned to manufacturers based on the average weight of their vehicles, while luxury and “small volume” carmakers will have separate limits. Any manufacturer exceeding their target will face fines of €95 per gram of CO₂ over the limit for each new car sold.
Renault CEO Luca de Meo, also head of the European Automobile Manufacturers’ Association (ACEA), estimates the auto industry could face €15 billion in fines next year. Stellantis’ Europe chief, Jean-Philippe Imparato, told Milan Finanza that the company risks penalties of up to €3 billion if it fails to comply. Analysts at Barclays believe Stellantis, BMW, and Renault are better positioned than Ford, Mercedes, and Volkswagen, which face significant emission gaps. Volkswagen’s potential fines alone could range between €1.5 billion and €4.7 billion in 2025, according to brokerage firm Stifel.
To meet targets, manufacturers with lower electric vehicle (EV) sales can “pool” emissions with industry leaders by purchasing emission credits. For instance, Suzuki has entered a pooling agreement with Volvo, and Ford has already spent $3.8 billion on credits for Europe and North America. Companies are also expected to boost EV sales through discounts or make traditional petrol cars more expensive to encourage customers to choose EVs.
Volvo is ahead of the curve, with a significant share of its production comprising EVs and plug-in hybrids. Tesla and Chinese automaker BYD are also well-placed to sell emission credits to underperforming manufacturers. Barclays estimates these credits could cost about €20 per excess gram of CO₂.
Germany’s Economy Minister Robert Habeck has called for more flexibility in achieving the targets, proposing that carmakers offset fines in 2025 with future compliance in 2026 and 2027. Similarly, Austria, Italy, Romania, and other nations are pushing for the EU Commission to review emission targets earlier, by 2025 instead of 2026, and consider reducing fines for non-compliant automakers.
ACEA’s Luca de Meo has also advocated for calculating fines over a five-year period leading up to 2030, when even stricter emissions rules are set to take effect.
