EU energy ministers approve 2035 phaseout of CO2-emitting cars

European Union countries have given final approval to a landmark law to end sales of new CO2-emitting cars in 2035, after Germany won an exemption for cars running on e-fuels.

The approval from EU countries' energy ministers on Tuesday means Europe's main climate policy for cars can now enter into force - after weeks of delay caused by last-minute opposition from Germany.

The targets are designed to drive the rapid decarbonisation of new car fleets in Europe.

The European Commission has pledged, however, to create a legal route for sales of new cars that only run on e-fuels to continue after 2035, after Germany demanded this exemption from the ban.

The EU policy had been expected to make it impossible to sell combustion engine cars in the EU from 2035. But the exemption won by Germany offers a potential lifeline to traditional vehicles - although e-fuels are not yet produced at scale.

German transport minister Volker Wissing said the agreement would "open up important options for the population towards climate-neutral and affordable mobility".

"The direction of travel is clear: in 2035, new cars and vans must have zero emissions," EU climate policy chief Frans Timmermans said.

E-fuels are produced by synthesising captured CO2 emissions and hydrogen produced using CO2-free electricity. They are considered carbon neutral because the CO2 released when the fuel is combusted is balanced by the CO2 removed from the atmosphere to produce the fuel.

READ MORE:  What are Europe's new driving rules and how will they affect you?

Revising market stability reserve

Poland voted against the law on Tuesday. Italy, Bulgaria and Romania abstained. Poland had called the law unrealistic and said it risked increasing car prices, while Italy had wanted cars running on biofuels to also be exempted from the 2035 phaseout.

Transport accounts for nearly a quarter of EU emissions.

Porsche and Ferrari are among the supporters of e-fuels, which they see as a way to avoid their vehicles being weighed down by heavy batteries.

Other carmakers including Volkswagen, Mercedes-Benz and Ford are betting on battery-electric vehicles to decarbonise, and some firms had urged EU countries not to row back the 2035 phase-out.

EU energy ministers also agreed on Tuesday to extend a voluntary target to curb their gas use 15 precent for 12 months, to help prepare for next winter with scarce Russian gas.

Member states also gave their final approval on Tuesday to a decision that revises the EU's market stability reserve aimed at addressing the surplus of emission allowances that have been building up in the EU emission trading system, the EU council said.

The decision extends beyond 2023 the increased annual intake rate of allowances of 24 percent, it added.

The market stability reserve is part of the bloc's 'Fit for 55' package that aims to enable the EU to reduce its net greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels and to achieve climate neutrality in 2050.

READ M0RE: EU approves ban on sale of new gasoline, diesel cars by 2035