The European Union is moving to connect its climate policy for cars with support for heavy industry, by allowing low-carbon steel and certain alternative fuels to count towards compliance with its revised vehicle-emissions framework.
The approach forms part of the bloc’s forthcoming Industrial Accelerator Act and reflects a broader attempt by Brussels to tie decarbonisation targets to industrial demand within the single market.
Under the Commission’s revised framework for cars and vans, manufacturers would be required from 2035 to meet a 90 per cent tailpipe emissions reduction target rather than a full 100 per cent cut. According to the Commission’s own description of the proposal, the remaining 10 per cent would need to be compensated through the use of low-carbon steel made in the Union, or through e-fuels and biofuels. That change marks a significant departure from the earlier regulatory trajectory, which had pointed towards an effective end to sales of new combustion-engine cars by 2035.
The proposal was first set out in the Commission’s Automotive Package presented on 16 December 2025. Brussels described that package as a framework intended to preserve climate objectives while giving manufacturers greater flexibility and maintaining what it called a technology-neutral approach. In practice, it means hybrids, plug-in hybrids, range extenders and some combustion-engine vehicles could continue to play a role beyond 2035, provided the emissions accounting is balanced through the new crediting system.
For the Commission, the logic is not only environmental but industrial. Automakers account for roughly a fifth of Europe’s steel demand, making the sector a potentially important source of demand for low-carbon steel at a time when European steelmakers are under pressure from high energy costs, global competition and the cost of decarbonisation. The new mechanism is explicitly intended to support Europe’s steel sector while also contributing to lower overall emissions from road transport and manufacturing.
This fits with the wider direction of the Clean Industrial Deal, launched by the Commission in February 2025. The Commission has said the Industrial Decarbonisation Accelerator Act will be used to increase demand for EU-made clean products by introducing sustainability, resilience and “made in Europe” criteria in procurement and other market rules. In steel and metals, the Commission’s existing action plan already identified lead markets and demand-side measures as necessary to support investment in cleaner production.
Yet the policy also exposes a practical difficulty: supply. Reuters reported that green or low-carbon steel remains scarce and more expensive than conventional steel, with many projects still not under construction and producers facing uncertainty over renewable hydrogen availability, financing and technology scale-up. One of the central problems remains definitional. There is still no single settled market standard for what should qualify as “green steel” or “low-carbon steel”, which creates uncertainty for both steelmakers and car producers trying to plan compliance or investment decisions.
There is also movement within Brussels over how far the Industrial Accelerator Act itself should go. A separate Reuters report on 3 March said a proposed emissions label for steel had been removed from a draft of the law, although the draft still included a requirement that at least 25 per cent of steel used in public procurement be low-carbon. That suggests the EU is still adjusting the balance between market signalling, industrial support and regulatory complexity.
The broader political context is equally important. The Industrial Accelerator Act is expected to introduce local-content and low-carbon requirements for products receiving public support, as the EU tries to strengthen domestic manufacturing and reduce dependence on cheaper imports, particularly from China. One goal is to raise manufacturing’s share of EU output from 14 per cent to 20 per cent by 2035. In that sense, the car-emissions revision is no longer only a transport measure; it is becoming part of a larger industrial strategy.
Whether the approach succeeds will depend on execution. Carmakers will need clarity over the accounting rules, steelmakers will need predictable demand and investment conditions, and Brussels will need to define what qualifies as low-carbon production without creating another layer of legal uncertainty. For now, the Commission’s direction is clear: the next phase of EU car policy is being designed not only to cut exhaust emissions, but also to reshape the materials and fuels that underpin Europe’s automotive industry.
Commission targets steel, wind and EVs in new industrial drive
