ICCT modelling finds weakening EU car CO2 standards could cost up to 185,000 European auto jobs by 2035

What the ICCT study found

A weakening of the European Union's CO2 standards for new cars and vans could eliminate as many as 185,000 passenger car industry jobs in Europe by 2035, according to the International Council on Clean Transportation, an independent research organisation based in Berlin. The findings come from a 58-page study titled Powering jobs, reported on 27 October 2026 and covered in English by Automotive World, which credits the ICCT as its source. ¹²

The ICCT argues that weaker regulation would temporarily delay job losses in combustion vehicle production while simultaneously slowing growth in electric vehicle and battery manufacturing and in the installation and maintenance of charging infrastructure, producing a net employment loss. ICCT research lead Sandra Wappelhorst, the study's main author, said weakening the CO2 standards was being presented as a way to protect jobs but that the analysis showed the opposite, adding that the EU should consider complementing its standards with measures to strengthen domestic EV supply chains and that clinging to what she called an obsolete technology like the internal combustion engine would not help workers in the long run. ¹³

These are modelled outcomes for the European industry through 2035. They describe European policy settings and employment, and do not constitute a forecast for the Australian automotive sector. ¹

Three modelled pathways

The ICCT modelled three scenarios. Under the current rules, which require fleet CO2 reductions of 55 per cent by 2030 and 100 per cent by 2035 against 2021, employment in 2035 would stay close to 2025 levels as gains in electric vehicle and battery work offset combustion engine losses. Reporting of the study's detail differs on the exact figure for this scenario: Automotive World, citing the ICCT, describes employment as broadly stable, German outlet ad-hoc-news.de reports it roughly 2 per cent below the 2025 level, and Spanish news agency EFE characterises it as a net 2 per cent increase. ¹²³

A second scenario pairs the current standards with targeted industrial policy supporting EU-based production, which the ICCT says could create around 320,000 additional jobs, an increase of 10 per cent by 2035. A third scenario, in which proposals to loosen the targets and delay them by five years are realised, could push employment up to 6 per cent below the 2025 level, leaving roughly 185,000 jobs lost and a gap of almost half a million jobs between that outcome and the strongest scenario, measured against a current sector workforce of 3.3 million people. ¹²³

The ICCT notes the differences between scenarios stay small until 2030, with vehicle production driving most of the later divergence. The organisation also states the scope of the analysis: it covers electrification alone, excluding automation, productivity effects and indirect jobs such as retail and after-sales employment. ¹

Where the modelled losses fall

The modelled losses of up to 185,000 jobs fall mainly on Europe's large industrial locations. According to the study, Germany accounts for nearly 77,000 at-risk jobs, France around 28,000, Poland and Italy roughly 21,000 each, and Spain about 19,000. ²³

Brussels is reviewing the rules

The study lands in the middle of a review of the EU's fleet targets. The current rules require a fleet average of 93.6 grams of CO2 per kilometre for 2025 to 2027, a 15 per cent reduction against 2021, followed by the 55 per cent cut in 2030 and 100 per cent from 2035; for light commercial vehicles the reductions are 35 per cent by 2030 and 80 per cent by 2035. ²

On 22 October 2026, the European People's Party, Socialists and Democrats and Renew groups in the European Parliament's transport and industry committees agreed a compromise that would lower the 2035 CO2 reduction for new cars to 87.5 per cent against 2021 rather than full zero emissions, below the 90 per cent the European Commission had previously proposed. The groups also agreed to drop binding electric quotas for commercial fleets from 2030, replacing them with non-binding reference marks without penalty, despite commercial new registrations making up as much as 60 per cent of the EU market. A vote in the environment committee is scheduled for early November, followed by a plenary vote in early December before negotiations with member states begin. ²

Earlier in October, on 16 October 2026, Germany and France presented a joint initiative targeting a 90 per cent reduction by 2035 without offsetting obligations, paired with requirements for European value-added shares in components and batteries. Under the pact, manufacturers would no longer need to cover the remaining 10 per cent using sustainable fuels and green steel, in a departure from the European Commission's earlier proposal as reported by EFE. ²³

Divided industry and political reactions

Reactions have split along familiar lines. ad-hoc-news.de reports that the German automotive industry association VDA called the German-French initiative an important step but judged it insufficient, citing its own forecasts that around 125,000 jobs in Germany could disappear by 2035. Environmental organisation Transport & Environment criticised any weakening of the targets. These are the positions of the organisations named, not findings of the ICCT study. ²

Market data cited in the same report adds context to the electrification trajectory the modelling assumes. The European manufacturer association ACEA recorded battery-electric vehicles at 22.7 per cent of new EU registrations in the first three quarters of 2026, up from 16.1 per cent in the same period a year earlier, with hybrids at 36.3 per cent and petrol and diesel combined down to 28.2 per cent. ²

The core finding of the study is directional rather than a prediction: the ICCT's modelling indicates the direction and rough size of employment effects depend on the stringency of the regulatory framework and on whether supportive industrial policy accompanies it. What the European Parliament and member states decide in the coming weeks of negotiation will determine which pathway the continent's largest manufacturing employers follow. ¹²