Implications of EU Carbon Emissions Reversals in the Auto Sector

Introduction

The European Commission has published proposals to reverse an effective ban on sales of new internal combustion engine cars from 2035, following pressure from auto makers in Germany, Italy, and other major producers across Europe. The delayed package is the result of fierce lobbying to allow transitional technologies such as plug-in hybrids and CO2-neutral fuels, despite concerns from climate campaigners and EV companies to maintain the original target.  At first glance, this looks like climate backsliding. But the pace of electric vehicle sales accelerated in the early 2000’s, but has slowed dramatically. The EU appears to be reacting to market pressure and demand signals that show EU consumers are buying fewer EVs.

It is true that more Europeans are buying electric vehicles, and about one in five cars now sold in the EU in 2024 were electric. The share of electric car sales rose in 2024 in 14 out of the 27 EU member states, but either stalled or decreased in the rest, especially in larger markets such as Germany and France, as subsidies were slowly phased out.

Subsidies for EVs are slowing Across Much of Europe

In Germany, subsidies ended in 2023, while  France has slowly reduced its subsidies over the years. In the Nordics, governments are moving from cash incentives for car purchases to other incentives such as free parking. While France was planning an increase in the carbon tax, it limited the amount of environmental bonuses that were available to higher-income car buyers, thereby reducing the number of vehicles that were eligible for the subsidy. Consumers are less incentivized to switch from combustion engine vehicles due to a slowly developing infrastructure and fewer incentives for purchasing.

Furthermore, the policy design in Europe has not created predictability for EU car manufacturers and may have held back policy growth in the electric car markets in 2024. As new targets are set to come into effect every five years, there were no incentives to push the sale of EVs in 2024. Furthermore, the lack of regulatory certainty also means auto makers cannot innovate properly, as rules will change every five years. Businesses need more regulatory certainty to innovate properly.  Ultimately, this slows the pace of EV adoption and the reduction of harmful CO2 emissions that have devastating consequences for the poorest citizens across the world.

What do Developing Countries think?

In developing countries like Cameroon, this is interpreted with some skepticism as the EU launched the EU Deforestation Initiative two years ago, forcing developing countries to comply with green regulations. Products like palm oil, cocoa, and coffee must be farmed on land that has not been deforested over the last two years – this is a boon for developing countries as it will force modern farming practices and support the preservation of ecosystems. In Cameroon, this is vital as the rates of deforestation are rising and citizens are forced to deforest new land due to sa ecurity crisis as they flee Boko Haram in the extreme North and the Anglophone crisis in the North and South West regions.

What Can We learn from our Neighbors in Europe?

In the United Kingdom – the second-largest car market in Europe – electric car sales reached a share of nearly 30%, up from 24% in 2023. Bear in mind that the UK only started its Vehicle Emissions Trading Scheme in 2023, requiring 22% of all new registrations to be BEV or fuel cell electric vehicle (FCEV). I did some digging, and when your account for the Schemes flexibilities that allow OEMs to borrow credits from future years, it made it easier for manufacturers to comply with a battery electric car sales share of close to 20%.

When the EU backslides, we should wonder why our siblings in the Nordics were able to achieve faster and quicker rates of electrification. Norway reached near-total electrification of sales, with 88% of car sales being battery electric and just under 3% plug-in hybrid. As a result of the growing stock of electric cars, Norway’s oil consumption dropped by 12%  in 2024 when compared to 2021. If a major oil producer in Europe ca reduces the use of fuel that they produce and export, we’d better learn from them. Norway used tax credits and financial incentives at first and then transitioned to other measures, such as free parking, to help more citizens switch to electric vehicles. However, Norway created generous incentives for EV charging companies, which helped them establish themselves and ensure customers have access to charging spots.

From April 2025, a tax increase on combustion engines and PHEVs will increase the rate of adoption of electric cars, ensuring that the Norwegian government meets its 100% zero-emission car sales goal. On another note, electric vehicle sales in Denmark increased by 10% to reached 100,00 cars sold in 2024.

Why are we bringing up to the Nordics?

Simple! The Nordics have shown once again that you can transition to EVs and ensure that infrastructure is being built concurrently. The commission is trying to harmonize regulations for 27 countries, which comes with a million challenges. But it appears that the commission is creating a new category for smaller electric vehicles that are under 4.2 meter similar to the Kei Japanese cars. They will benefit from super credits, allowing consumers to buy electric vehicles while helping automakers to meet their targets.

Who will win the Innovation race?

The issue is that emerging and developing economies in Asia (excluding China) have seen a large increase in electric car sales, reaching almost 400,000 in 2024. Between 2023 and 2024, EV adoption grew 40%, which has created a mix of demand and innovation incentives. Emerging and developing economies in Asia (excluding China) saw a large increase in electric car sales, reaching almost 400 000 in 2024, up over 40% from 2023. Market forces will drive up competition and tighten margins for European producers. But 1200 words will not revolutionize the EU auto sector. We need to maintain incentives, but ensure there are more technical requirements associated with subsidies and other incentives for automakers. Making batteries more durable, better charging capacity, etc.

The EU Needs Incentives and Targets to Compete More Effectively Against China

If the EU wants to stay competitive and possibly ahead of China, it must ensure that subsidies are accompanied by rigorous targets. This will ensure that the EU auto sector can regain its competitiveness over the long run. Otherwise, it risks losing market share and global competitiveness to the Chinese. Of course, Africa is already riddled with Japanese and European cars, so there is an advantage as more people can find parts for their cars when need be. The EU will not survive based on tariffs and stronger market presence across developing economies; it must innovate further and better. We need objective-driven subsidies.

Conclusion

Countries like Cameroon have a stake in the development of the EU auto sector. EU countries as a whole are our largest trading partners, and the diffusion of technology and technical know-how is contingent on how fast and well the EU innovates. For example, industrial machinery – now produced for the agro-processing industry in Cameroon – has benefited from the imports of EU machinery. From a climate standpoint, 2 million Cameroonians are impacted by climate change, and policymakers will be reticent to transition at a faster pace if the EU does not meet its climate objectives. The signal may be more important than the outcomes for developing countries that are cash-strapped and have to contend with slow-moving international finance. The EU must focus on making more competitive EVs at lower prices to support the attainment of climate goals and support technology diffusion in Cameroon.

Henri Kouam

Executive Director