The European Parliament's Environment Committee has approved a proposal to introduce dedicated low-carbon steel credits under the EU's carbon emissions standards for new cars and vans, aiming to encourage the use of low-emission steel produced in Europe and support the competitiveness of the European automotive and steel industries.
As SteelOrbis previously reported, three major political groups in the European Parliament reached a compromise in October 2026 on introducing low-carbon steel credits for carmakers. The Parliament's Environment Committee has now formally adopted the proposal.
The European Steel Association (EUROFER) welcomed the committee's decision, emphasizing that the proposed credit mechanism could help stimulate demand for low-carbon steel and support investments in decarbonized steel production.
Committee proposes revised CO₂ reduction targets for cars and vans
Under the committee's proposal, the fleet-wide carbon emissions reduction target for new passenger cars in 2035 would be lowered from 100 percent to 87.5 percent, compared with the 2021 reference level. Manufacturers would be required to compensate for emissions corresponding to up to 7.5 percent of the reference target through credits for low-carbon steel produced in the EU, enabling them to meet an overall reduction target of 95 percent.
For vans, the committee proposes reducing the 2030 emissions reduction target to 35 percent, compared with 40 percent in the European Commission's proposal and 50 percent under the existing rules. The 2035 target for vans would be lowered from 100 percent to 80 percent, with low-carbon steel credits permitted subject to a 7.5 percent cap.
From the entry into force of the revised rules until the end of 2034, low-carbon steel credits could contribute a maximum of three percent toward manufacturers' specific emissions targets for both passenger cars and vans. The proposal includes additional incentives for certain electric vehicles manufactured in the EU, including super credits for small and highly energy-efficient electric cars and electric vans. It also contains provisions recognizing vehicles operating exclusively on qualifying renewable and low-carbon fuels within the revised emissions framework.
Potential demand for 30 million mt of low-carbon steel highlighted
EUROFER stated that European steelmakers are currently planning or implementing approximately 60 decarbonization projects, representing the potential to produce around 30 million mt of low-carbon steel. However, the association emphasized that these investments require predictable demand and stronger market incentives to support their commercial viability.
The association also noted that the proposed credit mechanism would reward automotive manufacturers for using qualifying low-carbon steel produced in Europe, helping create demand for cleaner steel while supporting domestic industrial production and employment. Its director general Axel Eggert stated that low-carbon steel produced in Europe should be used in vehicles manufactured within the region, emphasizing that a dedicated steel credit could help translate decarbonization objectives into industrial investment, production and employment opportunities.
The European Parliament is expected to vote on its negotiating mandate during its December 2026 plenary session, after which negotiations with EU member states could proceed.
