The International Council on Clean Transport (ICCT) has summarized the impact of current policy decisions on CO₂ regulations for passenger cars on employment in the European automotive industry. The title of the 58-page study is: “Boosting jobs: employment under EU passenger car CO₂ standards.” The central message from analysts is that maintaining current targets – that is, phasing out new internal combustion engine (ICE) vehicles by 2035 – would guarantee current employment levels. However, relaxing the rules at this stage would put jobs at risk. Maintaining current standards, combined with additional instruments (e.g. EU production incentives), could even generate employment growth.
ICCT warns of net job losses
The ICCT authors argue that while the currently debated weakening of CO₂ targets for passenger cars for 2035 could temporarily halt job cuts in ICE production, it would slow job growth in electric vehicle (EV) manufacturing, battery production, recycling and charging infrastructure development. The net result, according to the forecast, would be a “net loss of employment.”
On the other hand, maintaining the current EU standards would likely keep employment largely stable until 2035. As the study emphasizes: “Although the implementation pathways will inevitably lead to a decrease in jobs related to ICEV production, they will also affect employment associated with battery production, battery recycling and charging infrastructure. Depending on the scenario, employment gains in these fields may offset losses in ICEV production.”
Furthermore, combining these rules with additional industrial measures to promote production within the EU could, as the document states, even “strengthen long-term employment in vehicle production and BEV-related industries.”
Before looking at the details, a brief overview of the current legislation: For the period 2025 to 2027, EU OEMs must achieve a fleet average of 93.6 g CO₂/km, which represents a 15 percent reduction compared to the 2021 baseline. By 2030, the target is reduced to a 55 percent reduction, and by 2035, it reaches 100 percent.
This is the current state. However, in its late 2025 ‘Auto Package’ project, the European Commission proposed relaxing this framework. Some parliamentary committees are already following this path. Most MEPs want to force manufacturers to achieve only a 95 percent CO₂ reduction by 2035, and original equipment manufacturers will be allowed to fall another 7.5 percentage points below this target if they use climate-friendly European steel in their vehicles as compensation. However, this proposal must still go through further commission stages.
The ICCT authors analyzed three scenarios
The ICCT study aims to provide guidance on the impact of impending policy decisions. While the industry itself warns that current CO₂ targets – and in particular the rapid transition to electric vehicles – could cost European jobs, the ICCT reaches the opposite conclusion. Sandra Wappelhorst, research leader at ICCT and lead author of the study, commented: “Weakening CO2 standards is presented as a way to protect jobs, but our analysis shows the opposite. “Instead, the EU should consider complementing its rules with measures to strengthen domestic supply chains for electric vehicles. Holding on to an outdated technology like the internal combustion engine will not help workers in the long term.”
The team of authors has calculated three specific scenarios. He Reference scenario (“Current standards”) projects employment based on current standards. He “Political measures” scenario models how jobs would evolve if the EU also implemented measures to strengthen value creation within the EU. These could include guidelines on local value-added content (such as those proposed in the “Industry Accelerator Law”), as well as national-level approaches or specific production incentives. Importantly, the authors note: “Rather than modeling these measures individually in the analysis, we incorporate broad assumptions linking them to a higher share of BEV and PHEV production in the EU.”
in the third “Delayed standards” scenariothe ICCT assumes a five-year delay in the implementation of CO₂ standards, which would result in a slower pace of electrification (“where the share of BEVs and PHEVs would increase moderately by 2030 and reach 100% BEVs in new car sales by 2040”). The ICCT itself describes the five-year delay as a “simplifying assumption”, as in practice the relaxation of regulations could take several forms.
Other influences on employment are excluded.
Methodologically, it is important to note that the ICCT has deliberately focused the study on the effects of CO₂ legislation on industrial employment. Other factors that could influence future employment, such as advances in automation and digitalization, or broader geopolitical and economic trends, are excluded. Nor are additional aspects evaluated, such as the needs to improve the capabilities of the workforce. The study exclusively examines the effects on employment in the context of upcoming policy decisions.
Regarding the findings: The ICCT analysis shows that the short-term employment differences between the various regulatory scenarios remain relatively small until 2030. However, by 2035, a clear picture emerges: while maintaining current CO₂ standards would keep employment in 2035 at a level only two percent below that of 2025, additional industrial measures to promote production in the EU could increase net employment by around ten percent, or approximately 320,000 additional jobs.
According to the study, lowering CO₂ standards would have the opposite effect: employment could fall up to six percent below the 2025 level, which ICCT experts equate with a loss of up to 185,000 jobs. “Instead, the EU should consider complementing its standards with measures to strengthen domestic supply chains for electric vehicles. Sticking to an outdated technology like the internal combustion engine will not help workers in the long term,” the team of authors concludes.
The pace of the powertrain transition is decisive
The ICCT adds: “Instead, the EU should consider complementing its rules with measures to strengthen domestic supply chains for electric vehicles. Sticking to an outdated technology like the internal combustion engine will not help workers in the long term.” Both factors are also strongly influenced by future policy frameworks.
It is clear that passenger car production accounts for most of the differences between the three scenarios, with battery production/recycling and the development and maintenance of charging infrastructure becoming increasingly important. Peter Mock, Director of ICCT Europe, summarizes: “Instead, the EU should consider supplementing its standards with measures to strengthen domestic supply chains for electric vehicles. Sticking to an outdated technology like the internal combustion engine will not help workers in the long term. Maintaining current CO2 standards will help European manufacturers put themselves at the forefront of the electric vehicle market.”
