An analysis by the International Council on Clean Transportation (ICCT)  of CO2 fleet emissions for new cars in H1 of 2025 shows that the car industry currently exceeds the EU limit by nine percent. This breach should actually trigger fines payable to the European Union. Due to the recent flexibilisation, that will not happen.

The ICCT has published detailed data on carmakers’ CO2 emissions for the first half of 2025: the average stands at 102 grams of carbon dioxide per kilometer (g CO2/km). That is nine per cent above the limit of 93 g CO2/km. Moreover, the average figure is somewhat misleading, as BMW, for example, already meets the target, while Volkswagen still has a long way to go.

How it works

To understand what is going on, the CO2 fleet limit mechanism must first be explained. Every newly registered passenger car in the European Economic Area (EEA), that is the 27 EU states plus Iceland, Liechtenstein, and Norway, but excluding Switzerland and the United Kingdom, has a CO2 value assigned.

The CO2 value is determined on a test bench according to the ‘Worldwide Harmonised Light Vehicle Test Procedure (WLTP) for the respective vehicle type. Electric cars have no direct emissions and thus zero grams of CO2. The fact that not all electricity in Europe is already green and that electric vehicles also have (indirect) CO2 emissions is regulated via the Renewable Energy Directive (RED).

Plug-in hybrids (PHEVs) take a special position. They go through the WLTP test cycle twice, once with a fully depleted battery, i.e., using the combustion engine, and once with a fully charged battery, effectively running purely on electric power. The results are weighted based on maximum electric range (Utility Factor); this mix leads to PHEVs having significantly lower CO2 values than comparable cars powered solely by petrol or diesel engines. At least in the WLTP procedure, things can be very different in real driving with not very disciplined users.

That the actual limit of 93 g CO2/km is only slightly below the previous 95 g CO2/km and not exactly 15% lower relates to various allowances. This includes a generous conversion from the former, now phased-out New European Driving Cycle (NEDC) to WLTP.

Another special rule is the weight factor: each manufacturer is assigned an individual limit based on average vehicle kerb weight. For 2021–2024, this meant a discount for brands with heavier cars.

Now the effect of the weight factor has reversed. While the Renault Group, with relatively light vehicles, has a limit of 96 g CO2/km from 2025, the BMW Group, with heavier cars, may emit no more than 88 g CO2/km.

Pooling

A collaboration on CO2 emissions between manufacturers is allowed and is called pooling. Each manufacturer may combine its fleet emissions with any other. These pools must be registered, but whether and what compensation payments take place between companies remains confidential and subject to contractual freedom.

Often, brands within a group pool together, as Volkswagen does. But there is no obligation: Hyundai and Kia, for example, report separately despite belonging to the same group.

New and notable is the intention of Tesla, Stellantis, and Toyota to pool together. An established pool is Mercedes with Polestar and Volvo, which already have mutual stakes. This trio has the heaviest vehicles and therefore the strictest limit at 86 g CO2/km.

High fines are still theoretical

The core issue is the threatened fines: normally, 95 euros must be paid to Brussels per gram exceeded per car. Volkswagen delivered about 1.25 million cars in Europe in 2024. One gram excess would thus result in fines of nearly 120 million euros, and a target gap of 13 grams would cost VW Group more than 1.5 billion euros in fines.

But nobody has paid a single euro so far. Current indications suggest that this will not change anytime soon. The often-cited revenues Tesla generates from selling CO2 certificates come almost exclusively from the U.S., not Europe.

Electrified passenger car registrations

By brand

The average share of battery electric vehicles (BEVs) among total new registrations in Europe reached 18% in June 2025 and 17% in the first half (H1) of 2025, compared with 13% in H1 2024. Several manufacturing pools had significant increases in BEV shares in H1 2025 compared with the same period in 2024. Kia (20%) and Volkswagen (18%) both recorded increases of 8 percentage points, and BEV shares for BMW (25%) and Hyundai (17%) pools each increased by six percentage points.

In contrast, SAIC stood out with a drop from a 41% BEV share in H1 2024 to 13% in H1 2025. The BMW pool had the highest BEV share in June (25%) and was followed by the Mercedes-Volvo-Polestar (23%), Hyundai (19%), Volkswagen (18%), Kia (18%), and SAIC (18%) pools.

The Tesla-Stellantis-Toyota pool (17%), Renault pool (11%), and Nissan (6%) were below the European average in June.

Plug-in hybrid electric vehicles (PHEVs) had an average market share among new registrations in Europe of 8% in H1 2025 (up one percentage point over H1 2024), led by the Mercedes-Volvo-Polestar pool (23% share). SAIC and Nissan had the most significant shares of full hybrid electric vehicles (HEVs) with 40% and 36%, respectively, in H1 2025.

The Mercedes-Volvo-Polestar and BMW pools led in new registration shares of mild hybrid electric vehicles (MHEVs) in H1 2025 with 38% and 37%, respectively.

By country

Looking at the primary European markets, total passenger car registrations in Spain grew 14% in H1 2025 compared with the same period in 2024, while registrations decreased in Belgium (-11%), France (-8%), Germany (-5%), and Italy (-4%).

Focusing on the largest markets by combined new BEV and PHEV registrations, Norway (96%), Denmark (66%), Sweden (60%), and the Netherlands (55%) all had combined shares above 50%, and Belgium (41%), Austria (31%), and Germany (28%) also recorded combined BEV and PHEV market shares above the average for Europe.

Among the largest markets by total new passenger car registrations, the highest growth in BEV registrations occurred in Spain, Czechia, and Poland, where they increased 83%, 66%, and 61%, respectively, in H1 2025 compared with H1 2024.

Registrations in France dropped 6% during the same period. BEV registrations in Germany, the largest European market, continued to rise, with a 35% increase in BEV registrations in H1 2025 compared with H1 2024, and over 47,000 BEVs were registered in June alone.

Registrations of PHEVs increased the most in Spain (+84%) and Poland (+81%) in H1 2025 compared with H1 2024, and HEV registrations increased the most in Austria (+31%) and Spain (+30%). Shares of MHEVs were highest in Italy (31%) and Poland (28%) in H1 2025, and they are gaining popularity in France, where registrations increased 52% in H1 2025 compared with the same period in 2024.

Ambition reduced

The flexibilisation, the joint CO2 accounting for 2025 to 2027, prevents several manufacturers from incurring financial penalties to the EU when pooling with others. But, as Jan Dornoff of ICCT notes, it also reduces industry ambition: “Since flexibilisation was decided in Q1, no increase in electric car share is observable.” Consequently, CO2 emissions are not falling further, says Dornoff, who regularly produces analyses.

In summary, the European CO2 fleet directive basically works. However, further weakening it would be a mistake. Manufacturers want planning certainty, which the EU limits provide. Further leniency would reward brands that have not acted consistently, and punish those with innovative model policies. And that’s certainly not the way to go, says the ICCT.