ICCT Data Shows Car Makers Still Exceed Limits, but Fines Remain Unlikely
Halfway through 2025, Europe’s car industry is at a crossroads: electric vehicles are gaining real momentum, but the sector as a whole still overshoots the European Union’s fleet CO2 emissions cap by 9%, according to the latest analysis from the International Council on Clean Transportation (ICCT). Despite this, automakers currently face no risk of EU fines—thanks to regulatory flexibility and complex exceptions. The reasons behind this are as fascinating as the numbers themselves.
CO2 Emissions: The Latest Figures
The ICCT’s newly released data shows that, on average, new passenger vehicles registered across the European Economic Area (which includes the 27 EU member states plus Iceland, Liechtenstein and Norway) emitted 101 grams of CO2 per kilometre in the first half of 2025. That’s well above the EU’s official fleet limit of 93 g/km for the period.
Under normal circumstances, such a breach would trigger automatic fines, but a mix of technical allowances, pooling, and a new ‘flexibilisation’ mechanism mean that manufacturers are shielded from immediate penalties. The average figure itself isn’t always telling: while BMW meets its weight-adjusted target, Volkswagen remains notably above its limit.
Understanding The CO2 Fleet Regulations
Each newly registered car in the EEA receives a CO2 rating, measured using the modern WLTP (Worldwide Harmonised Light Vehicle Test Procedure) standard. Electric cars, producing zero tailpipe emissions, naturally score 0 g CO2/km. This isn’t creative accounting—renewable energy rules also apply on the fuel side. In Germany, over 60% of electricity used in vehicles now comes from renewables.
Plug-in hybrids (PHEVs) occupy a grey area: they undergo WLTP testing twice (once on battery, once on fuel), with results weighted according to how often they’re likely to run electrically. This means PHEVs often record lower CO2 numbers than traditional petrol or diesel vehicles—at least in the lab.
Until 2024, the industry-wide limit was 95 g CO2/km. The 2025 target of 93 g CO2/km incorporates reductions and a range of technical adjustments, including conversions from the older NEDC testing cycle and weight-based allowances that favour lighter vehicles.
The Role of Weight, Pooling, and New Flexibility
The system is full of caveats. From 2025, weight-adjusted targets mean lighter brands like Renault are allowed up to 96 g/km, while BMW, with heavier models, must meet a stricter 88 g/km average. Manufacturers can also ‘pool’ their fleets, combining results to hit targets collectively. These pools are typically within corporate groups (like VW with its various brands), but outsiders can also join forces. For instance, this year, Tesla, Stellantis, and Toyota are aiming to pool their results.
Pooling arrangements are confidential, and there’s no obligation to join—some related brands, like Hyundai and Kia, report separately.
Fines in Theory, Not in Practice
While the official penalty for missing the CO2 target is steep—€95 per excess gram per car—no manufacturer has actually been fined. VW, which delivered 1.25 million vehicles in Europe in 2024, would face up to €120 million for going just 1 g/km over the limit. But thanks to the flexibility mechanisms and pooling, the threat remains theoretical. Contrary to popular belief, Tesla’s headline-grabbing revenues for selling CO2 credits mostly originate from the US, not Europe.
Brand-by-Brand: Winners, Losers, and the Power of Electric Vehicles
BMW: BMW and Mini precisely meet their adjusted 93 g/km target, thanks to a strong mix of electric vehicles (25% of sales) and PHEVs (14%). BMW’s ‘Neue Klasse’ electric platform promises further improvements, even as the company continues to back alternative fuels.
Volkswagen: By contrast, VW stands at 105 g/km, far above its 92 g/km target. This is despite high EV sales (18%), as traditional combustion models remain popular. To get closer to compliance, VW is planning a major push on small electric cars from 2026.
Tesla-Stellantis-Toyota: This unusual pool averages 101 g/km—7% above its 95 g/km target—largely because Stellantis and Toyota haven’t sold enough EVs to offset their higher-emission models. Stellantis, in particular, is seen as slow to roll out affordable EVs.
Hyundai and Kia: Both are close to their respective targets, aided by a growing range and popularity of electric models like the Hyundai Inster and upcoming launches such as the Kia EV2 and Hyundai Ioniq 2.
Flexibilisation: The Multi-Year Escape Clause
A crucial new rule allows carmakers to average their emissions over three years (2025–2027), rather than meeting the annual target every year. This ‘flexibilisation’ means a weak performance one year can be offset by stronger results later. It’s inspired by the UK’s approach, where automakers must hit rising EV quotas across multiple years.
Pooling, however, remains optional. Toyota, for example, might leave its current alliance, as it’s only just over its limit and expects to hit targets solo thanks to a slew of new electric models coming from October 2025.
The Road Ahead: More Electric Cars Essential
Looking forward, the EU’s CO2 limits are set to tighten sharply—by 15% between 2025 and 2029, and by a dramatic 55% from 2030 relative to the old 95 g/km baseline. For now, though, the main effect of flexibilisation is to relieve pressure on lagging manufacturers while discouraging an immediate surge in EV sales. Industry experts warn that further relaxing the rules would undermine the ambitions of both regulators and forward-thinking brands.
Conclusion
Europe’s CO2 fleet directive remains a powerful tool, but its impact is blunted by growing loopholes. As ICCT’s Jan Dornoff notes, “Since flexibilisation was decided in Q1, no increase in electric car share is observable.” The message is clear: further weakening the framework would reward inertia and penalise proactive innovation. For a sustainable future, the industry needs certainty and ambition—not more escape routes.
