BRUSSELS -- The European Commission has agreed to propose a legal route to exempt cars that run on e-fuels from the EU's 2035 phaseout of new combustion engine vehicles to resolve a row with Germany over Europe's main car climate policy.
Germany's transport ministry has for weeks blocked the European Union's plans to ban sales of new CO2-emitting cars in 2035, demanding an exemption for combustion engine cars that run on e-fuels.
A Commission document seen by Reuters on Monday showed how the EU plans to grant that exemption, under a deal reached on Friday by Berlin and Brussels.
When EU countries approve the 2035 phaseout law, the Commission will create a new EU vehicle category for cars that can only run on carbon-neutral fuels.
The Commission will then present another regulation specifying how these cars can contribute to the 2035 target, the document said.
This will take the form of a delegated act -- a type of law that is difficult for EU countries and lawmakers to reject. As an extra reassurance to Germany, the Commission said if this law were to be rejected, it would "follow another legislative path" to allow e-fuel car sales.
The deal paves the way for EU countries' ministers to finally approve the 2035 phaseout law for new combustion engine cars on Tuesday, allowing it to enter into force.
Italy, which wants cars that run on biofuels to also be exempted from the 2035 phaseout, on Monday tried unsuccessfully to delay the vote.
E-fuels are made using captured CO2 emissions and low-carbon hydrogen. Such fuels are not yet produced at scale, but are seen by some carmakers as a route to prolonging the use of combustion engines.
Good for Ferrari, Porsche
The deal is expected to change little when it comes to carmakers' long-term plans, aside from the most high-end vehicles.
Volkswagen Group said the deal will help with special applications such as emergency vehicles and low-volume models such as the Porsche 911 sports car.
"We see e-fuels as a useful addition to the existing fleet of combustion engines and for special applications such as emergency vehicles or limited series, the Porsche 911 for example," VW said in a statement. VW said it remained committed to the electrification of its fleet.
Germany's VDA car lobby said it supported a deal that allows several technologies to reduce CO2 emissions with significant challenges that need to be overcome to scale up production.
"Now we have to enable e-fuel output at scale and at competitive prices, which can only happen with large range of strategic decisions," the lobby group said in a statement. "Brussels and Berlin need a maximum of stable energy partnerships in the many countries that have excellent conditions to produce e-fuels."
Ferrari CEO Benedetto Vigna welcomed plans to exempt cars that run on e-fuels from the engine phaseout. The decision would give the automaker "greater freedom on the production scheme," Vigna told a Reuters newsmaker event.
Ferrari, which is renowned for its roaring gasoline engines, is already producing plug-in hybrid cars and has promised its first full-electric vehicle for 2025.
The exemption was criticized by climate campaigners. "E-fuels are an expensive and massively inefficient diversion from the transformation to electric facing Europe's carmakers," said Julia Poliscanova, a senior director at campaign group Transport & Environment.
Berlin's last minute opposition came even though EU countries and the European Parliament had agreed a deal on the combustion engine phaseout law last year. That upset some EU diplomats who say it could embolden governments to block other carefully negotiated deals on climate policies.
Bloomberg contributed to this report