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The European Union is set to propose all new cars sold from 2035 should have zero emissions, as part of an unprecedented plan to align its economy with more ambitious climate targets.

The European Commission, the blocs regulatory arm, plans to require emissions from new cars and vans to fall by 65% from 2030 and drop to zero from 2035, according to an EU document seen by Bloomberg News. The tougher pollution standards will be complemented by rules that will oblige national governments to bolster vehicle charging infrastructure.

The clean overhaul of transport will be part of a swath of measures to be unveiled next week to enact a stricter 2030 climate goal of cutting greenhouse gases by at least 55% from 1990 levels. Europe aims to become the worlds first net-zero emissions continent by 2050, which will require overhauling every corner of its economy with transport and industry being the biggest challenges.

Theres no way around it, reaching net zero by 2050 means phasing out combustion vehicle sales by 2035 at the latest, said Colin McKerracher, head of advance transport research for BloombergNEF.

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The new vehicle emission targets would be a significant tightening compared with the existing fleet-wide emissions goals, which require a 37.5% reduction from 2030 for cars. Passenger cars account for about 12% of total EU CO2 emissions.

The industry has been bracing for tough new measures. Barclays Plc said it will be difficult for carmakers to achieve a 60% emissions reduction target by 2030 even with plug-in hybrids, but the policy will drive further adoption of battery-electric models.

These targets should not come as a surprise, although they clearly require an accelerated shift, Kai Alexander Mueller, a Barclays auto analyst, wrote in a report Friday.

Automakers have in recent months announced plans for most or all of their sales in Europe to be battery-electric by the end of the decade. Volkswagen AG, the regions largest manufacturer, plans for more than 70% of its namesake brand sales to be EV from 2030 onward. Renault SAs main marque plans to reach 90% penetration by then, while Ford Motor Co. has said its passenger car business will be all-electric.

Tightening the CO2 targets this much is a huge boost for Europes EV market, said BNEFs McKerracher. The steady drumbeat of European automakers upping their EV commitments recently is probably an indication that they knew much tighter targets were coming.

The EU executive will next week propose strengthening and expanding its carbon market, revising energy taxation rules to discourage the use of fossil fuels and imposing the worlds first climate levy on certain emissions-intensive goods brought into the region. The Fit for 55 package will also include more ambitious climate targets for member states in areas not covered by the carbon market.

The package to be unveiled July 14 will also include a proposal to boost the share of power the bloc gets from renewable energy to 40% from the current 32% by the end of this decade, the document showed.

The revised renewable energy law will set targets for the use of sustainable fuels in transport, heating and cooling, buildings and industry.

To help the massive roll-out of electric vehicles, a regulation on alternative fuels will require member states to ensure electric charging points are installed every 60 kilometers (37 miles) on major highways. Hydrogen refueling points would have to be available at the maximum interval of 150 kilometers.

The document may still change before the package is adopted by the Commission. The EU executive arm has a policy of not commenting on draft legislation.

With assistance by Craig Trudell

(Updates with analyst comment in fourth paragraph)

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Read more:
Europe to Propose End of Combustion Engine Era in Green Overhaul - Bloomberg