Automakers are set to get three years, rather than one, to comply with the EU's 2025 CO2 emissions targets for cars and vans under a proposal to soften the rules, published by the European Commission on Tuesday.
European car manufacturers had asked Brussels for relief from the targets, which depend on selling more electric vehicles, a segment where they lag Chinese and U.S. rivals.
Under the proposed changes published on Tuesday, the EU would base compliance with the CO2 rules for 2025 on a carmaker's average emissions over the period 2025-2027, rather than just this year.
"With today's initiative, we grant more flexibility to this key sector, and at the same time we stay the course of our climate goal," Commission President Ursula von der Leyen said in a statement.
Von der Leyen pledged earlier this month to give automakers "breathing space" on the rules after European car manufacturers said the original targets could result in the industry facing up to 15 billion euros ($16.2 billion) in fines for missing the goals.
The tighter EU carbon dioxide emissions limits for carmakers kicked in this year, which require at least one-fifth of all sales by most car companies to be electric vehicles.
Tuesday's proposal to adjust the law requires approval from the European Parliament and EU countries, who can propose further changes. The Czech Republic, a hub for car manufacturing, has previously said it would push for a five-year compliance period.
European car manufacturers have already been hit by falling demand, factory closures and are now bracing for U.S. tariffs.
Volkswagen (VOWG.DE) and Renault (RENA.PA) are among those that have expressed support for extending the compliance period but not all industry players have backed such a change.
Volvo Cars, which is majority owned by Chinese EV maker Geely (GEELY.UL), had warned against disadvantaging companies that have already invested in making sure they could comply with the 2025 targets.
Electric transport industry group E-Mobility Europe has warned changing the 2025 CO2 limits will put Europe further behind China in EVs and deter investments in charging infrastructure.
The EU also has a longer-term climate target for all new cars sold from 2035 onwards to have zero emissions - effectively ending new sales of combustion engine vehicles.
Some EU lawmakers and member governments plan to push to overturn that target in a review of the policy later this year, arguing it will hurt already-struggling carmakers.
The European Commission has so far refused to amend the 2035 target, which it says is crucial for meeting green goals and providing a predictable long-term investment climate.
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