European Union legislators have reached political agreement on legislation that will effectively ban the production of new passenger cars and vans with internal combustion engines from 2035, reports The Verge.

As the EU is one of the world’s largest economic blocs and home to some of the world’s largest car manufacturers, the EU’s decision will have a huge impact on global transport, further pushing the industry towards an all-electric future. The legislation must now be formally approved by the EU Council and Parliament, although only minor changes are expected.

The main requirements are that by 2030, new passenger cars must reduce CO2 emissions by 55% and new vans by 50% (in both cases, these emissions are compared to 2021 levels). Then, by 2035, both new cars and vans must reduce CO2 emissions by 100%.

These are the main goals, but there are additional caveats. For example, manufacturers producing fewer than 10,000 cars or 22,000 vans per year will not have to meet the interim 2030 reduction target – only the final target of 2035. This is the so-called “Ferrari clause” designed to protect small automakers that produce fewer models per year than larger ones.

The agreement also contains a non-binding proposal to allow the production of vehicles “running exclusively on CO2-neutral fuel” (also known as “electric fuel”) after 2035, as long as these vehicles are “beyond fleet standards”. Which is interpreted by legislators as permission to use CO2-neutral fuel for vehicles such as ambulances and fire engines.

EU lawmakers said the wording of the proposal would be strengthened before the legislation officially comes into force, which should shed more light on exactly what it means.

Dutch centrist politician Jan Huitema, who negotiated on behalf of the European Parliament in writing the deal, praised it and said it would “create clarity for the car industry and stimulate innovation and investment for carmakers”.

“I am delighted that we have reached agreement with the Council on an ambitious revision of the 2030 targets and support for a 100% reduction in emissions by 2035. This is critical to achieving climate neutrality by 2050 and making clean driving more accessible to our citizens,” Huitema said in a press statement.

The legislation is the first major part of the EU’s Fit for 55 project to emerge from the negotiations. This is a package of proposed laws aimed at reducing EU emissions by 55% by 2030, with the ultimate goal of making the EU carbon neutral by 2050. Other parts of the package will address issues such as land use, cleaner fuels for aviation and shipping, and offer new funding for renewable energy technologies.