The European Union is set to propose softening emissions rules for new cars, scrapping an effective ban on combustion engines following months of pressure from the automotive industry.

The European Commission will lower the requirements that would have halted sales of new petrol and diesel-fuelled cars starting in 2035, instead allowing a number of plug-in hybrids and electric vehicles with fuel-powered range extenders, according to people with knowledge of the matter.

Under the new proposal, tailpipe emissions will have to be reduced by 90 per cent by the middle of the next decade compared with the current goal of a 100 per cent reduction, said the people, who asked not to be identified because talks on the proposal are private. The commission will set a condition that carmakers need to compensate for the additional pollution by using low-carbon or renewable fuels or locally produced green steel.

The stepback — to be unveiled Tuesday — is the result of intense lobbying from companies such as Stellantis NV and Mercedes-Benz Group AG. Major car-producing countries including Germany — home of Mercedes, Volkswagen and BMW — also pushed for changes to defuse political tensions and the threat of job losses. The China-US trade war is pushing more automotive competitors into Europe looking for new markets because of overcapacity and pricing pressure at home.

The proposal is set to be adopted by EU commissioners on Tuesday and will then be discussed by the European Parliament and by member states in the EU Council. Each institution has the right to propose their own amendments and the final shape of the measure will be negotiated in the so-called trilogue talks, which will involve the parliament, the council and the commission.

The European Commission declined to comment on the proposals. - Bloomberg