The EU executive appears to have bowed to calls from car makers to keep selling plug-in hybrids and range extenders that burn fuel as they struggle to compete against Tesla and Chinese electric vehicle makers.
Current EU rules require all new cars and vans from 2035 to have zero emissions.
Under Tuesday's proposal, the target would shift to a 90 per cent cut in carbon dioxide emissions from 2021 levels, instead of 100 per cent.
Car makers would need to offset the remaining emissions by using lower-CO2 steel made in the EU and synthetic e-fuels or non-food biofuels such as agricultural waste and used cooking oil.
The plan also gives car makers a three-year window from 2030 to 2032 to cut car CO2 emissions by 55 per cent from 2021 levels while the 2030 target for vans would be eased to 40 per cent from 50 per cent.
The moves, which require approval from EU governments and the European Parliament, mark the bloc's biggest retreat from its green policies enacted over the previous five years.
It follows Ford Motor announcing on Monday a $US19.5 billion ($A29.4 billion) writedown as it axes several EV models, in response to US policies and weakening EV demand.
European car makers including Volkswagen and Fiat owner Stellantis have also flagged soft EV demand and urged looser targets and lower fines for missing them.
Automotive lobby ACEA called the moment "high noon" for the sector.
German manufacturers are under particular strain as they lose ground in China to local rivals and face growing competition at home from Chinese EV imports.
