"We have just finished the negotiations on CO2 standards for cars," tweeted French MEP Pascal Canfin, who heads the European parliament's environment commission.

"Historic (EU) decision for the climate which definitively confirms the target of 100 percent zero emission vehicles in 2035 with intermediary phases between 2025 and 2030."

The agreed text, based on a proposal by the EU executive in July 2021, calls for reducing CO2 emissions from new cars in Europe to zero by 2035.

This means a de facto halt to sales of new petrol and diesel cars, light commercial vehicles and hybrids in the bloc by that date, in favor of all-electric vehicles.

European Commission chief Ursula von der Leyen praised the agreement as "a crucial milestone to reach our 2030 climate target".

There is a waiver for "niche" manufacturers, or those producing fewer than 10,000 vehicles per year.

Sometimes called the "Ferrari amendment" as it will benefit luxury brands in particular, these vehicles are allowed to be equipped with a combustion engine until the end of 2035.

BMW CEO Oliver Zipse, who is also the president of the European Automobile Manufacturers' Association (ACEA), said the decision was "extremely far-reaching".

"Make no mistake, the European automobile industry is up to the challenge of providing these zero-emission cars and vans," he said.

But more needed to be done for the industry to meet this target, added Zipse, such as having "an abundance of renewable energy, a seamless private and public charging infrastructure network, and access to raw materials."

The European Parliament had in June voted in favor of the 2035 ban on all vehicles with internal combustion engines.

Conservative MEPs and Germany had shown reluctance over some of the targets, fearing the costly burden they will place on EU automakers competing against global rivals with looser targets.

Currently around 12 percent of new cars sold in the European Union are electric vehicles, with its consumers shifting away from CO2-emitting models as energy costs and greener traffic regulations bite.

Meanwhile, China -- the world's biggest automobile market -- wants at least half of all new cars to be electric, plug-in hybrid or hydrogen-powered by 2035.