A shock German push to break an agreed EU-wide phase-out of conventional cars by 2035 could displace up to 46m electric car sales and trigger the burning of 135bn more litres of fossil petrol than needed, according to a study.

EU leaders and MEPs had agreed a phase-out of internal combustion engines (ICEs) by 2035 but earlier this month, Germany’s transport ministry, led by the liberal FDP party, lodged an objection just days before a rubber-stamping vote.

Berlin now wants an added loophole, championed by the oil and auto industries, to allow the continued production after 2035 of ICE cars that can run on synthetic petrol and diesel – also known as e-fuels – created from hydrogen and CO₂.

E-fuels are made by separating hydrogen from water and adding CO₂. Although the fuels themselves may be made using renewable power, the process is energy-intensive and studies indicate that cars running on e-fuels emit almost as much greenhouse gas as conventional vehicles, unless direct air capture (DAC) technology is used to offset this.

Alex Keynes, the clean vehicles manager of T&E, the campaigning NGO which produced the study, said: “Chancellor Scholz is threatening to pull the rug from under the European Green Deal for the sake of saving polluting combustion engines.”

According to the analysis, the e-fuel cars would also displace between 26m and 46m electric vehicles that would otherwise be built by 2050. Consequently, the e-fuels proposal would “derail the decarbonisation of the new fleet while allowing more conventional oil to be used in the existing fleet post-2035: a win-win for Big Oil”.

Moreover, the complex production process for e-fuels will make them expensive: in 2030, an average driver in the EU would pay €782 a year more for e-petrol than for conventional fuel, Keynes said.

The issue is expected to sour the mood at an EU leaders summit on Thursday, with France in a combative mood after “net zero” status was denied to its nuclear industry and some hydrogen created by it, in the EU’s net zero industry act last week.

The commission has pitched a compromise proposal, seen by the Guardian, that would create a new legislative category for cars using e-fuels – so long as they are fitted with special sensors called “fuelling inducement systems”. “Such systems shall not allow these vehicles to start if fuelled with non-carbon-neutral fuels,” the draft says. However, Germany’s transport minister, Volker Wissing, opposes the idea, according to national press reports.

Terry Reintke, the German co-president of the Greens in the European parliament, told the Guardian: “This theatre is getting more and more absurd. The German liberals seem to have not only forgotten their commitment to fight climate change but also their responsibility to act as a reliable partner in Brussels.

“Every day it becomes more difficult to explain why the German chancellor does not show more leadership with regards to this irrational behaviour. Every day that goes by without finding an agreement damages Germany’s reputation in the EU.”

The 11th-hour barricade to a diesel engines phase-out, backed by Italy, Poland, Bulgaria and the Czech Republic, is the fruit of a campaign by oil companies and the auto industry.

The first push for “sustainable renewable fuels” was launched in 2016 by FuelsEurope, a trade association representing multinational oil and gas companies that has spent millions of euros on lobbying in Brussels.

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Alain Mathuren, FuelsEurope’s communications director, said pilot schemes using DAC showed promise and the technology could soon be commercialised to make e-fuel powered vehicles climate-neutral. “By 2035 we should have synthetic fuels produced at industrial scale using captured carbon from DAC – provided we have the political framework,” he said.

Another lobby group in Berlin and Brussels, the eFuel Alliance, launched by the oil and auto industries after the EU announced its Green Deal in 2020, has also set itself against a ban on conventional cars by 2035.

Jan Wehrhold, the head of press and public relations, said the commission’s proposed compromise was a step forward but “not really practicable”.

“We are not talking about saving the internal combustion engine, but about a complete replacement of fossil fuels,” he said. “If the still very high global stock of combustion vehicles is not driven by adequate solutions after 2040, then net zero in 2050 can never be achieved.”

Seven of the eFuel Alliance’s 15 board members are working, or have previously worked, in the oil industry, including Jens-Christian Senger, ExxonMobil’s managing director in Germany.