Europe’s embattled automakers and their investors just got a reprieve. Volkswagen stock rose as much as 5% after the European Union said it would relax the bloc’s carbon-dioxide emissions rules—removing the immediate threat of fines.

Brussels will ease new emissions rules for combustion engine cars, allowing the embattled auto industry to avoid fines following a slower-than-expected transition to electric vehicles. The European Commission will uphold its 2035 ban on petrol cars but allow flexibility over the next three years in how carmakers meet stricter CO₂ emission targets entering into force this year,