Germany and the European Union reached an agreement on a landmark regulation that requires new cars to be carbon neutral by 2035.

"This paves the way for vehicles with combustion engines that only use CO2-neutral fuels to be newly registered after 2035," German Transport Minister Volker Wissing tweeted Saturday.

"We will work now on getting the CO-2 standards for cars regulations adopted as soon as possible,” EU climate chief Frans Timmermans said on Twitter, adding that the EU's executive arm will follow up swiftly with the necessary legal steps to implement a provision that allows classifying cars run on e-fuels as carbon neutral.

Berlin has been in talks with the European Commission for the past weeks over a dispute over the future of combustion engine cars running on e-fuels.

In February, the European Parliament voted to approve a new law banning the sale of petrol and diesel cars from 2035 with an aim to achieve carbon neutrality by 2050.

(With input from agencies)