The EU law states that new petrol car ranges must average 52mpg. Diesel ranges must average 58mpg.
Regulations come into force in 2012. By then, 65 per cent of new cars must hit the 130g/km target.
This increases to 75 per cent by 2013, and 80 per cent by 2014. Severe fines will be imposed on makers who fail to meet the target – for every additional gram of CO2 produced.
Exemptions are in place for makers producing less than 10,000 cars per year. These small volume builders will have a different set of targets.
Manufacturers building between 10,000-300,000 vehicles (such as Jaguar and Land Rover) need to deliver a 25 per cent reduction on CO2 levels from 2007.
Car makers can include an extra 10g/km from other measures such as alternative fuels, stop-start systems and tyre monitoring devices. This takes the overall cut to 120g/km – a near-25 per cent reduction on average new car CO2 levels.
So far this year, over 10 per cent of new cars sold produce 120g/km or less.
Speaking after the new rules were announced, SMMT chief executive Paul Everitt said: ‘This is an ambitious piece of legislation presenting a tough challenge to the automotive industry. We share the environmental objectives, and welcome the long-term framework the legislation sets out.
‘The sector has already made significant progress in improving the environmental impact of its products, and this legislation places an even greater premium on innovation, skills and training in order to meet these commitments.
‘At a time of economic uncertainty, it underlines the importance of long-term investment in the sector.’