CAR showrooms are to display colour-coded labels on all vehicles to highlight to potential buyers the amount of environmental damage that each model will do.

Large family cars and 4x4s will display red stickers while small, fuel-efficient vehicles will sport labels in various shades of green.

The Government believes that the labels — similar to the A to G stickers that mark the emissions ratings of fridges and washing machines — will encourage people to buy less damaging cars.

Britain has one of the most petrol-hungry car fleets in Europe and the industry is struggling to meet European targets for improving fuel efficiency. These aim to reduce average new vehicle emissions to 140g/km by 2008.

The labels will be linked to the existing system under which vehicle excise duty varies according to a car’s carbon dioxide emissions per kilometre.

A petrol-driven car with an AAA excise duty rating, indicating that it emits less then 100g of carbon dioxide per kilometre travelled and pays only £65 in duty, will carry a dark green label. The average new petrol car currently emits 172g/km, pays £145 in duty and will display an orange label.

The labels will also show the estimated cost of a year’s supply of fuel, based on an average of 12,000 miles.

Car manufacturers and retailers spent the past year blocking progress on the labelling scheme but have finally agreed to introduce it by next October. They fear that the labels will be the beginning of tougher restrictions on vehicle emissions which could threaten the future of some of their most profitable models.

The household appliance labels, introduced in 1997, were followed two years later by rules banning the production of the most polluting models.

The Energy Saving Trust, which was set up by the Government to tackle climate change, said that current rules that require car manufacturers to list emissions ratings were too confusing for most buyers.

Richard Tarboton, the Trust’s head of transport, said: “The existing system is not user-friendly because it just gives the number of grams of carbon dioxide each car emits without giving a scale to allow buyers to compare it to other models. With the new labels, it will be clear whether it is a high or low polluting car.”

Mr Tarboton said that the trust would be publicising the new labels widely. “We want to create a league of the cleanest cars and make energy efficiency something aspirational for motorists,” he said.

The Society of Motor Manufacturers and Traders doubted that the labels would make much difference to people’s choice of car. A spokesman said: “All the evidence that we have is that environmental factors are very low on people’s list of priorities when it comes to buying a car. People don’t buy cars in the same way they buy fridges.”

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