Drivers face steep price rises for luxury cars under measures to force manufacturers to meet strict CO2 targets. Those who go green by buying a car with low emissions will be rewarded with savings on fuel over the lifetime of the vehicle, according to plans unveiled yesterday.

With several commissioners dissenting, the European Commission set a four-year phase-in period from 2012 for fines on manufacturers whose fleets exceed an average of 120 g/km of the main greenhouse gas blamed for global warming.

A proposed system of fines linked to exhaust pollution will hit the manufacturers of larger cars hardest and brought protests from Angela Merkel, the German Chancellor, on behalf of her country’s market leaders such as BMW and Mercedes-Benz.

The mandatory measures are designed to reduce CO2 fumes from cars by one fifth in line with the EU’s desire to be a world leader in cutting greenhouse gases and find a successor to the Kyoto Protocol from 2012.

It looked last night as though Mrs Merkel, a former Environment Minister who has burnished her green credentials in the past, would be leading attempts to water down the proposals as they grind through Brussels over the coming year.

Stavros Dimas, the EU Environment Commissioner, said: “If the EU is to meet its ambitious targets for reducing emissions of greenhouse gases, the burden must be shared by all sectors. This will send a strong signal to the world about the determination of the EU to take bold measures on climate change and is an important step as a follow-up to the Bali conference.”

The proposed legally binding targets, enforced by fines, apply to all cars sold in the EU, including those made in Japan and the US, in a move intended to ensure that European producers are not at a disadvantage.

The aim is for today’s average CO2 car emissions of about 160g/km to be cut to 120g/km by 2012 for new cars. Vehicles already on the road will not be affected and vans have more leeway. Carmakers will have to cut emissions to 130g/km on average with the extra reduction coming from fuel and component makers, with the use of biofuels and improvements to tyres and air-conditioning units. EU officials admitted that all this would raise the average cost of a new car by at least €1,300 (£935) because of the technological developments needed. The worst polluters, such as Porsche, will be forced to buy into a share of a low-polluting company’s CO2 allowance — a penalty that could be passed on to the consumer.

Mr Dimas said that despite higher up-front costs, consumers would benefit from an estimated €2,700 saving in fuel over the 13-year lifetime of an average car — and more for lower polluters. He added that fines would be used because voluntary targets agreed by carmakers had failed to bring a significant drop in CO2.

There was a bust-up among members of the European Commission before the announcement yesterday, with seven of the 27 members said to be opposed.

Mr Dimas presented the details alone after the Industry Commissioner, the German Günter Verheugen, pulled out of a joint press conference. Mr Verheugen is understood to have joined the complaints at yesterday’s private meeting in defence of German carmakers. Mrs Merkel was more blunt in her condemnation, pointing out that the fines put the cost of pollution higher than in the industrial emissions trading scheme. “This is industrial policy at Germany’s expense,” she said. “It is senseless to impose a penalty that bears no relation to the actual cost of carbon dioxide emissions.”

The proposed fines would start low but rise steeply after a few years. They would begin at €20 per gramme of CO2 above the EU average in 2012 for each car sold by the manufacturer and climb to €95 in 2015. With BMW selling 740,000 cars last year emitting an average of 182g/km of CO2, the financial penalty is potentially huge.

The British Government broadly welcomed the proposals, which it said were of the order needed to meet ambitious climate-change targets. Green pressure groups complained that they did not go far enough.

There was a let-off for the London taxi, which is made in Britain and could have faced a tough challenge to cut emissions. But under the proposals, it would count as a vehicle adapted for wheelchair use and will be exempt. Brussels will today set out how airlines will be included in the EU emissions trading scheme.

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