IT may be time to kiss the limousine goodbye. European Union regulations to control carbon dioxide are threatening the future of some of the world’s most desirable cars.

Officials in Brussels are drawing up legislation to limit the average carbon-dioxide emissions of new vehicles sold in Europe after 2012 to 130g/km.

Some of today’s small cars with diesel engines fall under the 130g/km limit, but today’s average is just below 160g/km. Manufacturers such as BMW and Mercedes, which concentrate on bigger and more expensive models with powerful engines, have few cars below 180g/km. It is estimated that the engine modifications and other measures that will be required will increase the price of the average car by €1,300 (£970).

The new law is now the subject of intense lobbying from the motor industry and the German government, acting in the interests of its premium-car makers.

But the EC is in no mood to compromise. Stavros Dimas, the environment commissioner, said: “This measure is vital to the EU’s credibility – and more efficient engines will save consumers billions on fuel.”

The commission first said it planned to limit carbon-dioxide emissions last spring. Its original proposal was for an average of 120g/km to be attained by 2012. This was later revised to 130g/km for cars alone, with the further 10g/km to be achieved by other means, including low-energy air-conditioning systems, low rolling-resistance tyres and better traffic management.

At the Frankfurt Motor Show last September, ACEA, the association of European car manufacturers, determined to show a united front and put forward their agreed view on this proposed legislation.

Reconciling the makers of small cars (Fiat, Peugeot, Renault) with the luxury-car makers (BMW, Mercedes, Land Rover) was never going to be easy. So the manufacturers handled the problem presented by the carbon-dioxide proposal by walking around it. They made a counter-proposal that shifted much of the responsibility away from the cars and towards how they are used.

ACEA said its members supported the EC’s ultimate aim for a 120g/km carbon-dioxide average, but at a later date (2015 at the earliest), to allow for the motor industry’s development lead times and only if it was part of an integrated approach including improved road infrastruc-ture, education in economical driving, the use of bio-fuels, and the wider adoption of taxes on carbon-dioxide emissions. These measures, the carmakers maintained, were more cost-effective than introducing increasingly complex vehicle technology.

Where the levels are set is important because the penalties proposed for noncompliance are severe, up to €95 per g/km over the limit. The ACEA points out that they represent a carbon price 14 times higher than that applied to other industries through the European emissions-trading scheme.

Germany’s premium-car manufacturers have been sanguine until now. BMW and Mercedes claim to have met the 25% car-bon-dioxide reduction that was a voluntary agreement for 2008 and are equipping their cars with fuel-saving systems, from engines that stop and restart automatically when the car is standing at traffic lights to super-economical diesels and hybrids.

But it is clear that their overall average for large and small cars will have to be close to the 130g/km limit. Daimler chief executive Dieter Zetsche, who also heads the Mercedes and Smart car businesses, accepts it will have to be below 140g/km. He said: “That’s going to be very expensive and since it will be a legal requirement we can’t pass the cost on to the customer.” The cost to the industry as a whole has been estimated at €1.4 billion.

The average carbon-dioxide emissions for Mercedes in 2005 have been calculated by the German Federation for Transport and Environmentas 185g/km. The figure for BMW was 192g/km. With the introduction of new technology, BMW says 40% of its fleet will soon have carbon-dioxide emissions of 140g/km or less, but analysts put the extra cost at €500 per car.

For the premium-car manufacturers, making a higher proportion of smaller cars with smaller engines is inevitable.

But does the legislation mean the beginning of the end for ever more powerful saloons and sports cars? It might, as the European Commission is minded to put an upper limit on carbon-dioxide output, perhaps at 200g/km or 250g/km. The figure for the Mercedes SLR McLaren supercar is 348g/km. BMW’s M5 sports saloon records 357g/km.

This raises an important question: should consumers be prevented from buying the cars they want for the good of the environ-ment? Owners of gas guzzlers already pay more through fuel duty and graded vehicle excise duty and are punished by local councils in parking schemes. They will have to pay a £25-a-day London congestion charge and may soon be subject to a swingeing (£2,000) purchase tax.

Not surprisingly, Mercedes defends big cars – on which it makes large profits – and the right of its customers to buy them. After all, as Professor Herbert Kohler, Daimler research chief, points out: “If all six and eight-cylinder cars were taken out of the market it would reduce carbon dioxide by only between 1% and 2%.”

Inevitably, the carbon-dioxide law puts the interests of industry and environment into conflict. But José Manuel Silva-Rodriguez, director of general research for the European Commission, said: “Regulation and competitiveness are not contradictory. Future vehicles will need to be green to succeed in the market. Low fuel consumption and carbon dioxide are becoming key factors in consumers’ buying decisions.”

Manufacturers are not so sure. Many of them are introducing low carbon-dioxide models but they do not know if they will prove popular. Consumers feign interest in environmental issues but have been less than keen to purchase “green” cars, especially if they cost more. A recent survey by the UK Society of Motor Manufacturers and Traders found that price was top priority for car buyers, followed by specification. Low emissions was rated sixth as a reason to buy.

GEARING UP FOR GREENER CARS

FOR cars with internal combustion engines – all but electric vehicles – carbon-dioxide output is directly related to fuel consumption.

Official miles-per-gallon and carbon-dioxide figures are measured in the same EU test, conducted by a robot driver on a rolling road dynamometer. The European Commission’s proposal of a 130g/km average equates to 51.3mpg for a petrol-engined car and 57.6mpg for a diesel.

The spectre of carbon-dioxide regulations – and changing tax bands on the same basis – is the reason for a new crop of special fuel-economy models from big European carmakers: Ford ECOnetic; Peugeot Blue Lion; Renault ECO2; Seat Ecomotive; Vauxhall EcoFlex, Volkswagen, BlueMotion and Volvo Efficiency.

Vehicle-excise duty is banded from A (under 100g/km carbon dioxide) to G (over 226), zero to £300 a year. The economy specials – all diesels – use tricks such as higher gearing, narrower tyres and aerodynamic tweaks to squeeze into a lower tax band than regular models. Petrol-electric hybrids like the Toyota Prius (104g/km) and Honda Civic IMA (109g/km) have special tax arrangements; annual road tax for a Prius is £15.

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