Car manufacturers will be forced to produce smaller, more fuel-efficient models under European Commission proposals to be published next month.

They may have to withdraw some of their most polluting cars, including 4x4s, people carriers and large saloons, to comply with strict, compulsory targets to reduce environmental damage.

Three quarters of leading car brands are failing to reduce emissions at the rate they agreed under voluntary commitments signed in 1998 and 1999. Carbon dioxide emissions from road transport have risen by 22 per cent in Europe since 1990 and last year accounted for more than 20 per cent of the total emissions of the greenhouse gas.

The car industry as a whole will fall well short of its pledge to reduce the CO2 output of the average new car sold in Europe by 25 per cent between 1995 and 2008. By 2004 it had achieved a reduction of only 12.4 per cent.

Japanese carmakers have the worst record, according to a study commissioned by Transport and Environment, a Brussels-based lobby group. Nissan, Suzuki and Mazda occupy the bottom three places in a table of 20 car brands. Nissan has reduced its average emissions by only 3 per cent in the past eight years, largely because it has focused on selling its more profitable 4x4s.

Even Toyota, which presented itself as the greenest manufacturer because of its investment in hybrid petrol/electric models such as the Prius, is on course to miss the 2008 target by a wide margin.

Fiat, Citroën and Renault are the only manufacturers likely to comply. They have concentrated on developing cars with smaller engines and have invested in low-emission diesel technology.

Stavros Dimas, the European Environment Commissioner, said that legislation was needed to force manufacturers to reduce emissions because the voluntary agreement was not working. He is expected to publish proposals next month, with formal legislation likely to be tabled next year, after a period of consultation.

Günter Verheugen, the Commission vice-president and Industry Commissioner, has also voiced support for legislation, which would be subject to qualified majority voting.

Mr Dimas is considering setting a binding target for the average new car of 120g of CO2 per kilometre by 2012. Last year, the average new car emitted 162g.

To comply the industry would have to reverse the trend towards heavier, larger models, which has resulted in the average weight growing by 20kg (44lb) a year for the past decade.

The new Mini and the new Beetle are twice as heavy as the old versions. The VW Golf has become not only half a tonne heavier over 30 years, but also 60cm longer and 13cm taller.

The Society of Motor Manufacturers and Traders accused the Commission of ignoring the pressures its members had been under to comply with safety requirements, which have made vehicles heavier because of the addition of airbags and other devices.

Chris McGowan, the chief executive, said: “Legislation would be immensely damaging. It could mean models being taken off the market. It would certainly damage profitability and investment plans.”

He said that the Commission should not try to dictate what car people drive. “Cars are an extension of your DNA. You have got to fall in love with your car — it may be bigger or it may be smaller. But you can’t be prescriptive, otherwise we would all be driving a Trabant.”

Aat Peterse, spokesman for Transport and Environment, said Renault had proved that manufacturers could comply with both safety and environmental targets. The Renault Megane 1.5 diesel, a medium-sized family car, emitted only 120g/km of CO2 and achieved the top score in crash tests.

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