Agreement has been reached that will mean emissions from all new passenger cars sold in the EU will have to fall to 95g of CO2 per kilometre by 2020.
The agreement between the European Parliament and European Council sets out the mechanisms and rules by which car manufacturers can reach the target.
According to the Department of the Environment, as well as leading to significantly lower CO2 emissions, the development will also lead to more fuel-efficient cars.
It also says that the plan will motivate innovation and new technological developments in the car industry.
The plan includes a system of so-called super-credits, which are described as "incentives to encourage car manufacturers to develop breakthrough technologies and manufacture vehicles with ultra-low emissions".
The agreement also calls for a target beyond 2020 for further reductions, towards which car makers can work.