The European Union has proposed tougher car emissions targets including a credit system for carmakers to encourage the roll-out of electric vehicles and fines for exceeding carbon dioxide limits.

But the plan faces stiff opposition from nations with big automotive industries, with German foreign minister Sigmar Gabriel warning yesterday that stricter emissions rules could cost growth and jobs.

The European Commission's proposal aims to curb greenhouse gases from transport as part of a drive to cut emissions by at least 40% below 1990 levels by 2030.

The EU's executive is keen for legislation to stimulate European industry to develop electric vehicles, afraid that it is falling behind China, Japan and the United States.

"The competition is here," Commission Vice President Maros Sefcovic said, citing the use of Chinese electric cars by Brussels taxis firms. "The car was invented in Europe and I believe it should be reinvented here."

The proposal calls for a 30% reduction in the average CO2 emission of carmakers' fleets by 2030 compared with 2021 levels.

It also sets an interim goal of a 15% reduction by 2025 to help ensure carmakers start investments early.

If they are found in breach of new rules, carmakers face potential fines in the millions of euros, with penalties set at €95 for every gram of CO2 above the limit and for each new vehicle registered in that year.

Inspired by Californian climate policy, the draft bill would allow carmakers to offset their overall target if the share of zero and low-emission vehicles in their fleet surpasses a benchmark set by regulators.

The bar for low-emissions vehicles is set at 50 grams per kilometre - ruling out most hybrid vehicles.

Unlike California's system - viewed by many in the sector as the leading laboratory for policy on electric cars - EU regulators shied away from quotas.

There is also no penalty for failing to meet the zero-emission vehicle benchmark.

Heralding tough negotiations with member states and the European Parliament before the bill becomes law, companies called the proposals too ambitious, while environmental campaigners and consumer groups said they did not go far enough.

The European carmakers lobby ACEA said the 30% target was "overly challenging" and the 2025 interim target did not give the industry enough time to make changes.

"The current proposal is very aggressive when we consider the low and fragmented market penetration of alternatively-powered vehicles across Europe," Erik Jonnaert, ACEA secretary general, said in a statement.

In a nod to manufacturers' concerns, the Commission is set to earmark €800m to support the rollout of charging points for electric vehicles and €200m for battery development.

Outrage over Volkswagen's cheating of US emissions tests has put pressure on EU regulators to tighten controls, with several European governments and cities announcing bans of combustion-engine cars in the next two decades.

"We want the European automotive industry get back in the race for global leadership on clean vehicles," EU climate Commissioner Miguel Arias Canete said.

The International Council on Clean Transportation (ICCT) said its analysis showed a more ambitious CO2 target would foster the uptake of electrified vehicles.

"From a technical standpoint, more progress is definitely possible," said Peter Mock, the ICCT's EU managing director.

The Commission also set targets for public authorities to source a percentage of either low emission or zero emission vehicles in their public procurement by 2030, for example garbage trucks.