The report, compiled by the Society of Motor Manufacturers and Traders (SMMT), indicates that CO2 emissions from new cars have plummeted over the last decade, falling 1.9% on last year's figures alone.
CO2 emissions have fallen 8.2% since 1997 and the SMMT expects this trend to continue as manufacturers continue to develop cleaner petrol and diesel engines and fleets continue to choose greener alternatives.
An SMMT spokesman said: 'Fleets play a crucial part in these figures. Half of all new cars registered are from fleets and it is vital when managers are choosing their fleet they make the right choice as, like choosing a computer, vehicles are business tools.'
Almost 40% of cars on UK parc currently meet stricter Euro IV emissions standards according to the report, which is good news for the Government, as fleets still have two years before Euro IV officially comes into effect.
Christopher Macgowan, chief executive of the Society of Motor Manufacturer and Traders, said: 'This report clearly shows the motor industry's commitment to improving the environmental performance of its products, and the tremendous progress that has been made in reducing CO2 emissions.'
The report also indicated positive news for vehicle manufacturers with production climbing for the first time since the report began. Manufacturing turnover for the industry rose 1.9% year-on-year. Car and commercial vehicle registrations also generated positive figures and are continuing to climb.
Macgowan said: 'It is encouraging to see these environmental gains alongside growth in production and registrations. The success of recent plant restructuring programmes and resulting growth in global share and exports show the competitiveness of the UK as a global base for automotive manufacturing.'