European environment ministers have acceded to German pressure to scrap an agreement to cap CO2 emissions from new cars at 95g/km from 2020.
The European Parliament, the Commission and EU governments had reached agreement in June and the deal was expected to 'rubber-stamped' by the European Council. However, the German government, has been accused of caving into pressure from its car makers, and has argued that the regulations would cost jobs and damage its premium manufacturers.
Germany was supported in seeking a renegotiation by several countries - including the UK - which had earlier indicated acceptance of the deal. As well as the UK, Portugal, Slovakia, the Czech Republic, Hungary, Poland and Estonia backed Germany.
Ministers from the 28 EU member states ultimately agreed to reopen negotiations, but said they would work to secure it in weeks, not months, and that the margin for change from the deal originally agreed is limited.
Connie Hedegaard, the EU climate commissioner, told reporters she was disappointed that agreement on implementing a target first laid out five years ago had been blocked. "It is not a terrific thing that we could not conclude on cars," she said.
She also said flexibility was limited and a German proposal to delay full implementation of the 95 gramme target for four years to 2024 was not acceptable.
The German minister, Peter Altmaier, said (reported by the BBC): "It's not a fight over principles but how we bind the necessary clarity in climate protection with the required flexibility and competitiveness to protect the car industry in Europe".
Environmental campaigners claim Germany is abusing the EU's democratic process, throwing away the chance to make European cars more energy efficient and to reduce the bloc's dependency on oil imports, despite BMW, Mercedes-Benz and Audi achieving dramatic reductions in average CO2 emissions of their ranges in recent years.
British-based consultancy Cambridge Econometrics researched how much Europe would save on oil imports if the 95 g/km target was implemented across the EU fleet. It found the EU as a whole would save around 70 billion euros ($94.94 billion) per year, while Germany would save 9 billion euros in fuel bills.
Greg Archer of Brussels-based environment group Transport & Environment said: "It's an unacceptable price, which will be paid by every European driver in higher fuel bills, by the planet that will warm quicker and potentially by Europe's auto sector that will be less competitive."