The number of VED-free, sub-100g/km cars rocketed in 2012, more than doubling their share of the market to 8.2% in the year, according to figures from the Society of Motor Manufacturers and Traders (SMMT).
This trend towards low emissions and maximum fuel efficiency was reflected by the number of cars registered with less than 130g/km of CO2 emissions.
This emission level is the target average limit set by Europe for manufacturers to achieve by 2015 and last year more than half the market - 55.4% - met the level or improved on it.
Analysis of the emissions of all new cars registered in the UK showed a continued trend in falling CO2 and improving fuel efficiency. Emissions in 2012 improved 3.6% year-on-year to 133.1g/km CO2 (equivalent to 53.4mpg), down more than 26% since the year 2000.
Vehicle manufacturers have concentrated efforts on providing low carbon choices for motorists buying across all types and sizes of vehicles, says the SMMT.
Looking at the rate of progress made over the past five years, average emissions across all segments (car sizes), dropped almost 20% with larger vehicles making the biggest improvements. Executive cars cut CO2 25% while Specialist Sports and Dual Purpose vehicles improved 24.7% and 23.1%, respectively.
Matthew Croucher, author of the SMMT's report, said: "Industry can be proud of the progress it has made in reducing CO2 emissions and improving fuel efficiency by more than 25% since 2000.
“The UK motor industry recognises its responsibilities and the industrial opportunities from the transition to ultra-low carbon vehicles.
"Future environmental and economic success will be determined by sustained investment in new technology, R&D, infrastructure and consumer incentives.
“We are seeing improvement in conventional technologies and the emergence of a range of alternative technologies, creating one of the most innovative periods for the global automotive industry."
Achieving record market shares, diesel and alternatively-fuelled vehicles (AFVs) continued their rise in popularity, taking 50.8% and 1.4% of the 2012 market respectively.
Petrol-electric hybrids accounted for 85% of all AFV volumes in 2012 with an average CO2 output of 98.7g/km, some 26% below the UK average. Though market development is in its earliest stages, electric and plug-In vehicle registrations rose 111.8% in 2012 to 2,237 units, aided by the introduction of new models and the Plug-In Car Grant.
UK automotive is a global leader for low carbon R&D, productivity and quality, exporting its products around the world, says the SMMT.
To retain this position and meet the stringent EU legislative target of 95g/km CO2 by 2020, successive governments must commit to a strong long-term industrial policy that provides the certainty required by international firms to sustain investments in low carbon R&D in the UK.
It concluded, that Government needs to provide consistency on taxation and maintain and expand incentives like the Plug-In Car Grant, which encourage consumers to move towards low carbon and more fuel-efficient technologies.
To download the SMMT New Car CO2 Report 2013, click here.