The Society of Motor Manufacturers and Traders (SMMT) has warned that an imposed cap on emissions from cars could have a negative effect on both carmakers and motorists.
Yesterday, the European Commission proposed that a target be set for all cars to emit only 130 grams of CO2 per kilometre by 2012 â€“ compared to the current rate of around 160g/km.
The SMMT said the industry accepts that it has a crucial role to play in the environment issue and argued that some cars have already been brought to the market that could meet the 130g/km limit.
However, Christopher Macgowan, chief executive of the SMMT, said that the problem lies with a lack of demand for these cars from motorists.
"We recognise the importance that cars play in climate change but everybody has a role to play in reducing CO2 emissions. It is important to put this in context and if the commission is intent on placing the onus onto car manufacturers, then we see serious difficulties ahead," Mr Macgowan said.
"There is a huge threat to employment and the economy. Not only will the choice of cars be reduced by these measures if we are to meet the limits, but independent estimates place a projected increase in the region of £2,500 to the sale price of each new car."
The SMMT chief called on governments, suppliers, motorists and oil companies to work together to tackle the problem.