Sept. 25 (Bloomberg) -- The European Parliament's environment committee voted to cap carbon dioxide from all new cars in 2012, rejecting German demands to ease costs for automakers such as Daimler AG and Porsche SE by excluding part of their fleet.

The committee in the European Union assembly decided to impose the emission curbs in one step rather than bow to German demands for a phase-in over three years until 2015. The verdict endorses a proposal by the European Commission, the EU's regulatory arm, and follows a months-long German campaign to scale back the limits aimed at fighting climate change.

``This is a big blow for corporate lobbying,'' Chris Davies, a U.K. member of the environment committee, said in Brussels after colleagues stood up and cheered the result. The panel also upheld penalties that Germany sought to cut in half and added a stricter emissions target for 2020.

The vote sets up a showdown with Germany, which objects to draft EU rules that pit its premium brands against smaller, cleaner cars from France's PSA Peugeot Citroen and Italy's Fiat SpA. The measures, which still need the support of the full 785- seat EU Parliament and national governments, also affect non- European manufacturers including General Motors Corp., Toyota Motor Corp. and Hyundai Motor Co.

Car Prices

About 15 million autos are sold each year in the EU, with cars accounting for more than 10 percent of releases of CO2, the main greenhouse gas blamed for rising global temperatures. Average car prices may rise by 1,300 euros ($1,916) because of spending on the new technology required, according to the commission, which proposed the law last December to replace 2008-2009 voluntary goals that the industry is on track to miss.

``Overall, this is negative for EU carmakers, which may need to bring forward technology spending plans to meet 2012 targets,'' said Credit Suisse analysts in London led by Arndt Ellinghorst.

The legislation would cut average car CO2 emissions by a fifth to 130 grams a kilometer in 2012 through varying targets for individual manufacturers, with the heaviest autos having to make the biggest reductions. Based on 2006 emissions data, the draft plans would force German automakers to slash CO2 as much as 49 percent compared with a maximum 15 percent reduction for French and Italian producers.

`Misguided Regulation'

German automobile industry association VDA said the environment committee's vote risks further undermining a European economy already suffering from the global financial crisis.

``Such misguided regulation threatens not just a few jobs without really serving climate protection,'' the Frankfurt-based group said.

While the cuts for Fiat and Peugeot as well as France's Renault SA are smaller than those proposed for German carmakers, these three manufacturers' individual limits would each be below 130 grams of CO2 a kilometer to pull the industry average down to that level.

The Parliament's environment committee upheld this burden- sharing arrangement, refusing to force French and Italian manufacturers to do more so German competitors could do less.

At the same time, the committee rejected compromise amendments that offered relief to Germany by imposing the emission curbs on 70 percent of the new car fleet in 2012 and 2013, 80 percent in 2014 and 100 percent beginning in 2015. The amendments, sponsored by leading Parliament members, also sought a near halving of the planned fines.

Withstanding Demands

The committee ``stood up to the demands of the car industry,'' said the Brussels-based European Federation for Transport and Environment. ``Europeans need fuel-efficient cars now.''

Guido Sacconi, an Italian Socialist steering the draft law through the EU Parliament, had proposed the compromise amendments after the assembly's industry committee demanded an even greater dilution of the rules in a Sept. 1 non-binding opinion for the environment committee. That opinion was drafted by Werner Langen, a German member of the Christian Democrats, the Parliament's biggest political group ahead of the Socialists.

Sacconi abandoned his support for the original commission proposals to address German concerns and then faced a revolt by the environment committee, including some of his fellow Socialists. The panel's final vote was 46 to 19.

Compromise a Given

Sacconi said the environment committee must eventually compromise because of the split within the assembly as a whole and the need to strike a deal with national governments including that of German Chancellor Angela Merkel, who has vowed to scale back the measures. Sacconi's comments were echoed by Martin Schulz, German head of the Socialists in the Parliament.

``We have to ensure that we have a broad majority,'' Schulz said. ``We want an economically reasonable solution. We want to protect the interests of employers and employees.''

These remarks, along with pledges by the German car industry to fight today's result, signal that a phase-in of the caps and reduction of fines will resurface when the full assembly prepares to vote as soon as November and the Parliament enters into negotiations with governments.

The penalties proposed by the commission and endorsed today by the Parliament environment committee would reach 95 euros for every gram/kilometer above the limits, multiplied by the number of vehicles sold.

Tougher Cap

In addition, the committee introduced a stricter average cap in 2020 of 95 grams of CO2 a kilometer to give the industry a longer-term perspective. The commission's proposal had no target beyond 2012.

The push to regulate car emissions follows an EU pledge under the global Kyoto Protocol to cut greenhouse gases 8 percent in 2008-2012 compared with 1990. The 27-nation bloc now also aims to reduce these emissions at least 20 percent in 2020, a sign of growing worries about global warming.

In addition to limiting CO2 from cars, the EU plans to tighten caps in 2013-2020 on energy and manufacturing companies covered by the European emissions-trading system, set varying national targets for limiting greenhouse gases from industries such as agriculture and buildings outside the trading program and promote the underground storage of CO2. The commission proposed these measures in January.

The EU aims for a fast-track agreement on the whole package by yearend. This normally enhances the importance of Parliament committee votes, which could form the basis of a negotiated agreement with governments that the full assembly would be asked to rubberstamp.

With the draft car-emissions law, the environment committee's verdict may delay any final accord by making it more difficult for members like Sacconi to negotiate with national governments before the full Parliament has voted. Sacconi said it would now be ``very difficult'' for the EU to reach an agreement this year on car emissions.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: September 25, 2008 10:42 EDT