Dec. 17 (Bloomberg) -- The European Union decided to phase in caps on carbon dioxide from cars as of 2012, ending a fight with Germany over climate rules through a compromise that eases the costs for automakers such as Daimler AG and Porsche SE.

The European Parliament voted today to impose the emission curbs on 65 percent of the new car fleet in 2012, 75 percent in 2013, 80 percent in 2014 and 100 percent beginning in 2015. The European Commission, the EU’s regulatory arm, had proposed introducing the caps on all new cars sold in the region in 2012.

Germany demanded the delay because the law pits its premium, higher-polluting brands against smaller, cleaner cars from France’s PSA Peugeot Citroen and Italy’s Fiat SpA. The current industry slump reinforced calls to let manufacturers exclude their dirtiest cars for up to three years from the rules, which also cover non-European producers including General Motors Corp., Toyota Motor Corp. and Hyundai Motor Co.

“We’re trying to find a fair balance,” said Werner Langen, a German member of the 27-nation EU Parliament in Strasbourg, France. EU governments signaled support for the law in early December when they struck the compromise with Parliament negotiators, making final approval a formality in the coming weeks.

The EU’s first CO2 cap on the car industry aims to maintain Europe’s lead in the field along with Japan and follows efficiency initiatives in places such as California, Canada, South Korea and China. The new law, to be underpinned by fines against companies that breach the limits, helps an EU goal to reduce greenhouse gases by a fifth in 2020 compared with 1990.

CO2 Releases

About 15 million autos are sold each year in the EU. Cars account for more than 10 percent of releases of CO2, the main greenhouse gas blamed for global warming. Average car prices may rise by 1,300 euros ($1,835) because of spending on the new required technology, the commission said when it proposed the law last December to replace 2008-2009 voluntary goals that the industry is set to miss.

Germany, Europe’s biggest car-producing country, complained that the proposal unfairly burdened makers of high-powered models such as Daimler’s Mercedes M-Class and Porsche’s 911. Chancellor Angela Merkel led the opposition, fighting off an October vote by the EU Parliament’s environment committee that upheld the commission proposal in the face of an industry-wide downturn.

European auto sales fell 26 percent in November, the seventh monthly drop and the biggest one since 1999, and the industry has lobbied the EU for 40 billion euros in loans to cover research into cleaner vehicles.

‘Stuck’

Environmental groups accused politicians of caving in to the industry when the Parliament negotiators and the French government, current holder of the EU’s rotating presidency, reached their compromise accord on Dec. 1.

“Consumers will be stuck with inefficient cars for years to come,” said Franziska Achterberg, a Greenpeace transport- policy campaigner.

The legislation will cut average car CO2 emissions by a fifth to 130 grams a kilometer in 2015 through varying targets for individual manufacturers. The heaviest autos will have to make the biggest reductions.

Based on 2006 emissions data, the law forces German automakers including Porsche, Daimler, Bayerische Motoren Werke AG and Volkswagen AG to slash CO2 as much as 49 percent compared with a maximum 15 percent reduction for French and Italian producers.

Emissions Requirements

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

The German government was unable to force French and Italian manufacturers to do more so German competitors could do less, settling for the phase-in as well as a reduction in some of the fines for any violations.

The penalties proposed by the commission would have reached 95 euros for every gram/kilometer above the limits, multiplied by the number of vehicles sold, as of 2015 after starting at 20 euros in 2012. The law approved today reduces the fines for the smallest breaches of the limits to as little as 5 euros while upholding the maximum 95-euro penalty.

The maximum possible fine will apply once a manufacturer exceeds its target by 4 grams or more. This arrangement will last until 2019, when the maximum penalty will apply to all violations.

The new law foresees a stricter average cap in 2020 of 95 grams of CO2 a kilometer. The 2020 target depends on an impact assessment and another draft law from the commission, whose proposal last year had no target beyond 2012.

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

Last Updated: December 17, 2008 05:46 EST