Tough new EU regulations passed today will force manufacturers to reduce the average CO2 emissions of their cars to 130g/km by 2015.
That's roughly the equivalent of achieving 58mpg in a diesel car and 52mpg in a petrol model.
A sliding scale will be introduced to meet the new emissions targets, with heavy fines for manufacturers that exceed them.
By 2012, 65 per cent of new cars must achieve 130g/km. That figure rises to 75 percent by 2013, 80 percent by 2014, and 100 percent by the 2015 deadline.
Small volume manufacturers (below 10,000 models per year) will have separate targets.
Meanwhile, niche manufacturers (producing 10,000 to 300,000 units) will be expected to deliver a 25 per cent reduction on 2007's average emissions by 2015.
Jaguar, Land Rover and Aston are counted among Britain's small and niche manufacturers.
The Society of Motor Manufacturers has welcomed the legislation. Chairman Paul Everitt said it "presented a tough challenge to the automotive industry".
"We share the environmental objectives and welcome the long-term framework the legislation sets out," he said.
Government loans - being sought publicly and privately by a number of UK-based car manufacturers - hinge around using public money to invest in green automobile technology for the future.