The European Union late on Monday agreed a compromise deal to enforce stricter rules on carbon dioxide emissions for all new EU automobiles from 2020.
The outline agreement on implementing a target of 95 grams of carbon dioxide per kilometer (g/km) still needs the official endorsement of EU member states.
German efforts to ensure that its luxury car makers, such as BMW and Daimler, can continue to produce more polluting, less fuel efficient cars complicated the final stages of talks.
But Ireland, holder of the rotating EU presidency, which has brokered the deal, said the compromise struck the right balance between environmental ambition and economic considerations.
Under the rules, each manufacturer is assigned an individual target to take account of the nature of their fleet and their past cuts.
But making less-polluting cars is costly and restricts profit margins, which is why Germany sought ways to delay meeting the stricter rules.
Member states last week rejected a German plan that would have allowed automakers to carry over credits to pollute accrued before the new rules kick in 2020.
Known as supercredits, these permits are earned if manufacturers produce some very low emissions vehicles, such as electric cars, which German firms are making to meet a separate national target.
Germany then proposed another plan focused on another technical device, referred to as a multiplier.
As agreed on Monday, the multiplier still buys time for automakers because it increases the number of supercredits a manufacturer earns for each low emission vehicle.