The deal between the European Commission, Parliament and Irish Presidency of the European Council, also called for targets to be set beyond 2020. However, a move to include a 2025 target in the range of 68-78g/km by 2025 was rejected but the European Commission will propose the exact target by 2015.

The agreement, which is subject to ratification by Member States, also includes a system of “supercredits” to encourage supply of electric and other ultra-low carbon vehicles. The agreement means that every electric vehicle sold in 2020 counts double, with the qualifying threshold raised from the Commission's proposed 35g/km to 50g/km.

The accord also confirms that a new system for testing emissions of new cars should be introduced from 2017. MEPs noted that recent studies show that manufacturers have exploited weaknesses in the current procedure for testing the environmental performance of cars, with the result that official consumption and emission figures are far from those achieved in everyday driving conditions.

The news has been welcomed by environmental NGO Transport & Environment (T&E), which said the new rules should mean that the average fuel economy of new cars, currently around 6 litres/100km (in tests), will fall to 4 litres by 2020.

The agreement anticipates further improving fuel efficiency by 4-6% per annum after 2020, which could result in fuel economy by 2025 being below 3l/100km and CO2 emissions below 70g/km.

However, T&E said that the final agreement is weaker than that of the European Parliament and offers too many concessions to appease German luxury carmakers.

Commenting on the outcome of the negotiations, Greg Archer of T&E said: ‘The EU has made an important step forward to reduce climate-changing emissions from cars. But it could have been even better for drivers, jobs and the EU economy if Member States had focused on the significant long-term benefits of more fuel-efficient cars instead of being influenced by the narrow, short-term interests of some carmakers.’

T&E also said that the changes to the supercredits scheme allow carmakers to make less progress in reducing emissions from conventional cars and will raise the 2020 target from 95g/km to 97.5g/km, ultimately costing the average driver money in extra fuel purchased.

Mr Archer added: ‘The deal shows the EU recognises its economic future is dependent upon driving innovation towards more efficient, environmentally-friendly cars. But gas-guzzlers would have been condemned to history had the EU adopted a 2025 target and less generous supercredits in 2020.’