Penalties will be based on the number of grams per kilometre that an average vehicle is above the proposed limit of 130g/km, multiplied by the number of vehicles sold by that carmaker.

A premium of €20 (£14.35) per g/km has been proposed in the first year of 2012, gradually rising to €35 in the second year, €60 in the third year and €95 from 2015.

The plans still need the backing of European Union governments before they can be ratified and the Commission said it expected most manufacturers to meet the target set by the legislation, so significant penalties should be avoided.

"The aim of the legislation is to reduce CO2 emissions from cars in order to help fight climate change,” said environment commissioner Stavros Dimas.

“The legislation will also ensure important fuel savings which will translate into considerable benefits for consumers. Moreover, it will encourage the car industry to invest in new technologies and promote eco-innovation.”

The automotive industry hit out the proposals, with Acea, the European carmaker trade body, labelling them “unbalanced”.

Acea president Sergio Marchionne said the Commission had gone against its principle of 'better regulation' in proposing the emissions fines.

“The proposal is very disappointing and both its content and the way it was adopted are in stark contrast with the 'better regulation' principles of the European Commission”,” said Marchionne.

“The upcoming regulatory framework should support us in a constructive and sustainable way. We urge the EU governments and European Parliament, who will have the final say, to take up this challenge in the months to come.”

The SMMT also voiced its opposition, claiming it had particular concerns regarding unrealistic lead-times and costs of non-compliance.

“Manufacturers must not be penalised for past decisions on product development,” said SMMT chief executive Christopher Macgowan.

“Proposals must be achievable and cost-effective, implementation dates must be realistic and fines proportionate if we are to maintain the breadth and diversity of automotive manufacturing across the UK.”