German manufacturers such as BMW, Mercedes, Audi and Porsche were unhappy with the original C02 targets proposed by the EU.
German carmakers could breathe easier Tuesday after Berlin and Paris agreed on a proposal that relaxes carbon dioxide emission targets for cars.
The accord "is a clear improvement on a proposition by the European Commission," said Matthias Wissmann, head of the German automobile association VDA.
He spoke after France and Germany agreed on Monday to a joint proposal for carbon dioxide emission levels that seeks to tone down one mooted by the European Union's (EU) executive branch.
German manufacturers welcomed the compromise "even though it is not an ideal solution," Wissmann said.
Car companies such as Volkswagen, BMW or Daimler went to battle over a plan floated by the EU commission in December to sharply reduce the level of CO2 emitted by new cars, which set a target of 120 grammes per kilometre.
German Chancellor Angela Merkel had also criticised the plan, saying that the EU's industrial policies were being established "at the expense of Germany."
German cars are among the most powerful models produced in Europe, and auto manufacturers argued they would be penalised more than competitors in countries like France and Italy that produce a larger number of small vehicles.
France and Germany have worked for months to reach a compromise that would be acceptable to all 27 EU members and the result was a relaxed version of the EU plan.
The fundamental goal remained the same, with the 120-gramme target to be reached through concerted efforts by carmakers.
They will be expected to make engines that emitted no more than 130 grammes, and 10 grammes that were to be eliminated mainly through the use of cleaner fuels.
The method of calculation would also remain the same - a barometer
based on the vehicle's weight.
But under the Franco-German proposal, the auto industry would have until 2015 to reach the targets for models that are already in production, compared with 2012 across the board in the EU Commission's plan.
It also stipulates that they could obtain a slight additional margin above 130 grammes if they introduced certified "eco-innovations" elsewhere in the vehicle such as more environmentally friendly tyres or seven-speed transmissions that would augment fuel economy.
Both measures were backed by the German auto industry.
An EU system of fines for vehicles that exceeded established CO2 limits might also be relaxed, though details of possible modifications were not provided.
"Not everything is clear. But the solution is softer. The targets will be easier to reach," commented Ferdinand Dudenhoeffer, a German auto specialist.
BHF bank analyst Albrecht Deninghoff added: "It's better." But he remained prudent regarding the Franco-German plan, telling AFP: "It might be good, but it is not sure this is what we were hoping
"Regulations would be neutral from a competition viewpoint if each kind of vehicle had an appropriate target."
That is, if small vehicles were obliged to make the same effort as large ones.
Ecologists reacted with anger to the proposed compromises.
Merkel "has once again signed off on all of the German auto manufacturers' propositions," one of the chief whips of the Green party, Renate Kuenast, was quoted by German media as saying.
The Franco-German agreement "meant nothing good for climate protection," she added.
Wolfgang Lohbeck, an auto specialist at Greenpeace, told AFP: "It's absolutely ridiculous.
"Since 1995, constructors constantly obtain delays and improvements. This time they got it all."
Lohbeck said that "this leaves a bitter aftertaste, we wonder what France must have obtained in exchange for giving in to the German positions."
Details of the project, which would need the approval of the other 25 EU states, were to be released in the coming weeks.
The European Commission Tuesday welcomed the agreement between France and Germany but said the two countries could not decide the issue alone.
"We welcome the convergence of views between members which have big car industries but it's a discussion that takes place within the council, with all members," said commission spokesman Amadeu Altafaj.
"The process is still underway so at this point there is no question of changing the (commission's) proposals."