That would contribute to an overall target of 120 g/km by 2012 compared to current levels of roughly 163 g/km.
Use of biofuels, efficient air conditioners, and gear shift indicators would help contribute the 10 g/km that does not come from cleaner engines.
Environmentalists criticised the Commission for not putting the full burden on car companies to make the cut to 120 g/km.
The European auto manufacturers’ lobby said the new targets were arbitrary, too severe, and damaging to the economy.
Environment Commissioner Stavros Dimas says the rules are essential to meet the bloc’s Kyoto commitments to cut greenhouse gas emissions by 8 per cent by 2012 from 1990 levels.
Road transport contributes roughly one-fifth of the EU’s CO2 emissions. Passenger cars account for 12 per cent.
Mr Verheugen says the rules aim to reduce emissions without making European automakers less competitive.
The EU would expect bigger cuts from high-polluting, larger cars, whose producers could absorb cost increases more easily, he says, adding Brussels never intended to set a uniform limit for all vehicle types.
Manufacturers of small and medium-sized cars in Spain and Britain were at greatest risk from global competitors and would have a harder time dealing with higher costs, he says.
This will be taken into account in the new rules.
The Commission strategy paper says legislation will be framed to "ensure competitively neutral reduction targets that are equitable to the diversity of the European automobile manufacturers".
Mr Verheugen and Mr Dimas acknowledge the measures could lead to higher car prices but say consumers will recoup the cost over time in lower fuel bills.
EU presidency-holder Germany had expressed concern that such laws would unfairly penalise its industry, which specialises in larger premium automobiles, but welcomed the compromise, which came after weeks of battling within the Commission over how big a burden to place on the auto industry.
European carmakers are set to miss a voluntary pledge to reduce the average CO2 output from new cars to 140 grams per km by 2008, a fact which created momentum for binding targets.
"We are very disappointed that the industry isn’t sticking to the goals it has itself set. The road to hell is paved with good intentions," German Transport Minister Wolfgang Tiefensee said on German television, endorsing binding limits.
The European Automobile Manufacturers Association (ACEA) says the Commission’s strategy is not the most effective way to fight climate change.
"The proposals are unbalanced and damaging to the European economy in terms of wealth, employment and growth potential," it said in a statement.
But manufacturers such as France’s Peugeot Citroen and Germany’s Audi and BMW say they are working hard to produce low-emission cars.