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The SMMT published its annual New Car CO2 Report, which shows that average UK vehicle CO2 emissions fell for the 17th consecutive year by 2.9% to 124.6g/km.
The 2014 UK new car CO2 average is 4.2% below the 130g/km 2015 pan-EU target.
CO2 reductions were seen in all fuel, segment and sale types in 2014, in which all registrations grew year-on-year.
Key trends include greater fuel efficiency of new engines, an increase in the uptake of alternative-fuelled vehicles, and a market shift to lighter cars and more compact engines.
The total volume of alternative-fuelled vehicles grew from just over 16,000 in 2007 to nearly 52,000 in 2014, a three-fold increase, and a 58.1% increase over 2013. The bulk of this growth remains in hybrids, although the SMMT said electric vehicle growth is making good progress.
New light commercial vehicles' average CO2 emissions fell to 182.4g/km in 2014, decreasing by 1.8% since 2013 and by 3% since 2012.
The European Parliament and the Council of the European Union have set mandatory CO2 emission targets, which new passenger cars and light commercial vehicles must meet by 2020. By this time, manufacturers must hit a 95g/km average across 95% of its registrations, rising to 95g/km across of all registrations from 2021. Light-commercial vehicles will be limited to 147g/km CO2.
The SMMT said: "The 2020 EU targets for new cars and vans remain ambitious and challenging, but offer stability and planning certainty, which are critically important for industry competitiveness and development.
"Key drivers of change towards CO2 reductions and decarbonising transport will be a greater collaboration between Government and industry as well as continued investment in R&D and new technology."
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