By Art Patnaude

BRUSSELS--European Union rules aimed at reducing vehicle pollution were criticized Tuesday by the German automobile industry, which is expected to continue lobbying heavily against the regulation ahead of a more formative decision set for later this week.

Proposed regulation requiring manufacturers' new car fleets to emit an average of 95 grams of carbon dioxide per kilometer by 2020 will face scrutiny in the European Commission when leaders of the 28-member bloc meet in Brussels on Thursday.

"The European Union is failing to provide a powerful impulse for technological development and a market ramp-up of alternative drives despite an economic crisis," said Matthias Wissmann, president of the VDA German Auto Industry Association.

The Irish Presidency on Monday secured a compromise on the deal, which it said struck a balance between "environmental ambition and economic considerations."

Groups on either side have continued to argue their points Tuesday. The deal had been heavily contested in recent weeks by German luxury car makers--such as BMW AG (BMW.XE) and Daimler AG (DAI.XE)--whose more highly polluting cars could mean bigger adjustments will be needed compared to their peers.

At the center of the debate were so-called super credits, which will give manufacturers additional incentives to produce cars with emissions of 50 grams of carbon dioxide or less--namely electric or hybrid cars. German industry was a proponent of super credits, while environmental groups have said they weaken the deal, as does the lack of agreement on an even lower 2025 target.

"It is in everyone's interest to get clean vehicles on the roads, and super-credits are the only EU-wide incentive to help put on the market today the technologies of the future," said The European Automobile Manufacturers' Association, representing members including BMW, DAF Trucks, and Daimler.

Rebecca Harms, co-president of The Greens/European Free Alliance political group in parliament, said: "These (EU) proposals go some way towards tackling CO2 emissions and the growing problem of air quality, but ultimately the automobile lobby was successful in preventing a binding target and slowing the possible development of ambitious new technologies."

EU leaders will meet in Brussels on Thursday and Friday. An approval from the Commission is likely to come on Thursday, and would also help secure the legislation's passage through the European Parliament next month.

Write to Art Patnaude at art.patnaude@dowjones.com

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