(Updates with quotes, details, background) By Marcin Grajewski BRUSSELS, March 20 (Reuters) - European carmakers fired a new salvo on Tuesday in their battle with the European Commission against setting binding limits on carbon dioxide (CO2) emissions, saying the caps would cripple the industry. The European Union executive proposed last month that automakers be required to cut CO2 emissions from new cars sold in Europe to an average 130 grams per kilometre by 2012 through improvements to engine technology. That would contribute to an overall target of 120 g/km by 2012 compared to current levels of roughly 163 g/km, part of the Commission's drive to fight climate change. Sergio Marchionne, chief executive of Italian carmaker Fiat <FIA.MI> and head of the European Automobile Manufacturers' Association (ACEA), said the targets were unrealistic and would undermine the EU car industry's ability to compete worldwide. "Producing legislation in 2009 for ... 2012 is nonsense," Marchionne told a news conference during a business seminar in Brussels, adding the industry needed longer to adjust. "It's not a bakery, you cannot do it, you just cannot." The Commission is to propose draft legislation on car emissions by mid-2008 and EU governments will then negotiate its final shape with the European Parliament, with much lobbying expected from carmakers and environment protection groups. Marchionne said that while the target of 130 grams of CO2 per kilometre through improved engine technology was unrealistic, the 120 grams general goal was achievable if governments improved road infrastructure, refineries produced better fuel and drivers changed their habits. "It is prohibitively expensive to achieve a target of 130 grams per km through vehicle technology only," he said. To achieve the wider target, "other stakeholders need to get involved", he said. Forcing firms to make engines that produce less CO2 was the least cost-beneficial way of reducing the amount of gas seen as causing global warming, he added. ACEA represents manufacturers including BMW <BMWG.DE>, DaimlerChrysler <DCXGn.DE>, Porsche <PSHG_p.DE>, Fiat and Renault <RENA.PA>. Marchionne said Asian carmakers would bear the cost of adjusting to new standards much more easily than European producers. Asked about possible consequences of the proposed changes, he said: "We will stop selling cars." The Commission said it would legislate emission caps after it became clear that European carmakers were set to miss a voluntary pledge to reduce the average CO2 output from new cars to 140 grams per km by 2008. Environment Commissioner Stavros Dimas said the rules were essential to meet the bloc's Kyoto Protocol commitments to cut greenhouse gas emissions by 8 percent by 2012 from 1990 levels. Road transport contributes roughly one-fifth of the EU's CO2 emissions. Passenger cars account for 12 percent.
