PSA Peugeot Citroen is to develop a family of low-emission one-litre petrol engines that will range in power from 69bhp to 98bhp.
PSA says the engines are being developed to produce a number of cars that emit less than 100g/km of carbon dioxide.
The first engines will be built in France and go on sale in 2011.
A second plant in Eastern Europe will be set up to increase build capacity from 2012, although the exact location has yet to be decided.
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