CO2 emissions fell by their biggest ever margin in 2008, according to the Society of Motor Manufacturers and Traders (SMMT).
Its annual New Car CO2 Report revealed that the average model emitted 158g/km - 4.2% less than the 2007 figure.
The report suggested that although the number of cars on the road and the average distance travelled has increased, their share of total UK emissions continues to fall.
Cars now account for just 11.5% of the country's total CO2 emissions, the SMMT said, citing new technology, improved fuel consumption rates and better consumer awareness as factors.
'The motor industry has made enormous progress in its work to cut the environmental impact of its products but more must be done if the tough targets set by European legislations are to be met,' said SMMT chief executive Paul Everitt.
'Maintaining a steady rate of renewal is vital to this success, so the recent fall in car registrations presents more than an economic challenge.' he added. He urged the government to implement a scrappage-incentive scheme to take older, high-emitting cars off the road and boost the new car market.