European Union regulations forcing car makers to cut their average CO2 emissions to 130g/km by 2012 has been declared illegal.
The proposals had sought to push car makers to lower engine emissions across their model ranges or face stringent fines.
Now, negotiations on emissions targets, fines and start dates may have to start from scratch.
EU Parliaments Legal Affairs Committee, which made the decision earlier this month, said the regulation had not fallen under the correct Article of the EC Treaty.
A vote is due in October, which will either result in the rules being introduced by the end of the year or delay formalising the plans until next year.