Last year, new vehicles recorded an Australian average of 226.1g of CO2 emissions for every kilometre they travelled.
That's down on the 2006 figure of 230.3g, and during the past five years the industry has achieved a reduction of more than 10 per cent in average emissions.
By comparison, a Toyota Corolla produces 175g/km and a Holden Commodore 260g/km.
In Europe, where strict emissions controls have been in place for longer than Australia, emissions levels have remained almost unchanged.
Federal Chamber of Automotive Industries chief executive Andrew McKellar said the motoring industry was on track to meet its self-imposed target of 222g/km by 2010.
Meanwhile, fuel economy has improved from an average of 10 litres per 100km in 2002 to about 8.8 litre/100km last year, heading toward the FCAI's voluntary 2010 target of 6.7 litre/100km.
“These figures demonstrate that the industry is continuing to implement new technology to lower the impact passenger cars have on the environment,” Mr McKellar said.
However, Mr McKellar said further improvements would rely on improved fuel quality with lower sulphur content, which was not yet available.
The FCAI pointed out that passenger cars accounted for less than 8 per cent of Australia's total carbon emissions, which is about half of the emissions from agriculture.
RACQ manager technical services Steve Spalding said that for motorists to reduce their emissions, they should reduce their fuel consumption.
“We would suggest motorists buy the smallest car that will still do the job you need and then look for the most fuel efficient car within that category,” he said.
He said the FCAI fuel and CO2 figures were reached under test conditions and not real-world driving. He added that if motorists wanted to reduce fuel consumption and CO2 emissions, they should also drive and maintain their vehicle correctly.