The European Commission will on Wednesday announce carbon dioxide emissions cuts for the car industry amid pressure from automakers, particularly in Germany.
EU environment commissioner Stavros Dimas has been aiming at a C02 emissions target of 120 grams per kilometre by 2012 for cars sold in Europe.
"The commission has undertaken a review of whether the strategy is on track to meet this target, and will announce the outcome and possible further measures to be taken," it said in a press note.
But the German auto industry has voiced opposition to the target, saying production cars would shrink and jobs would move elsewhere.
And German chancellor Angela Merkel, whose country holds the rotating EU presidency, entered the debate last week, arguing against a blanket solution for the industry.
"The diversity of the automobile industry must be respected," Ms Merkel said.
At the weekend, she told Germany's Bild am Sonntagweekly that while "I support further cuts in carbon dioxide emissions from cars... we need ambitious, but different goals for reductions in the different markets for various automobiles".
Her comments drew an angry reaction from Mr Dimas. "If Germany blocks, the rest of Europe doesn't play along. And if Europe doesn't play along, neither does the rest of the world," he said, according to press reports.
"In that case, we might as well pack our bags," he said. Already, the commission has had to delay the announcement by two weeks because of a dispute between Mr Dimas and industry commissioner Guenter Verheugen, of Germany.
Some sources have said the commission will modify its target to 130 grams per kilometre, compared with 160 grams currently.
Last Wednesday's fuel quality directive adopted by the commission sparked claims by the oil industry that it had bowed to lobbying from carmakers. The directive requires petrol to contain at least 5 per cent ethanol from 2001, with the level rising to 10 per cent by 2020.