Lawmakers in the European parliament have called for a faster reduction in car pollution to accelerate the shift to electric vehicles in Europe.

Last year the European Commission proposed an end to new cars powered by petrol or diesel by 2035, as part of its far-reaching green deal, the EU response to the climate crisis.

In a vote on Wednesday, the European parliament’s environment committee backed that 2035 target, but said carmakers should meet an interim goal of a 20% reduction in carbon emissions by 2025 to speed up the shift from petrol and diesel.

In a blow to green campaigners, an amendment proposing a target of a 75% reduction in emissions by 2030 was rejected.

The vote is not final, but a crucial step ahead of negotiations between MEPs and ministers from the 27 EU member states.

Carmakers currently have to ensure that their average fleet of new cars emits no more than 95 grams of C02 a kilometre. The equivalent target for vans is 147g CO2/km. The European parliament argued that carmakers need tougher short-term targets to reduce emissions “to accelerate the update of zero-emission vehicles”. To this end, MEPs proposed interim targets for 2025 and 2030. The commission had proposed a 55% reduction for cars and 50% for vans by 2030.

Phasing out petrol and diesel cars is seen as a crucial component in cutting pollution from transport, the only economic sector where emissions have been rising. Road transport accounts for 20% of the EU’s greenhouse gas emissions and fuels toxic air pollution. Cars and vans are the single largest source of nitrogen dioxide pollution, linked to the deaths of 40,400 people in the EU a year, according to the European Environment Agency.

The car industry is also one of the EU’s biggest employers, supporting 14.6m direct and indirect jobs including manufacturing, sales and transport services. The proposals for tighter regulations are being closely watched by EU governments.

To avoid economic hardship, the MEPs have urged the EU executive to create a special fund to help small and medium-sized firms that are dependent on manufacturing parts for internal combustion engine vehicles.

Pascal Canfin, the centrist French MEP who chairs the environment committee, told reporters before the vote that a “just transition fund” totalling several billion euros would be needed. He said the sum was “not huge” for the EU, but necessary to support firms that faced “a massive shift of their business model”.

The UK has promised to end the sale of petrol and diesel cars by 2030, although hybrid models can still be produced until 2035, a significant concession for the car industry.

The EU’s CO2 and cars regulation is one of a dozen proposals that make up the EU’s green deal. Other elements include an expansion of renewable energy, an overhaul of the EU emissions trading scheme that caps industrial pollution and a heavily criticised forest protection strategy. All the legal proposals must be agreed by the European parliament and EU council of ministers before coming into force, making the coming months a crunch period for the union’s green ambitions.

In a sign of the political divisions over the EU green agenda, the CO2 and cars vote passed via a left-liberal-green coalition with 46 votes in favour, while 40 MEPs from the centre-right and nationalist parties voted against, and two abstained. The text will be voted on by the full European parliament in June.

Campaigners urged the EU to set more demanding emissions-reduction targets to speed up the transition to electric vehicles by the end of the decade.

“The EV boom will falter for the next 10 years unless lawmakers step in with an interim target in 2027 and a more ambitious goal in 2030, “ said Alex Keynes at Transport and Environment. “Without it, Europe may not sell enough zero-emissions cars to meet its own 2030 goals as well as those of many EU countries.”