Germany has blocked a European Union agreement on capping car carbon emissions because the deal could have cost jobs and harmed its domestic auto industry, officials said Friday.

The blunt admission that Europe's biggest economy put business interests before environmental standards is at odds with Germany's image as a champion of green issues. The country has invested heavily in renewable energy and Chancellor Angela Merkel has previously advocated a global agreement to curb climate change, which scientists say is largely driven by carbon emissions.

"At a time when we're spending days sitting here talking about employment, we must pay attention not to weaken our own industrial base despite the need to make progress on environmental protection," Merkel said at a meeting in Brussels, where EU leaders were discussing the continent's youth unemployment crisis.

Environmental campaigners had lobbied to limit emissions from passenger cars to an average of 95 grams of CO2 per kilometre within seven years. But Germany wants to allow automakers such as BMW, Daimler and Audi — whose emissions are higher than those of their European competitors — to collect "credits" they can use to offset higher pollution levels beyond 2020.

"A fair solution also has to take account of the particularities of the German auto industry," government spokesman Georg Streiter told reporters in Berlin, explaining why Germany asked for a decision on the issue to be postponed Thursday.

An estimated 700,000 jobs in Germany depend on the auto industry, and the country has enjoyed economic prosperity in recent years, unlike many of its European neighbours.

"We wouldn't be doing so well today if the auto industry were doing badly," Streiter said.