In the European Union, car manufacturers are required to reduce the average CO2 emissions of new passenger cars to 95 g CO2/km until the year 2021. After 2021, a new regulation will need to be established. With this paper, we attempt to contribute to the discussion on a new regulation by comprehensively evaluating alternatives to the currently applied emission standard. These alternatives comprise of different regulatory and market-based instruments as well as their combinations. We show that policies combining an emission/energy consumption standard with an upstream or midstream emission trading system are worth considering. These combinations provide a promising approach to allow greater flexibility for the car manufacturers and to enhance efficiency and effectiveness of the regulation, whilst at the same time respecting political objectives and consumers’ interests.