Fiat Chrysler (FCA) has confirmed that it is to pay hundreds of millions of dollars to Tesla, the zero-emissions electric carmakers, to avoid getting hit by European Commission fines. 

The statement from the Italian-US firm confirmed a report in the Financial Times that FCA was paying Tesla, whose electric cars have no CO2 emissions.

The European Union imposes limits to the levels of carbon dioxide emissions cars can produce.

 But companies can pool CO2 credits between them to avoid fines from the European Commission. 

"The whole point of a CO2 credit market is to leverage the most cost-effective ways to reduce overall GHG (Greenhouse Gas) emissions in the market," said an FCA statement. 

Last June, Fiat Chrysler announced a €9 billion investment in moving its vehicles towards electric power to adapt to European norms.