Transport, which accounts for almost a fifth of Germany's overall greenhouse emissions, is the only sector that has not managed to reduce its emissions compared to 1990, the UBA agency said.
"Because more and more freight is being transported by road and the trend is going towards heavier cars with more horsepower, more economical engines have served little purpose for climate protection," said UBA president Maria Krautzberger.
Germany's automakers - BMW, Mercedes-Benz, Audi and Volkswagen - produce many powerful vehicles.
The agency called for more freight transport to be transferred to rail and ships after the number of goods transported by road rose by almost a third between 2000 and 2013.
It also suggested extending a road toll on lorries to vehicles that are heavier than 3.5 tonnes and called for tough CO2 limits for lorries.
Under a climate action program agreed last December, the transport sector is obliged to cut CO2 emissions by 10 million tonnes by 2020 to ensure Europe's biggest economy meets ambitious targets to fight climate change.