Volkswagen, the world's third largest carmaker, has joined compatriot Daimler in deciding not to use a new air-conditioning refrigerant developed by U.S. firms Honeywell and DuPont in its cars.

Volkswagen plans to roll out carbon dioxide-based air conditioning systems throughout its entire fleet instead of the Honeywell/DuPont refrigerant called HFO-1234yf, which was created to meet more stringent environmental regulation.

Daimler engineers testing the flammability of HFO-1234yf discovered that it could spark a fire under the hood of the car strong enough to spread throughout the vehicle. In the process, the chemical emits a highly toxic gas when burning.

The U.S. duo invested heavily in bringing to market the refrigerant, which conforms to a new EU directive. Due to its high price, costing 10 times as much as the current common refrigerant R134a, it's only commercial application is in cars.

"Over the course of more than two decades in development, CO2-based automobile air-conditioning systems have experienced a number of performance, cost, safety and environmental issues that have made them a less attractive alternative to automakers globally," Honeywell said in a statement, after Daimler decided on Thursday to develop a new CO2-based A/C system.

Critics of carbon dioxide as a refrigerant argue that it requires a comprehensive and costly redesign of A/C systems, can cause drowsiness among drivers if it leaks into the passenger cabin and may trigger higher indirect carbon emissions since it potentially requires more fuel to operate.

While Daimler sold only about 1.5 million Mercedes and Smart cars last year, VW's decision means Honeywell and DuPont have lost another 9.3 million vehicles worth of business.

A spokesman for Volkswagen declined on Friday to say when exactly Volkswagen would begin to use carbon dioxide in its A/C systems, citing such information was relevant for competitors, but ruled out any possibility that it could begin this year.

Volkswagen Chairman Ferdinand Piech had signalled in November that his group - consisting of brands that include Audi, Porsche and Skoda - would not use HFO-1234yf because of its flammability.