The whole point of regulations is to go against what the market will buy without them. If people bought low emission cars without any outside forces then you wouldn’t need any regulations. Of course, in reality that path leads you to smog-choked cities and lots of dead people.

Low-emission might not be a priority, but people still think of it, and some governments measures target the most-polluting vehicles to discourage their use.

If we want companies to follow the law, then those that violate emissions standards should face harsh punishments. For example, they could be banned from selling vehicles in the US market for one year, all of their lineup should need recertification under more strict oversight, and they be required to fix or buyback the offending vehicles. And personal liability for senior executives.

The major problem the US has with all automotive regulations is GM and Ford get their lobbyists to write the laws with loopholes that cater to them. For example, CAFE standards that are based on vehicles footprint and are different for passenger cars vs. "light trucks." While the regulations are "fair" on paper, but in practice, they are much more lax for the types of vehicles domestic automakers sell.

You forgot the two biggest factors - cost and efficiency. Most people doesn't want big or necessarily fast cars. Most people want cheap cars that go a long way on a little fuel. However, it's difficult to make cars that are cheap AND fuel efficient AND environmentally friendly.

People might want big, fast and safe cars, but they don't get to have them at the expense of the health and wellbeing of everyone else.

No it doesn't. Driving a car faster is less safe, all other factors being equal, but simply making a faster car doesn't make it less safe. Look at Mercedes's performance cars, which typically lead the market in safety features. An example off the top of my head is the carbon cone built into the front of, I think, 2000-era SL500s. They could dissipate a tremendous amount of energy, making that fast car significantly safer than most other cars on the road at the time.

(Of course when you push the limits of the car, all bets are off again.)

We do have racetracks, and people want to drive regular cars fast on those racetracks.