Transport Secretary Philip Hammond has confirmed that motorists will be given an incentive of up to £5,000 towards the purchase of an electric or ultra-low carbon car from January 2011.
The grant, first announced by the Labour government, covers electric, plug-in hybrid or hydrogen fuel cell cars, which often attract lower car insurance premiums.
It means that people who buy new ultra-low carbon vehicles from January 2011 will get a 25% discount, up to a maximum £5,000.
The incentive has been announced ahead of the completion of the autumn spending review to support the early market for ultra-low carbon cars, according to the Department for Transport.
Mr Hammond said: "The coalition Government is absolutely committed to low-carbon growth, tackling climate change and making our energy supply more secure.
"We are sending a clear signal that Britain is open for business and that we are committed to greening our economy. This will ensure that the UK is a world leader in low-emission vehicles."
The incentive level has been agreed until the end of March 2012. It will be reviewed in January 2012.
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