As part of the funding, local authorities and bus operators will have the opportunity to bid for an additional £10 million to buy new low carbon buses. This is an extension to the existing scheme which is delivering around 350 low carbon buses in England.

There will also be a £3.5 million pot to support the increased use of biogas - a sustainable renewable fuel produced from waste material. Biogas can be used in the same way as conventional fossil fuels, powering vehicles and homes.

The Government believes that generating fuel from waste has the potential to provide significant environmental benefits and will be crucial in helping the UK meet its tough carbon reduction targets.

Transport Secretary Andrew Adonis said:

“I want Britain to be at the forefront of ultra-low carbon technology, blazing a trail for environmentally-friendly transportation.

“These measures will not only help us to reduce emissions but also provide a sustainable and economically viable alternative to traditional carbon-based transport.

“I am confident that we are on the right track to deliver a greener and cleaner industry that meets the needs of society as a whole whilst addressing the environmental challenges we face.”

Pat McFadden said:

“Increasing the funds for developing the UK’s supply chains for low and ultra low carbon vehicles is further proof of the commitment we have across Government to address the low carbon challenge.

“Car manufacturers such as Toyota and Nissan have already announced that they will be producing low carbon vehicles in the UK and we hope Vauxhall will follow. This funding will also help consumers and operators recognise low carbon vehicles as a viable, affordable alternative when buying a vehicle and drive Britain closer to our goal of being the number one destination in the world to manufacture low carbon technologies.”

Also included in the fund is:

- an increase in funding for the Technology Strategy Board’s low-carbon vehicle supply networks competition. This aims to develop UK supply chains for low and ultra-low carbon vehicles;

- a new test centre in Nuneaton, to develop and test future intelligent transport technologies. It is hoped that these technologies could increase fuel efficiency and improve congestion;

- a low carbon truck demonstration project, aiming to demonstrate the benefits of lower carbon heavy goods vehicles over a full range of operations; and

- further funding for the Alternative Fuels Infrastructure Grant programme, which supports the installation of refuelling and recharging stations for a range of alternative fuels.