The government is proposing grants of up to £5,000 for motorists towards a new green car in a bid to harness the "untapped" potential of electric cars.
Under the scheme, motorists will be offered between £2,000 and £5,000 towards the cost of a new green car, currently sold at up to £12,000, to help bolster the eco-friendly vehicle industry over the next five years.
It comes as part of Gordon Brown's electric dream for the UK, unveiled last week, which included plans to develop green cities throughout the UK and to provide £20 million for charging points and related infrastructure.
There is also an expected announcement by the chancellor in the Budget next week for a £2,000 'scrappage' incentive to encourage motorists to swap their old, polluting cars for new, greener models.
Transport secretary Geoff Hoon said: "Cutting road transport CO2 emissions is a key element to tackling climate change.
"Less than 0.1 per cent of the UK's 26 million cars are electric, so there is a huge untapped potential to reduce emissions."
But last week, green campaigners pointed out that increasing the number of electric car users will not cut carbon emissions without creating more renewable power stations to create the electricity needed to charge the cars.
Today, Greenpeace again urged the government to put greater effort into the wider picture of climate change by tackling coal-fired power stations.
John Sauven, executive director of Greenpeace, said: Todays announcement is a step in the right direction but once again the scale of ambition falls far short of what is needed if we are to develop a low carbon economy.
More importantly, increasing the number of electric cars on the roads will make little difference if the energy powering them comes from dirty coal-fired power stations.
"If the government is serious about tackling climate change, the priority must be massive investment in renewable energy like offshore wind. We need a joined up strategy. Electrification of the transport system alongside a massive investment in renewable energy.
He added that the incentives Mr Hoon is offering to motorists would only put 26,000 new electric cars on the road, 0.1 per cent of the total number of cars in the UK.
Liberal Democrat shadow transport secretary Norman Baker said: This announcement is like adding a small dab of green paint to the rusty hulk of the governments failed transport policy.
Discounts on electric cars are all very well for those who can afford to buy a new car but it cannot hide the fact that the Government has forced up rail fares and destroyed many local bus services.
This might have been a sensible policy if it was part of an overall climate change strategy, but on its own it is just a gimmick.