Car buyers have been given an incentive to go green with the government's confirmation of £5,000 grants towards the cost of electric or low emission cars.

Despite deep government cuts, Transport Secretary Philip Hammond announced yesterday that the funding, first proposed by the Labour government, will go ahead from January 2011. The grant will reduce the cost of new ultra-low carbon vehicles by 25%, capped at £5,000.

The incentive has been agreed until the end of March 2012, with the level of grant being reviewed in January 2012.

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."

The grant covers electric, plug-in hybrid or hydrogen fuel cell cars. And Belfast could benefit from the boost in plug-in cars as the city is bidding to be one of six UK cities to install charging points for electric cars.

Some 11,000 charging points for electric cars are to be built in London, Milton Keynes and north-east England over the next three years, supported by £30m of government money for the Plugged-In Places scheme.

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: "This is great news for industry and a significant commitment by the new government to create UK jobs in the emerging market for ultra-low carbon vehicles.

RAC motoring strategist Adrian Tink said: "We saw with the scrappage scheme that motorists like incentives and we know from our report on motoring that a third of drivers wanted the price of electric cars to fall before they'd consider buying one. So this is undoubtedly good news.

"That said, the motoring public will still need more information on the running costs and the range of these vehicles before they commit their hard-earned money to them."

Friends of the Earth's transport campaigner Richard Dyer said: "It's disappointing that the government has not committed to continue grants for greener cars until 2015 - longer term financial incentives are a great way to kick-start the market for low-carbon vehicles in Britain."