Manufacturers of super-efficient petrol and diesel vehicles could be in line for £2,500 grants for each vehicle, if a revamp of the 'green cars' funding scheme is pursued.

The Energy Savings Trust is putting together proposals for a new programme to reward the development of cars, of whatever type, that achieve significant cuts in CO2 emissions.

The Trust is proposing the scrapping of its current Transport Energy Scheme, which at present spends around £20 million a year on research and development projects such as hybrids, LPG and fuel cells.

The new scheme, expected to begin in 2005, will award grants to any vehicle that has low CO2 emissions compared to other cars in its class. A sliding scale would reward developments according to the size of emissions reduced.

The Trust's announcement of a review of its scheme follows the admission that its Transport Energy grant fund has been exhausted, largely thanks to demand for LPG vehicles in London, because they are exempt from the congestion charge.

If the Trust's new plan is implemented, interest in these is likely to diminish while the debate about emissions standards heightens.

Some observers believe it is unfair to incentivise the purchase of fuel-efficient diesel cars that are already selling well.