An investment of £30 million has been made to widen the range of eco-friendly buses in England.
The government has allocated the funding as part of its drive to boost green fleets of buses and promote the use of low carbon vehicles in the country.
Local authorities and bus operators will bid for the cash grants, which they will use to roll out new green technologies and buy additional green buses.
Transport secretary Lord Adonis said: "CO2 emissions from buses have increased significantly over the last ten years. For the sake of our environment and the air quality in our towns and cities it's important to encourage the industry to move towards low carbon models."
He added: "Over the next two years we expect this fund to support the purchase of several hundred low carbon buses and, just as importantly, help to stimulate the development of a new green technology industry and help to safeguard up to 900 jobs in bus manufacturing."
Just 0.2 per cent of buses on England's roads at present are low carbon vehicles.
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