News that the UK's Low Carbon Car Fund will not breach European state aid rules has today been welcomed by the motor industry, according to The Society of Motor Manufacturers and Traders (SMMT).

The SMMT noted that the ruling by the European Commission Competition authority is an important step for government to set in place grants for buyers of some of the cleanest, low carbon cars following the collapse of the Powershift grant scheme 14 months ago.

Schemes like Powershift, managed by the Energy Saving Trust, had offered a total package of £14 million to new car buyers and commercial vehicle operators in 2004/05. However, grants were discontinued in March 2005 amid concerns of a breach of European state aid rules. Since then, none have been available to new car buyers.

Six new schemes were submitted to the European Commission by the Department for Transport, with a combined budget totalling £24 million. The Low Carbon Car Fund was one of these programmes. Under the proposals, it is thought that cars emitting 115 g/km CO2 or less would be eligible for a government grant of between £300-1,000.

SMMT chief executive Christopher Macgowan said: "Incentives are a fundamental way to drive a market. The Commission's ruling has cleared the way for the UK government to support the scheme as soon as possible and send a clear message to consumers."