The Chinese government is set to introduce a pilot program in which the purchase of electric and hybrid cars will be subsidised. This is in line with China’s plans to cut emissions in what is now the world’s largest car market.

Applicable in Shanghai, Shenzhen, Hangzhou, Hefei and Changchun, plug-in hybrid cars are entitled to a subsidy of 50,000 yuan, which is about $7,320. Maximum subsidy for a full electric car will be 60,000 yuan ($8,787) according to China’s Ministry of Finance.

Instead of handing out cash to consumers, the money goes to carmakers, who would then lower the prices of eco models accordingly. Besides that, China will introduce nationwide subsidies of 3,000 yuan for cars with 1.6-litre engines or smaller that consume 20% less fuel than current standards.

It wasn’t mentioned what the “current standards” are, but this proactive measure to cut emissions and lower fuel consumption is a nudge to carmakers to produce cleaner vehicles. And they’re responding. SAIC plans to roll out its first hybrid car this year, while car and battery maker BYD started retail sales of its plug-in hybrid F3DM in March.

What about charging infrastructure? The Government will allocate unspecified funding for the construction of charging stations and battery recovery networks in the pilot cities.

Last year, China’s tax incentives for small cars and subsidies for vehicle buyers in rural areas helped domestic vehicle sales surge 46% to 13.6 million units, even as sales in other parts of the world slumped. The impact of this green car subsidy will not have the same short term effect, but it’s a good move nonetheless.

Emissions has of course become a serious problem in major Chinese cities and they’ve had to implement certain policies such as an odd-even based alternate day car ban based on a car’s numberplate during the recent Olympic games in order to cut down on the smog.