People buying new electric and hybrid vehicles will be able to get up to $8625 back from the government, in a rebate scheme announced today.
From 1 July people buying a used imported vehicle with low-emissions will also be able to get up to $3450 back.
Climate Change Minister James Shaw and Transport Minister Michael Wood announced details of the scheme in Auckland this morning.
The scheme will be funded through levies on high-emissions vehicles from 1 January 2022.
Wood said the clean car discount will prevent up to nine million tonnes of carbon dioxide emissions and will help with the up-front cost of switching from petrol-run vehicles.
He said changes have been made to the previous policy, or 'feebate' scheme that was revealed last year, then scuppered by New Zealand First.
"Only cars costing under $80,000 will be eligible for the discount scheme and we will also ensure that only the most safe vehicles are eligible for the scheme."
Shaw said that scheme had, however, laid down some of the groundwork for today's announcement.
"Obviously we weren't able to get it over the line, so it's good that finally we're able to do it," he said.
"I'm really pleased, as climate change minister, that we're able to do this and start putting in place some of the most fundamental shifts that we need over coming years."
He said the rebates would be available from 1 July this year for electric and plug-in hybrids.
The government is also setting up an EV sector leadership group to help to increase the uptake of low emissions vehicles.
The government said it will cost up to $5175 more to buy a new high-emission car, and up to $2875 more for a used import, like a Ford Ranger or a Toyota Hilux.
The Motor Industry Association predicts that will lead to an increase in imports of high emissions vehicles before the levies start in January.
Its chief executive David Crawford said while rebates for electric and hybrid vehicles will boost demand, the new fees will also drive sales before their introduction.
From next year some petrol and diesel cars with low emissions will also be eligible for a smaller rebate - such as Suzuki Swift or Honda Jazz - depending on their CO2 emissions.
Wood said overall eight out of the 10 most commonly purchased cars in New Zealand will either be unaffected, or eliglible for a rebate.
He said there are significant benefits to owning an electric vehicle.
"Charging your EV at home off-peak is like buying petrol at around about 40 cents per litre, depending on your electricity retailer. And battery EV motors have so few moving parts that there is less to maintain, and less to go wrong."
Under the government's new clean car scheme there will also be fast EV chargers every 75km along most state highways, and car retailers will need to display emissions information.
Shaw said the last time there was carbon dioxide in the atmosphere in the concentrations present today, there were palm trees in Antarctica.
He said that indicates how urgent it is to deal with emissions.
"Much of that has come from our transport fleet and our transport emissions as a country have been the most rapidly growing of any sector in the economy.
"So dealing with the energy that we use to get around within our cities and between our cities is the most urgent of all our climate change challenges."
He said the Climate Change Commission has also laid down the challenge to arrest emissions.
Policy punishes people who can't afford EVs - National
The National Party claims the policy will unfairly punish people who can't immediately switch.
National's transport spokesman Michael Woodhouse said while his party supports financial incentives for people to buy electric vehicles, it does not agree with financially punishing those who cannot afford them.
"I look forward to the time when utes and other larger vehicles are able to be powered by either hydrogen or electricity, but we don't have that right now and in the meantime they're going to be asked to pay a premium for the vehicles that are available for them in order to discount the vehicles of people who can afford EVs."
The policy will unfairly hurt farmers, tradespeople and low-income earners, for whom low emission vehicles are too expensive, or unsuitable, Woodhouse said.
Technologies already exist - Sustainable Business
Sustainable Business director Mike Burrell said the technologies already exist to decarbonise the country's light vehicle fleet and the costs are constantly falling.
"The commission's advice shows that the purchase price of a new battery electric vehicle will be cheaper than a petrol car by 2031, or very soon afterwards. Which is all very well - but New Zealand needs to move to lower-emissions transport, including the cars we buy, much sooner than that to meet our climate targets," he said.
Mark Gilbert, chair of Drive Electric, a not-for-profit established aimed at promoting the uptake of EVs, said hundreds of thousands of EVs would be needed to meet the government's climate targets.
He described today's announcement as "monumental" and a "step change".
"This announcement says to global car manufacturers that New Zealand is serious about EVs. We're looking forward to seeing their response, in the form of new ranges and new models, perhaps including utes eventually," he said.
On Wednesday the Climate Change Commission released its final report laying out the roadmap for the country to slash emissions and become carbon neutral by 2050.
Among its recommendations was one saying that nearly all cars imported by 2035 must be electric vehicles.
Greenpeace - More than just electric vehicles needed
Greenpeace said a government rebate for electric and hybrid vehicles is welcome news, but more investment in public transport is needed.
Greenpeace's head of campaigns Amanda Larsson said she hopes the package will be complemented by offering alternatives to cars.
"This is definitely a good step, but it is just a small step, and it would be disappointing if the government put all of its eggs in the electric vehicles basket, because that won't deliver the kinds of emissions reductions that we need to see."
Larsson said petrol and diesel car imports will need to be banned by 2030 to have an impact on transport emissions.