Bus operators and councils can bid for the money which they can then use towards the additional up front cost of buying low carbon buses.

A Low Carbon Emission Bus (LCEB) is a bus that is able to achieve the LCEB target for Greenhouse Gas Emissions, which is equivalent to a 30% reduction in its Greenhouse Gas Emissions compared to a current Euro 3 diesel bus of the same total passenger capacity. These buses will all meet the latest air quality standards, delivering at least Euro V EU emission standards. Low carbon buses currently make up just 0.2% of buses on the road.

The funding will support investment in more low carbon buses as well as addressing the information gap about their performance by requiring the winning bidders to share information with others in the industry.

The first round of the Green Bus Fund competition was run in 2009 with the winning 24 bidders announced in December 2009. The 24 winners are sharing £30 million (US$45 million) which is supporting the purchase of around 350 new low carbon buses. This second round will see an additional £15 million being awarded in 2010.

Bus operators and local authorities will be able to bid for funding towards 90% of the difference between the cost of a LCEB and the cost of its standard diesel equivalent. The Department will assess the bids against published criteria and will award grant to the winners. This grant will help to meet the upfront cost of the vehicles.

The fund is also available for very low and zero emission vehicles, such as electric vehicles, and the Department would be interested in receiving bids which covered the demonstrations of such buses in regular use for services.