The scheme had been announced by the previous Fianna Fail/Greens Government, but hadn't been signed off by them.
In the scheme, all vehicles with CO2 emissions of less than 75g/km CO2 emissions will be eligible for a purchase subsidy of up to €5,000.
Qualifying vehicles sold after 1 January 2011 are eligible for the grant, and a total of €5m has been allocated for this purpose.
The aim is to have 10 percent of vehicles (approximately 220,000) powered or part powered by electricity from the grid by 2020.