Its chairman, Tim Yeo, told the BBC this morning that it is an urgent issue.
"We don't want them to stop driving, but we want them to choose the greenest car.
"They need the biggest possible incentive, that's why the government should be even bolder - really penal rates for high-emission cars and really attractive 'carrots' so that tax is almost nothing on the greenest models," said Yeo.
And because three of every four cars bought were second-hand, the tax should apply to old as well as new cars, he argued.
The committee's report, VED As An Environmental Tax, supports the tax hikes but says the cost difference between tax bands is too little to make consumers switch to the greenest models.