Ministers believe the scheme could help reduce global warming by subsidising drivers who switch to greener vehicles.
The Environmental Audit Committee (EAC) agreed that a ‘car scrappage scheme’ should be considered by the Treasury.
It said: "In any scheme that were implemented, it would be important to ensure high emission vehicles were genuinely scrapped - with as much of their materials recycled as possible - rather than allowed to stay on the road under different ownership, for instance in another country."
The Government announced in this year’s budget that vehicle excise duty (VED) rates will rise for existing cars with higher emissions registered since 2001. Since then, attention has been drawn to the 1.1 million car registered between 2001 and 2006, that will see their VED double from £210 to £439 or more.
Thr EAC suggested: "It makes sense to reband existing cars, since this could influence buyers of second-hand cars to choose models with lower emissions. This is especially important given that three-quarters of all car sales are second-hand."