Environment secretary Michael Gove is expected to reveal details of a targeted diesel scrappage scheme before July 31.
The Government has until Monday next week to publish a final revised UK Air Quality Plan for tackling nitrogen dioxide and it is expected the scrappage scheme plans will be part of measures set out in the plan.
According to The Times, the original plan of £500 million to fund a diesel scrappage scheme and £250m to help local councils launch clean air schemes “has evolved significantly".
The source from the Times also says Gove is expected to introduce new tests for diesel toxicity levels that go further than current EU standards.
Gove has previously criticised the EU testing regime over how it enforces emissions standards. The Government has also refused to rule out further changes to VED in the Budget this autumn.