Just a few years ago, there was little incentive for anyone to buy a ‘green’ or hybrid car. Such new environmentally friendly vehicles struggled for street cred next to the more speedy gas guzzlers of old. It seemed that only if you had a real passion for environmental change would you consider opting for an eco-car, and even then you would run the risk of general ridicule.

But the world has changed dramatically and more people than ever are not just facing up to fears of climate change but are looking to do something practical about it. In early 2006, More Than insurance conducted a survey that revealed that up to one in six people would consider switching to a hybrid car. Since then, sales of hybrid cars have doubled in the UK. Figures from the Society of Motor Manufacturers (SMM) show that 6,538 hybrid vehicles were purchased in 2006 to 2007 – while in 2005 to 2006, just 3,117 cars with auxiliary batteries as power sources were sold. Meanwhile, the SMM figures also reveal that sales of sports utility vehicles dropped by a not insignificant 12%.

Car insurance companies have wisely responded to the switch in consumer behaviour by offering ‘eco-friendly’ policies. CIS was one of the first companies to offer ‘ecoinsurance’. The policy offsets 20% of your car’s CO2 emissions by investing in projects like reforestation, renewable energy sources and third-world education schemes. It also offers a 10% discount for cars in tax band A - those that emit less than 100g of CO2 per kilometre. It also appoints repairers that only use recycled materials - a package of incentives that should rightly please the more environmentally minded.

More recently, other car insurance companies have come out of the eco-friendly woodwork. More Than offers all new customers free carbon offsetting for the first 3,000 miles, if you buy your insurance online. Drivers with hybrid, electric and alternative fuel vehicles are also offered a discount of up to 15%. Newly launched Ibuyeco also enables drivers to offset 100% of their carbon emissions. It offers two quotes - one for your premium and another to offset your emissions.

Although you need to look at all premium payments carefully before making a decision on your insurance, it also seems that some of the eco-friendly policies are competitively priced. CIS, for example, offers a good premium on a quote for a 35-year-old teacher driving a 2004 1.5l Toyota Prius (£307.83 compared to £339.15 with Tesco or £347.55 with Direct Line).

Most of us have been moved to consider environmental issues in recent years and it is good to see that insurance companies are responding to consumer pressure by providing policies that encourage motorists to go green. "Drivers are becoming more and more concerned over the impact they are having on the environment. By providing eco-friendly insurance policies, companies are giving motorists a real incentive to become environmentally friendly without having to sacrifice their cars," said Sophie Neary, product director at BeatThatQuote.com.

Neary also added some words of warning, however: "Some drivers may be spending more than they need to on car insurance - for example, opting for third party, fire and theft cover when a fully comprehensive policy can be cheaper. It is great to look at insurance incentives that suit your way of life, but be sure to remember your premium costs and to continue to compare policies carefully for the best deal." Quite simply, eco-friendly policies may be good for the heart and the head, but don’t let a passion for the environment stop you from seeing the bigger picture in getting the best deal you possibly can for whatever car you decide to drive.

Caroline Poynton is a financial journalist who writes for Beat That Quote about loans and other personal finance topics.