The European Commission has approved €60 million (£53.8m) of funding for low emission buses and supporting infrastructure in Portugal.
It was initially unclear whether the environmentally friendly plans, which would reduce the greenhouse gas emissions of each bus by at least 15%, would be in line with EU state aid rules.
The Commission considered public funding appropriate to incentivise uptake of the green buses and mitigate the financial risks involved.
It said aid is to be limited and proportionate as the beneficiaries will be selected through an open tender process and the support will only cover the cost related to the set-up of the recharging/refuelling infrastructure.
The buses may run on natural gas, electricity or hydrogen. The Portuguese government will support 85% of the eligible costs through EU funding, with bus operators bearing the remainder.
Commissioner Margrethe Vestager, Head of Competition Policy, said: “This measure will help to improve air quality in Portugal and is aligned with Europe’s objective to reduce emissions. It supports the transition towards greener public transportation in urban areas without distorting competition.”