Ford, the US car maker, will spend £1bn in the UK over the next six years developing environmentally friendly engine technologies and vehicle designs. The investment will cover a range of green technologies aimed at reducing carbon emissions across more than 100 car models.

The initiative will secure more than 9,500 UK engineering jobs in Coventry, Dunton in Essex and Gaydon in Warwickshire, but represents a redirection of funds that would have been spent on vehicle and engine research anyway.

Ford is the UK's fourth-largest investor in research and development. "Ford is taking green motoring into the mainstream," Lewis Booth, the chairman and chief executive of Ford Europe, said.

In an average year, the technological changes could result in carbon emission reductions equal to the total emissions of a city the size of Newcastle upon Tyne, he said. While Toyota and Honda have invested heavily in developing flagship hybrid electric cars, Ford has decided to invest in improving carbon emissions across its product range, which covers Land Rover, Ford, Volvo and Jaguar models.

The challenge is not at the top end of its range where consumers often pay more for fuel-efficient models, but in the mass market where customers are not prepared to spend more to "go green". Mr Booth said on average, the greener cars would cost about £1,000 more than current models at the retail level, but that Ford would look to offset those additional costs. Ford will develop greener versions of luxury cars at no cost to performance. One way it can do this is by using aluminium instead of steel for the car's body. Ford will also invest in developing cheaper hybrid electric cars and biofuel technology for its mass-market vehicles.

Mr Booth said: "We are not going to introduce just one or two high-profile green cars that sell in relatively low numbers and leave it at that.... We are not going to tackle climate change just with hybrids." As an example, he said future models of its Ford Focus, of which about 145,000 are sold a year in the UK, will emit less than 100 kilogrammes of carbon per kilometre, an improvement of about 20 per cent on the current model.

Douglas Alexander, the Secretary of State for Transport, commended Ford for its investment. "We can and we must do more to reduce emissions from transport," he said. However, Mr Booth urged the Government to adopt new legislation and fiscal incentives to allow competing environmental technologies to flourish. He said incentives should be based on lower carbon emissions, not the specific vehicle or fuel technology.

He said drivers of hybrid cars such as the Toyota Prius do not have to pay the congestion charge in London, despite emitting more carbon than Ford's environmentally friendly Focus, which is charged the full rate.

Richard Parry-Jones, Ford's chief technology officer, said: "The internal combustion engine will continue to play a dominant role for the foreseeable future. There is no panacea, no single thing we can do to solve this problem [climate change]."