NSW drivers are being given the option to buy carbon credits to offset their car's yearly emissions when paying their registration.
Treasurer Matt Kean on Friday said the average car generated about 2.4 tonnes of carbon dioxide emissions each year but that could be fully offset with $80 of carbon credits.
"It's the first scheme of its kind anywhere in the country. We're really excited about it," the treasurer told reporters on Friday.
"We know that vehicle emissions can cause about 22 per cent of the state's total emissions.
"Fifty per cent of that comes from private vehicles.
"This is an opportunity for people to do their bit for the environment to offset their carbon emissions."
The voluntary scheme will allow drivers to purchase Australian Carbon Credit Units, generated through abatement projects around the country.
Corporate Carbon Advisory has been appointed as the offset provider partner.
Drivers can choose their offset amount, between $5 and $200, when opting into the scheme which began on Friday.
Private vehicle emissions are an increasing burden on the carbon budget of the state and the country.
The lack of emission standards and sluggish electric vehicle sales when compared to many peer countries means transport is projected to become NSW's dirtiest sector by 2030.
While the state has an EV target for the government-owned vehicle fleet, Mr Kean told reporters in December that vehicle emissions standards were a matter for the federal government.
Increased sales of SUVs and utes, where there are fewer choices for cleaner vehicles, are tempering Australia's improvement in transport emissions, the National Transport Commission says.
NSW recently lifted its greenhouse gas emissions target to a 70 per cent reduction on 2005 levels by 2035.
However, the target is not legislated - a criticism of teal independents targeting Liberal safe seats.
Quizzed on how popular the scheme would be in the midst of a cost-of-living crisis, Mr Kean said the government was not forcing the cost onto drivers.
"People who choose to do their bit to reduce their emissions, to protect our environment, whilst registering their vehicle can now have that opportunity," he said.
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