Motorists stuck in neutral because they feel guilty about their environmental impact can now choose an insurance policy that is eco-friendly and cuts costs.

If you drive a fuel-efficient car or you're looking for a new vehicle that will be kinder to the environment, shop around among insurance companies and you could be rewarded with a discount on your comprehensive insurance premium.

Even if your car doesn't qualify, for less than $1 a week (depending on the size of your car) you can buy carbon credits separately to compensate for your car's carbon emissions.

Insure for less

If you own a hybrid vehicle such as the Toyota Prius or Lexus 450 GS that relies on a combination of electricity and one or more fuel types, you will pay 10percent less on your comprehensive car insurance if your policy is with Suncorp or GIO.

The discount applies to about 40 energy-efficient cars compiled by the NRMA. These include vehicles using 5.5litres or less per 100kilometres and models such as the Daihatsu Charade, a number of Hondas, Fiats and Peugeots, and the Volkswagen Beetle and various Golf models. Head of research at NRMA Robert McDonald says the savings have been popular: "Since we introduced the offer, we've seen a 55per cent uplift in the number of customers saving on their premiums because they drive a fuel-efficient car."

Save and feel good

An insurance product called Ibuyeco, owned by the Budget insurance group, says its comprehensive car insurance premiums are not only cheaper than many insurers but also have a component that offsets the carbon emitted by your car. Part of the premium is given to Greening Australia, a not-for-profit environmental organisation involved in large-scale landscape projects to encourage less carbon.

Ibuyeco's premiums certainly appear competitive (see case study). Putting its claim to the test, we compared quotes from NRMA and Ibuyeco for comprehensive car insurance for a 2004 Suzuki XL-7 five-door automatic wagon.

Both policies were based on a $600 excess, market-value replacement price, top no-claims discount and an annual premium (always cheaper than paying by the month). The NRMA quote was $1027.91 while Ibuyeco's was $795.49 (including offsets for 3.92tonnes of carbon based on the car's mileage of 12,501-15,000km a year).

Bear in mind, though, that the NRMA quote could be lowered substantially through multi-policy discounts and loyalty discounts if you've been with the insurer for years.

"It is extraordinarily difficult to get people to completely change their driving habits and it's very difficult to change their desire for a certain size of car," says Jonathan Kerr, associate director of Ibuyeco. "Instead of ... offering insurance discounts for smaller cars ... we are able to offer a good price and our quote includes a 100percent offset so you can be carbon-neutral."

Pay for offsets

Should you be happy with your current insurance cover but want to offset your car's carbon emissions, have a look at http://www.climatehelp.com.au, an NRMA initiative. Its carbon calculator helps you work out the impact your car has on the environment based on the size of its engine and your annual mileage.

As an example, for a medium car (defined as one with an engine size of 2-2.9litres) with an estimated mileage of 10,000 to 15,000km a year, the calculator shows annual emissions of 2.8tonnes. You can offset this at a cost of $43.90 a year, or about 84cents a week.

Greener options

Case study

Photographer Nicholas Purcell did not set out to lessen his household's impact on the environment when looking for new car insurance - it was a happy accident. He compiled a list of 10 motor insurance companies and asked each for a quote. One was Ibuyeco, part of Budget Insurance, whose premiums include a carbon offset service. "Their rate was very competitive [and] had the added advantage of carbon offsets, so that was the decider for us," says Nicholas. Fuel efficiency was part of the reason he and his wife Anna chose their Toyota Corolla. Now they're able to offset their car's carbon emissions at no extra cost. "The premium was cheaper than some of the more well-known insurance companies and it means we're able to ... minimise our footprint without it costing us any more," says Nicholas. Ibuyeco's carbon offset activities are managed by environmental group Greening Australia.