Honda is planning a hybrid version of every model within five years as part of a massive investment in green cars.

The firm was one of the first manufacturers to offer a petrol/electric hybrid car when it launched the radical Honda Insight in 2000, followed by the Civic IMA in 2003.

It revealed a major development of its hybrid system that achieves a 5% fuel economy improvement over the old model, which will debut in the new Civic next year.

The system combines a 1.3-litre petrol engine with an electric power unit to offer a variety of power combinations. When stationary, the petrol engine switches off. At low speed, the engine runs in electric only mode.

During braking, a dynamo is engaged to recharge the battery.

The petrol motor only needs to be used when accelerating hard or travelling at high speed.

Experts believe the system would also suit the Jazz supermini, the CR-V soft-roader and the FR-V people carrier. The Accord is also thought to be in line for a hybrid option eventually, along with the all-new Legend.

To strengthen its green credentials, Honda revealed this week that its 200-strong dealer network had already introduced the colour-coded environmental labels officially launched by the Government last week.

The labels, similar to those found on fridges, give an at-a-glance comparison of the CO2 emissions of cars.