Germany is doubling the funds to help municipalities avoid driving bans for old diesel vehicles to almost 2 billion euros ($2.3 billion), Chancellor Angela Merkel said.
The government had previously pledged 1 billion euros to help improve air quality, but after meeting with municipal representatives on Monday, Merkel said this program would be increased to 1.5 billion euros by 2020.
The chancellor said the federal government would also set aside an additional 432 million euros for hardware retrofits of small trucks with older diesel engines.
The government has been pushing automakers to shoulder more of the burden of retrofitting cars with insufficient exhaust filtering systems following scandals involving schemes to conceal the true levels of polluting emissions from diesel cars.
Environmental activists have sued municipalities and cities to force bans of heavily polluting vehicles in areas where levels of toxic nitrogen oxide violate European clean air standards.