The government is planning to fit 1,400 older buses with devices that will cut their nitrogen oxide emissions by over 60 per cent.
The Environmental Protection Department is seeking HK$400 million for the project after seeing the results of a 17-month trial which showed the equipment can reduce emissions by between 63 and 81 per cent.
Six buses that were built to Euro II and Euro III specifications of the 1990s were fitted in 2011 with selective catalytic reduction devices, or SCRs. Their emissions were reduced to levels comparable with Euro IV buses that used technology a decade more modern, the department said.
There were also no unacceptable emissions of other pollutants, such as carbon monoxide and total hydrocarbons.
The department said the trial showed that the retrofit was technically feasible for the Euro II and Euro III Dennis Trident and Euro II Volvo Olympian models - although there had been some maintenance and operational problems which were fixed.
Four other Euro II and Euro III models could also be retrofitted, it added.
"We propose to fully fund the franchised bus companies for the capital costs of retrofitting SCRs for some 1,400 Euro II and III buses, including the buses selected for the pre-qualification trial," the department announced.
The companies - KMB, Citybus, New World First Bus and Long Win - will be responsible for the subsequent operational and maintenance costs.
They will also be responsible for carrying out the retrofitting project, which should start in April 2015.
The cost of retrofitting a bus with the device was estimated at about HK$250,000 each, and HK$350 million will be required to complete the job in all 1,400 eligible vehicles.
Allowing for about 15 per cent contingency to cover inflation, foreign currency fluctuations and prices of precious metals, the budget for the programme was about HK$400 million.
The department said it would seek approval from Legco's finance committee for funding next month if the environmental affairs panel endorses the project, which was scheduled to be completed by the end of 2016.