The DETR said councils will have the chance to design transport schemes which suited their particular needs, subject to the approval of the secretary of state.
Workplace parking and road user charging to discouraging traffic in towns and cities will be options.
Councils will also have robust powers to require higher standards from bus operators. There will be two strands, Quality Partnerships and Quality Contracts.
Quality Contracts will allow councils to draw up contract specifications for bus services and let them after a competitive tender.
The Local Government Association welcomed the legislation. LGA transport chair Mark Dowd said: 'The introduction of levy charges will give local authorities a real chance to tackle pollution from work-based care journeys and, we hope, encourage people to take a longer-term view of their transport habits.'
But he wanted to see councils play an even bigger role in local transport issues.