There is an environment cost to manufacturing a car, any car. Sure in the long term, more efficient is better is better for the environment, but you want to amortize the harmful costs of manufacturing (and discarding) cars by getting as much use as possible.
In other words, a policy like this would require a fair bit of balance (make sure cars stay on the road for long enough), otherwise it risks increasing pollution.
As long as it's measured by MPG per occupied seat. Our family fills our Dodge Durango and gets better MPG per occupied seat than a single driver Smart car.
If you get 10-18 MPG... you must pay 10 times the registration fee that a 40-50 MPG hybird pays.