The Finance Ministry said the regions eligible for the rewards were Beijing and its neighboring city of Tianjin, the provinces of Hebei, Shanxi and Shandong, as well as the Inner Mongolia Autonomous Region.
The awards would be made at the end of the year and would be determined by pollution reduction targets, investment in tackling the problem and falls in PM 2.5 particles, which are especially bad for health, the ministry said on its website.
The provinces of Shanxi and Inner Mongolia are among China's top coal-producing provinces and have been a major source of air pollution.
Smog over northern cities in January generated widespread anger as did the discovery of thousands of dead pigs in March in a river that supplies water to the city of Shanghai.
Protests over pollution in China are becoming common, to the government's alarm. Authorities have invested in various projects to fight pollution and even empowered courts to mete out the death penalty in serious pollution cases.
But the results have been mixed. Enforcement of rules has been patchy at the local level, where district authorities often rely on taxes from polluting industries.
State media said in July the government planned to invest A$286 billion (1.7 trillion yuan) to fight air pollution over the next five years.
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