The first of two applications for funding is for around £3.8m which would finance a study into the possibility of introducing revolutionary hybrid trams which can also run on rail tracks.

Blackpool's regeneration company ReBlackpool revealed in February that it was pursuing the option of running so-called tram-trains on the South Fylde line which would enable passengers to travel all the way from Fleetwood to Preston as part of a ground-breaking light rail system.

ReBlackpool chairman Sir Peter Hall is stepping down from his role in order to develop the project based on German technology.

Blackpool is bidding in partnership with schemes from Germany, Holland and France.

The council has now agreed to a submission for cash from the European Regional Development Fund which would be matched by the Northwest Regional Development Agency.

ReBlackpool chief executive Doug Garrett said: "A bid has been put together for money which would enable us to look at the feasibility of this project. It would put us in the position of having the information we need to to allow us to progress with a scheme of this nature or to look at viable alternatives."

A council report says: "The scheme requires co-operation and collaboration with a number of European partners to share ideas and experiences."

The second bid being put together is for around £1.3m, comprising European funding and money from the existing tramway budget, to investigate the best way of building a new tram depot in an urban setting.

The bids, which have been agreed by Blackpool Council's executive, will be submitted either this month or as part of the next round of submissions in September.

Blackpool secured the £85m it needs for a full upgrade of the existing tramway, including a fleet of 16 new trams, at the end of January this year.

The first hybrid trams to arrive in the UK will be tested in Sheffield in 2010.

It could cost up to £50m to introduce hybrid trams, which switch from electric to diesel power, on the Blackpool line.