The early attempts in New York to encourage the switch to hybrids were struck down as illegal by a federal court of appeals. According to Greencarreports.com:

"The city's Taxi & Limousine Commission (TLC) first required that new taxis put into service since last October must achieve an EPA rating of at least 30 miles per gallon on the city cycle.
When that was struck down, it altered the rules to require fleet owners to raise their daily lease rates for hybrids, but lower them for the de facto taxi, the Ford Crown Victoria sedan -- which gets only 12 to 14 miles per gallon in urban use."

Only the federal government can mandate fuel-efficiency and emissions standards, which is the basis of the ruling from the federal court of appeals.

While one can see the plight of the taxi companies, and especially the individual drivers, when a city raises prices or levies fines aimed at forcing a switchover to hybrids, it's still unfortunate that the good intentions -- reducing emissions in already-crowded cities -- are being blocked by the law. It just goes to show that widespread acceptance of hybrid and other alternative-fuel powertrains face more than technological hurdles on their way to widespread acceptance.