Seat Ibiza Cupra

This week, it's Seat's very own, in-house carbon offset programme, featuring two new Seat Ibizas. One, which we'll come to later, is the Ibiza Ecomotive, the latest version of the low-CO2 car familiar as a prize-draw inducement with every tax-disc renewal demand. Under 100g/km CO2 rating, free road tax – how will the DVLA fund itself with this sort of carry-on?

The second is the Ibiza Cupra, the hardcore hot-hatchback version designed to bask in the glory of Seat's successes in the British Touring Car Championship and build up the brand as a maker of credible cars in which to have a good time. Frivolous? Possibly, but we in the UK still seem to like small, fast hatchbacks more than any other nation.

Besides, the Cupra, too, has a degree of eco-sensibility. The future for petrol engines lies in downsizing: making them smaller but turbocharging them to release the same power with greater efficiency and with a lighter engine. The Volkswagen group, of which Seat is the Spanish part, is an early and capable advocate of such downsizing. Three or so years ago it created a very neat, 1.4-litre engine which uses both turbocharging and, to fill the typical turbo engine's lack of energy the instant the accelerator is pressed at low engine speeds, a separate supercharger.

The result is a stream of potency from low speeds right up to very high ones, and the Ibiza Cupra uses the most powerful version yet created of this engine. It generates 180bhp from that diminutive 1.4-litre capacity, plus the sort of torque that will punch the Ibiza from just above idle speed as though it were the most muscular turbodiesel.

Now the controversial bit. Hoping to tap into what might too often be called the PlayStation generation, Seat endows the Cupra with a seven-speed DSG gearbox, a sequential unit with paddle-shifters, an automatic mode and no clutch pedal. Those who prefer their hot hatches with a normal manual gearbox are just too last-century for this car.

Doing my best to adopt the required Cupra mindset, I belt myself into a driver's seat, fire up the engine and head off for a few laps of the Bedford Autodrome. Squeezing in seven gears where you might expect six has made the lower gears surprisingly short-legged, and it quickly becomes clear that each bend is best taken in a gear one higher than instinct suggests. Through the hairpin, the Cupra is fine in third and even spins its wheels a bit until the "XDS" system – a virtual limited-slip differential which acts electronically by applying braking to the slithering wheels – smoothly cuts in.

It's great fun on the track, with quick, accurate steering and a tail willing to drift outwards when you lift off the accelerator in a corner. This it does enough to give the Cupra a pointable, agile feel but not so much as to make it unstable. Just two annoyances. The DSG gearbox won't let you downshift until speed has dropped enough for the desired lower gear not to speed the engine beyond 5,000rpm or so, which means missed shifts when piling into bends and the worry of no longer knowing exactly what gear you're in without looking at the display. And with the ESP system switched off, essential on the track to stop power being interrupted all the time, the warning light flashes distractingly while you're trying to concentrate.

Out on real roads now, with real bumps, I'm half expecting the ride to be rock-hard, as it has been in previous Cupra-badged Seats. They were thus afflicted in a misguided notion of what makes a car "sporting", but this time the engineers have done the job properly. The Cupra is taut but never uncomfortable, and it has the flow and subtlety that marks out a car created by people who understand. I'm even starting to like the DSG gearbox for its quick, smooth shifts and obedient automatic mode.

Sad to say, Seat has no plans to introduce a manual version, and the Cupra is thus denied to a lot of buyers who might otherwise consider it a credible rival for a Mini Cooper S or a Renaultsport Clio. Still, its little engine remains a miracle, and the Cupra, at £15,995, both looks and sounds the part of the compact performance car.

And the Ecomotive? Its 98g/km CO2 output equates to an official average of 76.3mpg, offsetting the thirstier habits of the Cupra, and its three-cylinder diesel engine sounds intriguing. But, as an experiment, I drove it with normal briskness instead of with a feather foot, to see what its economy is really like. Result: 46.2mpg on the trip computer, which is good but not great. Believe the CO2 hype at your peril.

The Rivals

Fiat Abarth Grande Punto: from £13,266.

Firmer, faster Punto has 155bhp turbo 1.4 engine, and is good low-cost fun. More money buys harder-edged EsseEsse with 180bhp.

Mini Cooper S: from £16,575.

Always a favourite, nowadays with 175bhp turbo 1.6 engine and as much frisky entertainment as ever. Avoid too-firm Sport suspension and wheels option.

Renaultsport Clio 200: from £15,750.

Two litres and no turbo means a high-revving route to an ample 200bhp. Cheaper Cup version is a purer driving machine but trim is basic.