The company is one of 20 consortia set to take part in the project, which is being undertaken by the Office for Low Emission Vehicles and Innovate UK.
The freight industry accounts for about one third of the UK's transport carbon dioxide emissions, and the initiative is designed to increase the number of electric vans and lorries running as hybrids or on hydrogen dual-fuel.
Avid will work with Magnomatics, a high-technology company formed in 2006 as a spin-out from the University of Sheffield, to implement its Magsplit hybrid system into trucks. These will be operated by Calor as part of its delivery fleet.
In a year-long trial, two 18-tonne DAF trucks will be fitted with Magnomatics' transmission technology which has the potential to reduce carbon dioxide emissions by one million tonnes a year by 2025.
Ryan Maughan, founder and managing director of AVID Technology, said: "Climate change, urban air quality and the rising cost of energy are major issues of our time.
"The energy consumption and exhaust emissions of heavy duty vehicles are a major contributor to these issues, despite being essential to everyday life.
"Over the past 11 years, we have developed the skills and know-how which gives us a unique position in the market place, leading to our involvement in this prestigious project.
"Our mission is to help our customers improve the efficiency and emissions of their vehicles and machinery through the design and manufacture of electrified ancillary systems for heavy duty and high performance vehicles."
Transport minister John Hayes added: "This project will help cut vehicle emissions, improve air quality and reduce pollution in towns and cities. "This is yet another important step towards this government's commitment to reduce carbon emissions from transport to help tackle climate change."