The Government is defending plans to introduce a tax break for ethanol, despite a British biodiesel company's decision to shelve plans to invest more than $100 million dollars in the country.
Argent Energy's New Zealand subsidiary is blaming the Biofuels Bill, which is currently before Parliament, for its decision.
Argent says ethanol will get a Government subsidy, through relief from excise duty that amounts to 42 cents a litre. Managing diredctor Dickon Posnett says that makes production of biodiesel in New Zealand uneconomic.
The company says Mr Posnett has spent nearly two years in New Zealand working on a feasibility study for the construction and operation of a plant that would use tallow and used cooking oil to produce biodiesel.
Energy Minister David Parker conceded that without the ethanol tax break, it would have been easier for Argent to commit to the project.
However, Mr Parker says that would not achieve the Government's objectives of developing alternatives to petrol and diesel.
He also rejected Argent's claims that the bill will make biodiesel production uneconomic, saying others are already building biodiesel plants in New Zealand.