Mandatory biofuel obligations have been repealed after Parliament passed legislation under urgency on Wednesday afternoon.
The legislation was passed by a slim majority of 62 to 59 because two of the Government's support partners - the Maori Party and United Future - opposed the move.
ACT was the Government's only partner to support the move under its commitment to back its 100-day plan, but did voice some concern.
Earlier, the Government said it was considering using a tax incentive to encourage biofuel production after the mandatory biofuel obligation for petrol companies was repealed.
The Biofuels Act, which came into force in October, required a proportion of petrol and diesel sold to be sourced from biofuel.
Energy Minister Gerry Brownlee said the mandatory obligation would have loaded unspecified costs on consumers and meant the importation of biofuel with no guarantee that it had been sustainably produced.
But the Green Party said there was a clause in the legislation that required biofuels to come from sustainable sources and sustainability standards could have been in place by the middle of next year.