The Government is to repeal a requirement for oil companies to sell some biofuel.
It says there is not enough local production of biofuel to meet the requirement and importing biofuel creates more emissions.
Under the policy, 0.5% of the total fuel sold by petrol companies has to be biofuel, which is seen as a cleaner alternative to petrol.
The Government says a compulsory quota is not helping the environment and plans to introduce legislation to repeal the law next week.
Instead, it will consider tax adjustments to encourage use of biofuels.
Energy and Resources Minister Gerry Brownlee told Morning Report there will be other uses for local bio-fuels, such as hospital and school boilers.
Dunne against repeal of law
The Government's support partner, United Future, is to oppose its repeal of the law.
Party leader Peter Dunne says the move will potentially bury a 100% sustainable tallow-based domestic biofuel industry.
Mr Dunne says environmentally conscious consumers will be forced to buy an imported product, uncertain if it is made sustainable source.
Former Energy Minister David Parker says the scrapping of biofuels legislation is killing a fledgling industry and costing New Zealand jobs.
Mr Parker says National is putting politics ahead of not only the environment, but the economy and employment at a time when the country needs jobs.
He says he has been contacted by a company that has invested more than $10 million in local biodiesel production.
Mr Parker says it stands to lose everything, as well as the 48 jobs created by the business.