The Government's decision to stop work on fuel economy standards for imported vehicles means the rejection of "one of the simplest and most effective" ways of reducing emissions, the Green Party says.

Transport Minister Steven Joyce announced on Friday that the Government had decided not to progress the development of a regulated vehicle fuel economy standard which was proposed by the previous Labour government.

While details of the scheme were never confirmed, it would have meant importers of less fuel efficient vehicles would have needed to buy credits, and more fuel efficient vehicles would have been awarded credits.

Green MP Jeanette Fitzsimons said stopping work on fuel economy condemned motorists to high fuel costs and rising emissions.

"New Zealand's vehicles are among the most inefficient in the world," she said.

That means New Zealand motorists had to buy more fuel, Ms Fitzsimons said.

"The reason the minister gives for this reactionary policy is bizarre - he claims it could cost those purchasing a large car up to $1500 more to buy it.

"This ignores the reason for the standard - to encourage people to buy more efficient cars, which would not cost more, and to encourage more of them into the New Zealand market."

Mr Joyce said it had been decided not to delay the existing timetable, in a move which gave the industry certainty.

"I have considerable sympathy for the motor vehicle industry as a whole at this time," he said.

Mr Joyce said the potential benefits of the scheme would have been outweighed by the cost to motorists.

The New Zealand Business Council for Sustainable Development welcomed the decision to implement the emission standards.

The scheme operates in the United States, where people are encouraged to trade in their old cars for fuel-efficient new ones and receive a credit of several thousand dollars from the Government.