Biofuel is part of the Government's climate change plan.

Biofuel is part of the Government's climate change plan.

Owners of used cars imported from Japan could end up paying more than other drivers for their fuel under the Government's plan to introduce compulsory biofuels sales targets for oil companies.

The price difference seems likely as the motor industry seeks a way to avoid problems that biofuels may cause in older vehicles, and the Government tries to offer incentives for people to switch to the new blended fuels.

Biofuels are part of the Government's big climate change push, and ethanol-blended fuels are likely to be flowing from service station pumps as early as next year as oil companies are forced to adopt the more environmentally friendly option.

The winners from the potential price difference will be the owners of cars which can run on biofuel blends of 5 per cent or more.

They will get the benefit of the Government forgoing excise tax on biofuels as a way of promoting them.

But the revenue lost in this move could be recouped by putting up the tax on non-biofuel petrol.

That would hit drivers whose cars cannot use biofuels - and older Japanese imports have been identified as among vehicles likely to have problems.

The fuel tax change is suggested in the Biofuel Bill, which predicts an $85 million revenue loss from the biofuel discount between next year and 2012.

And it says this cost "may be offset by increasing the excise on petrol".

The legislation, introduced into Parliament yesterday, sets a mandatory biofuel sales target for the major oil companies of 3.4 per cent of all combined petrol and diesel sales by 2012.

There is still uncertainty over how one million imported used Japanese cars will cope with the new blended fuels.

Car-maker representatives who are unwilling to guarantee there won't be a problem are endorsing a plan that would result in owners of those vehicles paying more to get non-biofuel petrol.

Motor Industry Association chief executive Perry Kerr yesterday said the solution to the confusion over potential car problems was to make New Zealand's highest selling fuel - 91 octane - the biofuel option.

Owners of cars unable to use the biofuel would then pay more for higher octane fuels without added biofuel. "To be on the safer side, they'll have to buy 96 octane fuel," Mr Kerr said.