Prime Minister Jacinda Ardern has said the Government considered an exemption but decided against it, adding that many ute owners were "not using them for the legitimate use as those who work in the primary sector and the trades".
The feebate scheme had been in the works since 2019, part of the Government's plan to slash carbon dioxide emissions in the transport sector by 40 per cent by 2025.
The scheme was ready early last year to go but work was halted mid-2020, a briefing noted, before resuming this year.
One of the risks raised by officials about the scheme was how it would impact those who needed utes for "genuine" reasons, and whether an exemption should be included.
A briefing in March from the Ministry of Transport advised against such an exemption stating the high sales of utes and "very high emissions" contributed to "significantly raising" the country's emissions.
It said if there were an exception it should be "as time-bound, limited in scope and limited in financial value as possible".
Options suggested in another paper in May considered a 50 per cent reduction for between 12 to 24 months for farmers subject to conditions, including requiring a farm environment plan, meeting certain emissions levels and having that threshold lower as lower emission and zero-emission vehicles become available.
In a Cabinet Business Committee paper, Transport Minister Michael Woods said while many utes were purchased for "productive workhorse use, the rapid acceleration of uptake is linked to their purchase for lifestyle reasons".
"The popularity of high-emissions utes in New Zealand is incompatible with transport decarbonisation."
Some would be able to purchase lower emission SUVs and hybrid and electric options, but he noted some drivers "with genuine need for 4WD or open-tray format vehicles will have little ability to avoid paying a fee".
There were several hybrid and electric ute options expected on the market in the next one to two years, he said.
As utes were over $60,000 it was suggested they would not be "sensitive" to a fee of a few thousand dollars.
The paper noted the Ministry of Transport, Waka Kotahi and the Ministry for the Environment all recommended no exemption for utes of the emissions impact.
The Green Party had also indicated support, it said.
For those reasons Wood said he advised against granting an exemption.
Other papers released discussed the potential risks associated with the scheme, particularly a lack of affordable electric vehicles on the market.
A Ministry of Transport Regulatory Impact Statement said there may be insufficient affordable EVs or other low emission vehicles to choose from to satisfy that demand.
"It may be many years before EVs become a mainstream product in a balanced, mature market. In the initial stages of EV market growth, demand could well exceed supply."
Many vehicles that would receive a rebate would be at prices out of the reach of lower-income households and it would take time before they became affordable, the paper said.
"There is a perception risk that feebate rebates would favour the well-off."
There was also a "fairness risk" related to the limited range of low emission vehicles, particularly affordable low emission "utes, vans, light trucks and people movers".
"The risk could be mitigated by delaying the introduction of the feebate scheme, but the overall impact on New Zealand's emissions is very undesirable," the paper said.
Officials warned the system could cost more than budgeted, and recommended the government operate a fund that would smooth out the effects of under and over fee collection.
