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It has announced the first tranche of measures that it said would help New Zealand's 2050 carbon neutral target.
Prime Minister Jacinda Ardern said today with transport making up the country's second-highest amount of emissions after agriculture, it was "important we reduce emissions from our vehicle fleet".
Transport Minister Michael Wood said the Government had agreed in principle to mandate a lower-emitting biofuel blend across the transport sector.
"Over time this will prevent hundreds of thousands of tonnes of emissions from cars, trucks, trains, ships and planes.
"There are economic opportunities for New Zealand in strengthening our clean green brand, encouraging innovation and creating jobs. It will also help our economic recovery. A biofuel mandate has the potential to create jobs and boost the economy through encouraging a local industry," he said.
Officials will consult with the public and stakeholders, with the Government expected to make a decision on the way forward before the end of the year.
The Government also outlined its plan to only purchase zero emissions public transport buses from 2025, and a $50 million commitment to help councils fully decarbonise the public transport bus fleet by 2035.
Legislation will also be passed this year to introduce a Clean Car Import Standard.
"The standard will begin next year, with the 105 grams of CO2/km 2025 target being phased in through annual targets that get progressively lower to give importers time to adjust," Wood said.
"The Import Standard will prevent up to 3 million tonnes of emissions by 2040, mean more climate-friendly cars are available, and will give families average lifetime fuel savings of nearly $7000 per vehicle."
Climate Change Minister James Shaw said these measures were a "good first step", but there would need to be "many more steps taken after this one".
"The window of opportunity we have to address the climate crisis is closing fast. Reducing emissions from transport will need to be a priority if we are to meet our targets and make sure New Zealand plays its part in keeping the climate stable.
"Together these measures will help to make our communities cleaner and healthier, and ensure the vehicles we use to get around leave a smaller carbon footprint," he said.
Ardern said the Tovernment would finalise its first three carbon budgets later this year, following advice and recommendations from the independent Climate Change Commission.
"The commission's advice is likely to ask a lot of all of us and require action in all sectors. Today's announcement is a good step towards what needs to be done."