California has dropped plans to halve petroleum use in vehicles by 2030, after intense oil industry lobbying.
Governor Jerry Brown and other senior lawmakers had included the proposal in a climate change bill, but were forced to retreat amid growing opposition.
State senate leader Kevin de Leon, who supported the cut, accused oil firms of deploying “scare tactics”.
The leaders have vowed to push ahead with other reforms, including boosting renewable electricity use.
“I’d say oil has won the skirmish, but they’ve lost the bigger battle,” Mr Brown said.
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