The proposed 25 London Congestion Charge for the most polluting vehicles has been scrapped by new mayor Boris Johnson.
Former mayor Ken Livingstone had planned to raise the daily levy from 8 to 25 in October, prompting car maker Porsche to bring a legal challenge.
Under the plans, cars that emitted less than 120g/km of carbon dioxide would have entered the zone for free.
One study said the plan would encourage smaller vehicles to enter the zone, increasing congestion and pollution.
Johnson said abandoning the proposal would save Transport for London (TfL) 10 million earmarked for the scheme. He said his decision was in keeping with his aim to achieve a 'fairer and more effective' Congestion Charge.
'I am delighted that we have been able to scrap the 25 charge, which would have hit families and small businesses hardest,' said Johnson. 'I believe the proposal would actually have made congestion worse by allowing thousands of small cars in for free.'
Livingstone said the decision was a further blow to London as a ground-breaking city to tackle climate change and improve the environment.
He added that rather than saving money, 'London will lose 30-60m expected annual revenue from the scheme.'
The proposal to charge the highest emitting cars 25 had been met with a legal challenge by Porsche. Its managing director, Andy Goss, said: 'The charge was clearly unfair and was actually going to increase emissions in London.'
Transport for London was ordered by the High Court to pay Porsche's legal costs, which is expected to be a six-figure sum. The manufacturer has announced the money will go to youth charity Skidz.