The Bioenergy Association has put out a call for the government to renew its biofuel subsidies to avert the "death" of the industry.
The association says the biofuel industry could supply 30 percent of New Zealand's domestic fuel needs by 2040 using fuel made from dairy industry byproducts, used cooking oil and wood.
The current support scheme that provides subsidies worth $36 million for biofuel production ends in June and the government has not said whether it will continue. An excise tax exemption for ethanol is due for review this year as well.
"The end of the support for biofuels would mean the death of biofuels and New Zealand should not allow this to happen," said Kevin Snowden, convener of the BANZ Liquid Biofuels Interest Group
BANZ Brian Cox executive officer said because of the ongoing uncertainty, sales of biofuels were already beginning to slip.
He said governments around the world supported their own biofuel industries and hundreds more jobs could be created in New Zealand if there was continuing support from the government that provided investor confidence.
But energy minister Phil Heatley told Radio New Zealand there were few takers for the scheme with less than $3 million of the money allocated being taken up.