Renewal of a biofuel subsidy by the Government is urged by the Bioenergy Association before it ends in June.
The association claims the biofuel industry could supply up to 30% of the New Zealand's domestic fuel needs, using fuel produced from dairy industry by-products, used cooking oil, wood and New Zealand-grown canola.
Since 2009, a biodiesel grants scheme has provided subsidies worth $36 million for biofuel production, but the scheme ends in June.
The Government has yet to say whether it will be renewed.
The association says the subsidies have enabled a five-fold increase in biofuel sales over the past three years and many fleet owners are keen to switch to the cleaner, greener fuel.
But executive director Brian Cox says the Government has indicated it won't renew the scheme and sales are already beginning to tail off.
He says uncertainty is also deterring would-be investors.
However, Energy and Resources Minister Phil Heatley says there were few takers for the scheme.
He says less than $3 million of the money allocated was taken up, which is hardly an enthusiastic response.
Mr Heatley says these are difficult times and it's possible the money could be better spent elsewhere.
The scheme was reviewed at the end of last year and Cabinet is now considering the outcome of that review.