The Government is eyeing up the possibility of using forestry waste to create a local biofuels industry.
The Ministry for Primary Industries (MPI) on Monday said it was currently in the process of working on a business case to establish the sector.
If it went ahead, the industry would use the residues of trees milled in New Zealand to produce biocrude, liquid and solid biofuels.
Jason Wilson, director of sector investments at Te Uru Rākau New Zealand Forest Service, says the move would help the country transition away from fossils fuels such as coal and petroleum.
"Tackling climate change is an ongoing priority for Government," Wilson said.
"Investigating the potential to manufacture biofuels from New Zealand wood could supercharge our efforts and deliver significant returns for our forestry and wood processing sector, rural communities, and economy."
He said although a biofuels industry had the potential to provide new jobs and boost regional centres, it would require "significant investment", so it's crucial a thorough business case be carried out before any further moves are made.
"We're excited by the potential of producing biofuels in New Zealand and we are committed towards working with the forestry and wood processing sectors to explore this opportunity, which could have lasting benefits for New Zealand."