Running New Zealand's entire vehicle fleet on home-grown and manufactured biofuels is the big vision behind a research project involving two state-owned agencies and a US-listed company.
Forestry research institute Scion and AgResearch are teaming up with Diversa Corporation to look at converting New Zealand "biomass", such as pinus radiata, eucalyptus and grasses, to feedstocks for biofuels, such as ethanol.
"The key point is [that it could be] something we can do here in New Zealand that is hopefully going to enable us to balance the challenge of renewable energy sources with sustainable land use," said Scion's chief executive Tom Richardson.
New Zealand, with about 7 per cent of its land in plantation forests, was "comparatively competitive" at growing biomass, he said.
"Given the size of the biomass potential in New Zealand and the size of the vehicle fleet ... there is the real potential to be self-sufficient," he said.
The three organisations have already investigated the potential for Diversa's enzymes to convert New Zealand-grown trees into sugars, which could be fermented and refined into ethanol and other products.
Richardson said the enzymes worked "surprisingly well" with radiata and eucalyptus but the process was not yet cost-effective.
So the new study, due to be finished by June, was looking at how the technology can be best applied here and how a commercial biofuels industry could run in this country.
"The big piece of the puzzle ... is what does it actually look like in the commercial context," said Richardson.
New Zealand already had a pulp and paper infrastructure and part of the study would be evaluating how this could be "re-tooled" for biofuels production.
If the results of the study were positive, the three organisations would work together on developing a biofuels industry here.
Richardson said there were already unnamed commercial parties interested in investing in a biofuels infrastructure in New Zealand if the business case stacked up.
Billions of dollars of investment would potentially be needed, he said.
Scion said biofuels had the potential to pump less carbon into the atmosphere because they burned cleaner than petrochemicals - research was to be conducted into just how much cleaner they were.
Diversa's chief executive, Edward Shonsey, said successfully developing new cocktails of enzymes to convert wood to ethanol "could really change the paradigm of energy thought and policy".