The Parliamentary Commissioner for the Environment advocates planting millions of hectares of pine forest to produce bio-fuel.
A report tabled in Parliament on Thursday by Commissioner Jan Wright said current biofuels made from waste meat tallows, whey and algae will always be limited by a lack of supply.
Dr Wright said only fuels made from wood could properly replace diesel in this country.
She said attempts to incorporate biofuel use by both the National and previous Labour Governments only tinkered around the edges and it's time to start thinking about how to produce fuels on a large scale.
A Government subsidy scheme of about 40 cents per litre has failed to lift production, although the range of eligible fuel blends was expanded last month.
Dr Wright also said New Zealand should not lock itself into large fossil-fuel factories like a lignite factory in Southland proposed by Solid Energy.
However, Lincoln University Ecology Professor Steve Wratten says people do not want more pine forests and the land could be better used for other fuel crops.