Fuel laundering could be "virtually eliminated" in early 2015 after the introduction of a new fuel dye to help detect smuggled diesel.
Revenue and Customs in Northern Ireland have said that the new dye will make it easier to detect illegal fuel and move towards eliminating the practice by spring of next year.
The dye will also be used here, where the issue of illegal fuel has been problematic in border counties.
It will be used to mark tax-rebated fuel that is intended for agricultural use and will be far more difficult to remove than the dye that is currently used.
The new dye will come into use early next year.
Organised crime gangs had become proficient at removing the dye currently used by adding chemicals to launder the fuel, which then caused damage to car engines.
A spokesperson for Revenue said that the problem is so significant that no reliable figure can be put on how much illegal fuel costs the exchequer.
"There is no reliable estimate of the scale of illegal activity in the fuel sector but it is a significant threat to Exchequer revenues," she said.
Since 2011, more than 130 filling stations have closed across the country.
In that time, Revenue has seized more than three million litres of fuel after shutting down 29 illegal fuel laundries.
Six convictions have been secured for fuel laundering in the past 18 months and a further 16 prosecutions are underway.
SIMI Director Tom Cullen welcomed the new initiative and said that it would help to increase legitimate competition with petrol stations and promote cleaner motoring.
"This goes right down to vehicles being damaged by contaminated fuel and we are seeing that at the moment with petrol stretching," he said.
"Hundreds of millions of euro go out of the economy because of fuel laundering and the loss of taxation to the state but the clean up of these operations is also an expense," he added.
"Millions of gallons of contaminated fuel make their way into local rivers and drains every year and then councils have to clean this up, so the environmental costs are massive."