The discovery of the elm leaf beetle comes just months after it was revealed the wrong species of elm has been growing on Finlay Avenue for the past two years.

Fifty-eight trees provided by a contracted nursery were found to be Scottish elms instead of English elms.

Under Heritage Victoria guidelines, any replacement trees planted in the avenue must be grafted from the original avenue trees. The incorrect species were due to be removed while they were dormant this winter and replaced with specially-grafted English elms being grown at a nursery north of Melbourne.

However, a recent inspection by members of Corangamite Shire's elm tree reference group has shown the new saplings have been affected by the elm leaf beetle.

The Friends of Camperdown Elms have now warned the insect could destroy many of the old trees which take pride of place along Finlay Avenue and in many residential gardens.

Spokeswoman Carol Eagle said efforts to control the insect, if it were to reach the town, could potentially cost hundreds of thousands of dollars.

Mrs Eagle estimated there were 2000 elms throughout Camperdown, with treatment methods costing $100 to $150 a tree.

``It's not curable - once you've got it, you've got it.''

The elm leaf beetle, which was introduced to Australia in the late 1980s, has invaded many of Melbourne's historic trees and moved as far west as Geelong.

Although the beetle does not directly kill a tree, heavy infestations can cause complete defoliation, eventually affecting its growth and reducing its lifespan.

``With the elm leaf beetle, it would be the demise of Camperdown's elms,'' Mrs Eagle said.

``I think there should be a quarantine zone.''

Corangamite Shire will discuss the problem at its meeting this week, with environmental services co-ordinator Lyall Bond confirming there are now no quarantine restrictions on the movement of the beetle.

``The impacts of it coming to the Corangamite Shire are extreme,'' Mr Bond said.

Mr Bond said the supplier had assured the council the trees would not contain any pests, including the beetle.

The shire has now sought advice from the Department of Primary Industries to determine the best method of preventing the insect from entering the district.

The council's elm tree reference group has also suggested the replanting program should be delayed by 12 months as part of a prevention campaign.