The system, known as an Algae Photo Bioreactor (APB), is designed to be installed at mines and power plant facilities to capture up to 85% of the greenhouse emissions produced on-site.

The technology - being developed by Perth company APBe - captures carbon dioxide and nitrous oxide emissions from industry, directing the gases into an enclosed where the gases are absorbed by the algae growing within.

Algae contained in these modules are harvested and then de-watered, dried and mechanically pressed to extract oils to produce biodiesel.

The technology is being developed by environmental engineer Stephen Clark, environmental designer Peter Galloway and environmental scientist Jason Haydock, who recently set up APBe.

Clark told PNN's sister publication, EnvironmentalManagementNews.net that a big advantage of producing biofuel in this way was the fast rate at which algae grows.

"Microalgae are the fastest photosynthesising organisms known to man," he said.

"They can complete an entire growing cycle every few days and can produce 100 times more oil per hectare a year than conventional soil based crops that are now being grown for biofuel use."

APBe is hoping to raise $1 million from investors to build a demonstration plant in Mandurah, south of Perth. It is expected to take about three months to build the facility.

Clark said APBe is the only Australian company currently working on commercialising the technology but there were about five to six companies around the world also developing similar technology.

One of these companies is Green Fuel Technologies, a US company that has signed a licensing agreement with The Victor Smorgon Group (VSG) headquartered in Melbourne. The deal grants them an exclusive license to distribute, install and operate Green Fuel's Emissions-to-Biofuels technology throughout Australia and New Zealand.

Under the terms of the signed deal, VSG will establish a small plant at Hazelwood in Victoria's Latrobe Valley to test the process.

Royal Dutch Shell and HR Biopetroleum, a US developer of microalgae production technology, also struck a deal recently to construct a pilot facility in Hawaii to grow marine algae and produce vegetable oil for conversion into biofuel.