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Some cars could be running on fuel from household waste in America and Europe within two years, and the technology could later become available around the world.
If so, waste including food scraps - rather than food sources - could provide an acceptable alternative to crop-based sources for biofuels.
Ineos, the world's third-largest chemical company, has announced it is aiming to produce commercial quantities of bioethanol fuel from biodegradable municipal waste within two years.
The production network of the global manufacturer of petrochemicals, specialty chemicals and oil products spans 71 manufacturing facilities in 14 countries throughout the world.
Ineos Bio chief executive Peter Williams said new technology was developed in Arkansas and would produce bioethanol in huge quantities from municipal solid waste, green waste, animal waste and agricultural residues.
He said changing policy in regions such as North America and Europe would see around 10 per cent of the gasoline or petrol being replaced with second generation bioethanol.
"We believe our technology will make a major contribution to reducing greenhouse gases and the world's need for fossil fuels."
Ineos bio-ethanol would release up to 90 per cent less net greenhouse gases than petrol.
One tonne of dry waste could be converted into about 400 litres of ethanol, which could be blended with or replace traditional fuels to substantially reduce vehicle emissions.
Mr Williams said the technology already proven at pilot plant scale used a simple three-stage process.
The waste was first superheated to produce gases then, through a patented process, the gases were fed to naturally occurring bacteria, which efficiently produced ethanol.
The ethanol was then purified to make the fuel ready to be blended for use in cars.
Mr Williams said car companies had already developed engines that could run efficiently on both bioethanol and conventional fuels.
"Up to now the challenge has been that bioethanol has been manufactured primarily from food crops and this has raised concerns on price and availability."
Mr Williams said the decoupling of second-generation biofuel from food was a major breakthrough, and a low-cost route to renewable fuels.
"We expect to announce the location of the first commercial pilot plant fairly shortly and we will quickly roll out this technology around the world. We aim to be producing commercial amounts of bioethanol fuel, for cars, from waste within about two years."
