Audi has trumpeted the creation of a “wonder-fuel” made from waste carbon dioxide, grey water, and sunlight, which it says could pave the way for a new blended fuel containing as little as 15 per cent petrol.

The German car maker and US-based technology firm Joule have commissioned a demonstration facility in New Mexico that is already producing sustainable ethanol and will soon produce a diesel alternative that existing Audi TDI clean diesel systems will be able to use without the need for modification.

“Sustainable e-ethanol has the same chemical properties as bioethanol, a fuel that is consistently gaining in popularity, but which has the disadvantage of being produced using biomass,” the company said in a statement.

“It will be possible to blend up to 85 per cent ‘Audi e-ethanol’ with as little as 15 per cent fossil-fuel petrol for use by vehicles capable of running on E85 fuel.”

The biofuel is created by using photosynthetic micro-organisms that would usually use the sun’s light to multiply, but have been genetically modified to convert waste CO2 and brackish water into liquid fuels.

Audi says the secreted fuel can be easily separated from the water and concentrated without the need for any further manufacturing steps.

The advantage of the process is that it employs a completely renewable feedstock and makes use of by-products from industrial processes. It also removes the need to take over agricultural land to grow the crops that have traditionally been used to create biofuels and works best in infertile regions like deserts.

The two companies have been working together since 2011 and agreed a strategic partnership last month designed to help accelerate the development of the new technology.