Fuel derived from eucalyptus trees could be the fuel of the future for the airline sector, says Virgin Group Chief Executive Officer Richard Branson.

Virgin Australia, the country's second biggest airline, announced it was working with Melbourne's Renewable Oil Corp. and Vancouver's Dynamotive Energy Systems to work toward developing a commercial plant in Western Australia to create biofuel.

The consortium plans to use fast pyrolysis technology developed by Dynamotive to process the native mallee species of the eucalyptus tree.

Speaking Wednesday at the Asia Pacific Cities Summit in Brisbane, Branson said, "Obviously Australia has a lot of eucalyptus trees and, if we are correct, it would be a wonderful fuel for the future which won't eat into the food supply," The Sydney Morning Herald newspaper reports.

Renewable Oil, which identified the mallee tree as a promising biofuel feedstock, is Dynamotive's Australian partner and develops biofuel projects in Australia.

Virgin Australia Chief Executive Officer John Borghetti said the company has been working with stakeholders across the industry the last few years to research and develop bio-derived renewable fuels that can "progressively replace" conventional aviation fuels.

"We believe this new project has great potential given the results with the technology and the availability of this unique Australian feedstock. It is also particularly attractive to Virgin Australia because it aligns with our commitment to supporting the Australian economy and environment, and encouraging Australian innovation," Borghetti said in a statement.

The demonstration unit is expected to be operational next year, followed by the construction of a commercial-scale plant, which could be operational as early as 2014.

A recent study by Australia's national science agency, the Commonwealth Scientific and Industrial Research Organization, claimed that biofuels for the aviation sector could slash Australia's reliance on fuel imports by $2 billion a year and decrease greenhouse gas emissions by 17 percent.

In 2009, the European airline sector pledged to slash emissions in half by 2050.

In a news conference at the Brisbane conference, Branson addressed his concerns regarding Australia's proposed carbon tax, the details of which are to be released Sunday by the government.

"Any tax should be done on a global basis, I think ideally, not on a country-by-country basis," he said.

Pointing to the next U.N.-sponsored climate change meeting in Durban, South Africa in December, Branson said he hoped for a global solution on carbon emissions that "doesn't disadvantage individual countries or individual companies."

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