The Queensland government has provided Aus$166,000 ($160,000) funding for an algae to biofuel project based in Townsville. The project is a partnership between James Cook University (JCU) and Australian company MBD Biodiesel Ltd.

"Considering the current debate about agricultural land being used to produce biofuels, algae may well be a significant future alternative fuel source as we set about tackling climate change," said state premier Anna Bligh.

"While most other biodiesels come from agricultural crops like canola, soy and palm oil, algae can be grown with ease in ponds or tanks on poor quality land.

"The process, which is also being trialled in Europe and the United States, also produces as a by-product ‘algal cake' for animal feedstock which could help drought-proof our livestock industry", she said.

MBD Biodiesel Director Doctor Marc Stammbach said the Bligh Government funding provided from the Department of Tourism, Regional Development and Industry was a significant step towards setting up a biodiesel plant and algae farm in Townsville.

"The first stage will be the identification and development of suitable algae strains to achieve stable, continuous, high yield algae production," Dr Stammbach said.

"MBD will provide the algae photo-bioreactor which will be situated at JCU. MBD has strong support from the Townsville business community and is delighted to be able to move forward with the support of the Queensland Government and JCU.

"Next year we plan to build a 35,000 tonne algae pilot farm followed by a 400-hectare algae farm by 2010 which can ultimately consume in excess of 2,000,000 tonnes of carbon dioxide and provide algae oil for a 250,000 tonne biodiesel plant," he said.

Professor Rocky de Nys, Head of Aquaculture at JCU, will lead the first stage of the project in Townsville with Doctor Kirsten Heimann, Director of the university's North Queensland Algal Identification/Culturing Facility.

"The environmental benefits of using algae to create biodiesel and feedstock are enormous," Professor de Nys said.

"Algae require large volumes of carbon dioxide to grow which means less carbon dioxide is released into the atmosphere so it will make sense in future to situate such farms near major industry and power stations.

"Companies that do produce carbon dioxide will eventually be able to claim carbon credits as the carbon dioxide can be stored or captured and released into algae farms."