Privately held Iogen said the demonstration delivery makes it the world\'s first supplier of cellulose ethanol, which is made from agricultural waste such as wheat straw and corn stalks.
Cellulose ethanol differs from conventional grain-based ethanol, which is already commonly used in fuel blends, in that it uses crop residues and not actual food products such as corn.
Iogen said the reduction in greenhouse gas emissions from cellulose ethanol are three times greater than those from grain-based ethanol on a life cycle basis.
Wednesday\'s modest delivery is to a Petro-Canada (PCA.TO: Quote, Profile, Research) refinery in Montreal, where it will be blended with gasoline and sold at several gas stations.
Ottawa-based Iogen said all vehicles can use a blend of up to 10 percent cellulose ethanol mixed with regular gasoline, without making any changes to engines.
The next step, it said, is to open commercial plants to produce more of the fuel. To date, the company has poured about C$110 million ($81 million) into research and development, supported by partners including Petro-Canada, Royal Dutch/Shell Group (RD.AS: Quote, Profile, Research) and the Canadian government.
Industry watchers say the global market for bio-fuels such as cellulose ethanol could top C$10 billion by 2012.
But Greenpeace energy campaigner Steven Guilbeault said while the technology is promising, it is still about a decade away from full commercialization.
\"To fight climate change we need all the technological improvements that we can get and I think cellulose is one of them but we have to be realistic,\" he said from Montreal.
\"It may be more than a niche, but I doubt that it will ever play a significant role. We shouldn\'t\' think this will solve our transportation problem because it won\'t.\" Iogen plans to decide by year-end where to locate a new C$300 million plant, which will need about 700,000 tonnes of straw to produce about 200 million liters (53 million U.S. gallons) of cellulose ethanol a year - a figure some said is unrealistic.
Earlier this month, Iogen canvassed farmers on the Canadian Prairies about the possibility of their committing thousands of hectares of straw to supply the new plant if it was built in the region.
\"It means new cash flow, between C$30 and C$50 million a year,\" for farmers in the area, said Rick Verspeek who heads a community group trying to lure the Iogen plant to Killarnay, Manitoba.
But some skeptics said the scale of the plant may be too big.
\"The size of the operation is much too large, I just think they\'re pushing it in volume,\" said Bill Ridgeway, president of the Manitoba Straw Producers Coop in Grosse Isle, Manitoba.
\"The area they\'re going to have to cover to get that amount of straw is probably the size of southern Manitoba.\"