Cars run on fuel made from household waste could be on the streets within two years, it was announced today.

Ineos, the world's third-largest chemical company, said it aimed to produce commercial quantities of bioethanol fuel from biodegradable municipal waste by 2011.

Peter Williams, chief executive officer of Ineos Bio, said: "This is a very robust and flexible process, and we have everything we need now to take it to a commercial level.

"This is very attractive from the perspective of the food versus fuel debate, as it takes fuel production away from corn."

The process produces ethanol by mixing a biological catalyst with carbon monoxide and hydrogen, which are produced by burning the biodegradable waste.

The innovation is supported by The National Non-Food Crops Centre (NNFCC) the UK's national centre for renewable fuels, materials and technologies.

Dr Geraint Evans, from the NNFCC, said: "This is the next generation of biofuels.

"It's quite a breakthrough - but it's not out of this world - it can be done. The process could be used to run cars today, I was looking to buy one just last night. There is enough rubbish in Humberside to make around 200,000 tonnes of ethanol for fuel."

But environmental groups have treated the announcement with caution.

Kenneth Richter, biofuels campaigner at Friends of the Earth, said: "Instead of gambling on second-generation biofuels, we must urgently invest in real green transport solutions like more fuel efficient cars, better public transport and safer routes for cycling and walking."