In contrast to a welter of gloomy commentaries over Italy’s inability to compete globally, a locally led international consortium has achieved a breakthrough in what could lead to a “green revolution” in providing new fuels to cut carbon emissions.

A $150m facility that opened recently in Crescentino is said to be the first in the world to produce “second-generation” or advanced bioethanol on a commercial scale using enzymatic conversion. It uses agricultural waste and arundo donax, a fast-growing kind of bamboo, rather than scarce foodstuffs.

Twelve years of research has gone into speeding up a process similar to how fungi digest the detritus of woodlands to produce sugar, according to Peder Holk Nielsen, chief executive of Denmark’s Novozymes, a leading producer of industrial enzymes.

The technology represents a leap forward from conventional ethanol blended into gasoline that relies on crops such as corn, sugar cane and palm oil. Although originally seen as an environmentally sensitive way of curbing rising oil prices and cutting greenhouse gas emissions, the use of conventional ethanol has generated controversy because of its impact on land use and food prices.

Advocates of advanced bioethanol claim that it could replace 50 per cent of gasoline without changing agricultural practices, because it uses agricultural waste and plants that can be grown on marginal land unsuited for food crops.

“We will turn agricultural waste into millions of litres of low-emission green fuel, proving that cellulosic ethanol is no longer a distant dream. It is here, it is happening, and it is ready for large-scale commercialisation,” Mr Nielsen said of the facility in northern Italy, which has the capacity to produce 75m litres a year.

The plant is run by Beta Renewables, a joint venture set up in 2011 by Italy’s Mossi Ghisolfi chemicals group and TPG, a US private equity group, with total investment of €250m. Novozymes took a 10 per cent stake last year.

Beta Renewables is planning a larger facility in Brazil with the GranBio group, while several competitors also have advanced biofuels projects on a commercial scale coming on stream in 2014. Kior of the US started producing biofuel from woodchips this year using different technology.

Novozymes hopes to be involved in 15 to 25 second-generation biofuel plants by 2017, Mr Nielsen told the Financial Times.

“A new era is dawning for advanced biofuels but less quickly than some were hoping or telling us five years ago. However, projects going on line look quite promising,” said Anselm Eisentraut, biofuels researcher with the International Energy Agency (IEA).

Nonetheless, the way ahead is fraught with difficulties, from proving the new technology can compete in cost with conventional gasoline to regulatory hurdles and, in the case of Italy, bureaucratic obstacles.

Guido Ghisolfi, chief executive of Beta Renewables, said hold-ups “by a caste of mandarin bureaucrats” cost two years of delays in Italy in spite of political goodwill in Rome. Mr Ghisolfi hopes to finalise plans soon for a second plant in southern Italy but warns that investors cannot afford the uncertainty of waiting years.

But getting biofuels to customers in a retail gasoline market controlled by the oil majors is proving a problem.

“The oil companies don’t like this and are already losing market share. They are fighting against wider use of biofuels despite the lower CO2 emissions. They are getting away with it,” Mr Nielsen said of the lobbying battle in Washington where there is resistance to offering fuel with more than 10 per cent ethanol to consumers, even though millions of “flex fuel” vehicles are already waiting for the chance to buy a much higher ethanol blend.

In Europe, the mix is less – nearly 5 per cent biofuels in every litre of transportation fuel. However, there are strong doubts over the future ratio because of the land use and food price controversy surrounding conventional biofuels.

Mr Nielsen says potential investors are worried about delays over the EU’s biofuel review, which mean no specific framework for advanced biofuels is expected before Europe’s parliamentary elections next year. The European parliament has proposed limiting the growth of conventional biofuels, predominantly biodiesel, to 6 per cent by 2020, and introducing an additional 2.5 per cent mandate for advanced biofuels.

According to the IEA, world biofuel production reached 1.86m barrels per day in 2012, almost unchanged from 2011 because a severe drought in the US drove up corn prices and led to a significant drop in ethanol output.

Still, the IEA projects output will reach 2.36m bpd in 2018, meaning that biofuels could provide 4 per cent of global road transport demand.

“But uncertainty on support policies in the EU and the US provides a possible downside risk, and might undermine the sector’s growth potential,” the IEA said in its 2013 renewable energy market report. It noted that a number of companies, including oil majors, had stepped back from projects, because of technological challenges and difficulties in raising investments.

“Overall the policy framework for advanced biofuels in many countries seems to be insufficient to fully address the investment risks associated with first-of-their-kind commercial scale production plants,” the agency said.

Italy’s Beta Renewables hopes to prove the IEA wrong. “Our technology will prove it is working, that our fuel per mile is cheaper than gasoline in the long run. We can replace 50 per cent of gasoline without changing agricultural practices. Do our politicians want this?” Mr Nielsen asked.