Some call it pond scum, but algae is drawing increasing attention as a source of biofuel that can help replace petroleum or fuels made from crops like corn or soybeans.

The notion of using algae to produce fuel has been around for decades, but has garnered new interest and investment amid a search for energy sources that will limit carbon dioxide emissions blamed for climate change.

Algae has obvious advantages over fossil fuels and biofuels from food-based crops, but has an additional benefit in that it absorbs carbon dioxide, and thus can be used to "scrub" emissions from coal-burning power plants, for example.

In a sign of the new enthusiasm, ExxonMobil announced in mid-July it would invest up to 600 million dollars in an alliance with biotech firm Synthetic Genomics to make a new biofuel from photosynthetic algae.

The biggest US energy firm said it was partnering with the firm headed by Craig Venter, a researcher who founded Human Genome Sciences and Celera Genomics and has worked on projects to sequence the genomes of humans, fruit flies and other organisms.

Dow Chemical announced plans in June to join Algenol Biofuels in a pilot-scale project to use algae and carbon dioxide to produce ethanol fuel.

These investments "were a great shot in arm for the industry, but you've seen other solid investments," said Mary Rosenthal, executive director of the Algal Biomass Organization, which was formed in 2008 and has some 150 members including big firms such as Boeing and Raytheon.

Rosenthal estimates over one billion dollars is being invested in algae biofuels, saying that "it shows a lot of promise." She said over 1,000 participants are expected at the organization's October summit in California.

Rodney Andrews, director of the Center for Applied Energy Research at the University of Kentucky, said driving the push to algae is "an interest in getting away from fossil fuels to more renewable systems."

Andrews directs a research project that uses algae to capture carbon emissions from coal-burning plants to grow algae, getting a double benefit from the marine plant.

"If you start doing the math on how much you can produce per acre of land, algae becomes very appealing because it offers much more per acre than other biomass materials," Andrews said.

A move to algae could avoid the diversion of crops such as corn and soybeans for ethanol fuel, criticized for boosting world food prices.

Algae produces an oil that can be developed into a type of biodiesel for cars, and this can be refined into other products including jet fuel or gasoline.

Still, Andrews said creating commercial algae fuels needs more research to determine its economic viability. The process can require large amounts of land and various technologies are still being tested.

"Right now it's more expensive" than petroleum-based fuels, according to Andrews, but the landscape is shifting.

He said the price may not take into account benefits of carbon capture or any future program that includes cap-and-trade systems for carbon emissions.

"When you look at the the CO2 footprint, it's not the number of tons you release but how much usable energy you get before the CO2 is released in the atmosphere," he said.

California-based alternative fuel company Sapphire Energy is already producing gasoline from algae that meets current standards and expects to produce by 2011 one million gallons (3.8 million liters) of biodiesel and jet fuel per year.

"Fuel from algae is not just a laboratory experiment or something to speculate on for years to come," said Sapphire vice president Brian Goodall.

"We've already successfully tested our fuel with two commercial airlines and within the next three years we'll be producing enough to help meet the growing demands of industry and the military."

Greener Dawn Research, a clean tech equity research firm, said algae is becoming competitive, needing far less land than corn or soybeans to provide an equivalent amount of fuel.

"Due to increased productivity, algae based fuel has the potential to be a revolutionary breakthrough," said Greener Dawn research director George Santana.