Danish ro-ro giant DFDS has become co-owner of biofuel start-up MASH Energy.
It has invested DKK 10m ($1.5m) in the Danish company, which uses agricultural waste to produce the fuel.
"The plan is to work towards testing the fuel on a DFDS vessel," the shipowner said.
"DFDS will hopefully in due time be using climate-friendly biofuel to propel its ships."
The investment is being made in three stages and DFDS will become a 24% shareholder.
MASH uses the by-products of nut processing in Tanzania and India for its feedstock.
Shipping companies are increasingly looking to alternative fuels to supplement their IMO 2020 strategies.
Sofie Hebeltoft, head of DFDS' corporate social responsibility (CSR) department, said: “The investment is a result of our ambition to take responsibility for the development of commercially viable biofuel that is a real alternative to fossil fuels.
"We have had a close dialogue with the company and its owners since its founding in 2015 and have great confidence in our joint abilities to fulfil the ambitions that are also perfectly in line with DFDS’ ambitions to reduce the carbon footprints of our ships."
She added: “In the long term, the aim is to produce enough quantities to make the biofuel commercially viable and work towards identifying other waste products that can be used to produce biofuel.”
Testing is crucial
MASH was founded by CEO Jakob Andersen and four colleagues from the Technical University of Denmark in 2015.
It has developed thermo-chemical processes and a reactor.
Andersen said: “The biofuel is CO2-neutral. During the growth season, the nut trees absorb CO2 that is emitted when the biofuel is combusted."
He added: “We are extremely pleased to add a large ship operator such as DFDS to the ownership circle and that we will thus get the opportunity to test the biofuel in engines and verify that our product is indeed of the quality and price necessary for it to succeed in the shipping industry.”
