A green start-up technology company has surprised scientists by producing a biofuel from old rubber tyres that can run turbo-charged diesel engines while reducing emissions by 30 per cent.

Green Distillation Technologies (GDT) can produce 3,000 litres of bio-oil from one giant seven-tonne mining truck tyre.

It hopes to increase production to more than 8 millions litres annually by mid-2017.

The oil can also be used as a heating fuel or further refined into an aviation jet fuel. ( ABC News: Lexy Hamilton-Smith )

Director Trevor Bayley said the company used a technique known as destructive distillation to convert wasted, old rubber into renewable energy.

He said the idea was driven by a desire to reduce massive stockpiles around the world which are growing at a rate of over a billion tyres a year.

"We are able to convert this wasted resource and environmental hazard into high demand valuable raw materials," Mr Bayley said.

"The process is emission-free and some of the recycled oil is used as the heat source for the production process.

"It begins by loading end-of-life tyres into a process chamber, which is evacuated of air and sealed.

"Heat is applied which acts as a catalyst for a chemical reaction, which sees the tyre destructed into different compounds, one of which is condensed into manufactured oil."

'We have zero waste from the tyre'

The oil underwent rigorous testing at the Queensland University of Technology's (QUT) Biofuel Engine Research facility.

Although scientists there admitted they were a little sceptical at first.

"So we think maybe it will be bad, but we got very good results," researcher Farhad Hossain said.

The team tested the tyre-oil blends in a six-cylinder diesel engine.

A GDT facility located just five kilometres north of Warren in western New South Wales. ( Supplied: Green Distillation Technologies )

"We tested the oil which GDT produces from both recycled natural and synthetic rubber tyres in 10 per cent and 20 per cent diesel blends," Mr Hossain said.

The experiments were performed with constant speed on four different engine loads with surprising results — no loss of engine performance and a massive reduction in emissions.

QUT's Professor Richard Brown said they found a 30 per cent reduction in nitrogen oxide which helps to create petrochemical smog.

"There was also a reduction by a third in particle mass. It works well," he said.

"It is a fuel that is as good as or better than normal diesel ... made from old rubber otherwise destined to rot as landfill."

GDT said the oil could also be used as a heating fuel or further refined into an aviation jet fuel.

It also recycles 100 per cent of every tyre, reselling the carbon and steel by-products.

"We have zero waste from the tyre," Mr Bayley said.

GDT was the first Australian company to win the prestigious Edison Award, that honours global innovation, for leading the way with biofuels.