Energy companies are planning to revive a polluting technology developed by the Nazis to replace dwindling supplies of oil with synthetic fuels derived from coal.

Senior industry figures told a high-level conference in Paris this week that coal-to-liquids (CTL) technology could fuel cars and aircraft for decades to come.

Green campaigners reacted with alarm because the process produces twice as much greenhouse gas as using oil. Supporters say much of the carbon pollution could be captured and stored underground, and that the synthetic fuel burns cleaner than conventional diesel.

More than 270 people from 28 countries attended the two-day Paris meeting, reflecting growing worldwide interest in the technology. China will open its first large-scale CTL plant later this year, and similar projects are under way or planned in the United States, India, Botswana, Australia, Germany, Poland, Germany and Indonesia.

Experts say the technology could contribute as much energy as biofuels do within 20 years. At present, only South Africa uses the technology to produce fuel on a large scale - a legacy of apartheid-era oil sanctions. Germany relied on CTL to run its tanks and planes on domestic coal stocks during the second world war.

Gerald Doucet, secretary general of the World Energy Council, said: "The future is very optimistic for coal-to-liquids. Coal is back in more ways than one."

Despite the recent focus on alternatives such as wind, solar and nuclear power, coal remains the fastest-growing energy source in the world. China alone added the equivalent of the entire UK national grid in coal power stations last year.

Most coal is burnt to generate electricity. In theory, converting it to liquid could see it replace oil as an energy source for transport. A study last year by the Chinese Academy of Sciences said: "Production of liquid fuels from coal is, practically, the most feasible route to cope with the dilemma in oil supply."

Du Minghua, deputy director of the China Shenhua CTL research institute, said the country had an "urgent need" to develop the technology. He said a further seven commercial-scale plants were planned and China could produce 30m tonnes of liquid fuels each year by 2020.

CTL has been more expensive than using oil, but analysts suggest it could become viable if the oil price stays above $25-$40 (£13-£20) a barrel.

Khurelbaatar Chimed, minister of fuel and energy for Mongolia, said the recent jump in oil price had damaged its emerging economy, and that it was turning to fuels from coal as a cheaper alternative.

The US air force is very interested and recently flew a B-52 bomber on jet fuel made from coal. It wants to complete testing its entire fleet on the fuel within three years. Bill Anderson, assistant secretary of the US Air Force, told the conference the move would force the RAF and French Air Force to follow, because nations share fuel supplies during operations. "They need to know they can fly on it," he said.

Gary Kendall, a senior energy analyst with the green group WWF, said the CTL push was a backward step. "If the oil price gets high enough then you can turn a Persian rug into diesel, but that doesn't make it a good idea," he said. "I can't imagine a more damaging fuel for the climate."