Algae holds promise to make aviation carbon-neutral.

The group, which owns Airbus, is showing off an aircraft powered by algae juice at the Farnborough Airshow this week. EADS (FR:EAD 16.36, -0.03, -0.15%)  is betting that the small aircraft, which completed its first successful flight last month in Germany, can help make air travel kinder to the planet in the not too distant future.

As deadlines for the industry to cut its carbon emissions loom and environmental disasters like the recent spill in the Gulf of Mexico remind the world of the perils of oil exploration, jet makers and airlines alike are more eager than ever to find alternatives.

"We absolutely need to find a plan B for the replacement of kerosene," EADS Chief Technology Officer Jean Botti told MarketWatch in an interview on the sidelines of the air show.

"What we're doing on biofuels right now is a very promising way of getting to that point. The potential from the use of algae is the highest I have seen so far," he said.

The advantages of algae over other types of biofuels, such as palm oil, are significant and help explain the enthusiasm it is generating.

First, algae don't compete with other crops for agricultural land and can even be grown in polluted water. Second, their production consumes large quantities of carbon dioxide, which is a big plus for an industry trying to become carbon-neutral by 2020. Third, algae can be blended with traditional kerosene without the engine or any pipes needing to be significantly modified.

The byproduct of algae production is a high-protein mixture that could eventually be sold for use in pharmaceutical or cosmetic products, thereby helping make the whole project more commercially viable. Last but not least, it has been estimated that algae produces up to 15 times more oil per square kilometer than other biofuel crops.