The city's Masdar Institute of Science and Technology will lead the pioneering research, which will also involve Boeing and Honeywell's UOP.
According to Renewable Energy Magazine, the project, which could create a biofuel for the aviation sector, shows Abu Dhabi's commitment to sustainable energy and other environmental issues.
Jim Albaugh, president and chief executive officer of Boeing Commercial Airplanes, said: "Together with the Abu Dhabi government, Etihad Airways and other industry leaders, we are forging our energy future by developing a renewable fuel supply now, not when fossil fuels are depleted.
"Developing and commercialising these low-carbon energy sources is the right thing for our industry, for our customers and for future generations."
Recently Nigel Blackaby told the Emirates News Agency that Abu Dhabi could expect to see major progress made at the fourth World Future Energy Summit.
Posted by Neil King