The carmaker is expected to unveil a version of the Commodore that can run on anything from 100 per cent petrol to E85, a combination of 15 per cent petrol and 85 per cent ethanol, while Caltex will trial a chain of E85 fuelling stations in a joint venture that will help both companies develop a strategy for introducing the fuel nationally.

The fuel is also expected to cost a lot less at the pump, with ethanol production costs running at about 50¢ a litre.

Caltex said its ''Bio E-Flex'' fuel would ''offer an energy option beyond the traditional fuel mix that can significantly reduce greenhouse gas emissions''.

''Caltex will be profiling the new fuel in Melbourne before it begins its national roll-out of the product,'' the company said. The ethanol-blended fuels would offer ''an energy option beyond the traditional fuel mix that can significantly reduce greenhouse gas emissions''.

Holden is expected to announce that it will soon be standard for Commodore engines to have E85 compatibility.

Owners will be able to decide if they want to refuel with petrol or any other combination of the fuel-ethanol mix up to E85.

While Holden has not sold an E85-compatible car in Australia before, Saab - at the time owned by General Motors, the same US parent as Holden - has tried to attract buyers to the fuel.

Saab's 9-5 BioPower, introduced to Australia in 1997, struggled after it was stifled by the limited availability of E85 refuelling stations. It was quietly dropped from Australian showrooms this year, shortly before the cash-strapped GM sold the Swedish carmaker to the Dutch sports car company Spyker.

The 9-5 used about 30 per cent more fuel when running on E85 than when with petrol alone, although the engine did perform better while running on the fuel and produced significantly lower exhaust emissions.

Holden is expected to announce E85 compatibility for its 3.0-litre and 3.6-litre V6 engines, while an E85-compatible version of its 6.0-litre V8 engine is tied to an export program that is developing Chevrolet-badged Commodores as police cars for the US.