Iberia has teamed up with Spanish airports operator AENA and AlgaEnergy to establish a microalgae-based biofuel research project at Madrid Barajas Airport.
The facility, in which an initial €600,000 ($539,622) has been invested, will be located near the airport's Terminal 4 and will become operational next month.
The research plant will capture and use carbon dioxide from Iberia's aircraft engine bench test facility, which would otherwise have been emitted into the atmosphere.
The eventual aim is to produce biofuel that can be used to power aircraft as well as airport ground vehicles.
Oil company Repsol plans to convert the biomass oils into biofuel.