Oil prices reaching nearly $140 a barrel are transforming the economics of the global plastics industry as producers start to pour billions of dollars into plant-based alternatives.

Already considered a growth sector because of increased consumer concerns about the environment, some of the world's largest chemical companies, including DuPont, Dow Chemical, Cargill and Braskem, are now accelerating their production of bio-plastics made from crops including sugarcane, corn and maize.

Dow, the world's largest producer of conventional plastics, is investing $500 million (£253 million) in a new factory in Brazil that will produce polyethylene, one of the most commonly used forms of plastic, from ethanol made from sugarcane. It is due to open in 2011 and will employ about 3,000 people, producing 350,000 tonnes of the material a year.

Meanwhile, Braskem, the Brazilian chemicals group, has embarked on a similar venture, aiming to produce 200,000 tonnes of polyethylene a year.

Other ventures are under way in the US, where NatureWorks, a subsidiary of Cargill, the American agribusiness group, has opened a factory in Blair, Nebraska, producing 140,000 tonnes of a different kind of biodegradable plastic known as PLA, which uses corn starch.

In Britain, Innovia Films, in Wigton, Cumbria, is building a new production line that will boost its ability to produce plastic film made from wood cellulose by 12 per cent to 28,000 tonnes a year.

Diego Donoso, commercial director for plastics for Dow Chemical in Brazil, claims that the trend is being driven chiefly by economics. Using sugarcane to make polyethylene, rather than the usual naptha-based crude oil or natural gas, is “economic with oil prices [even when they were] at $45 per barrel”, Mr Donoso said. “Sugarcane ethanol is an increasingly competitive alternative to oil...the big challenge is to be first,” he added.

Mr Donoso said that the original plan was to produce bio-plastic mainly for the Brazilian market, but that against a background of rising petrochemical prices, Dow was now considering exporting pellets.

Bio-plastics still account for only a small fraction of the more than 68 million tonnes of polyethylene and hundreds of millions of tonnes of other types of plastic produced annually worldwide, but further investments by other big companies are expected soon.

“The growth of bio-plastics is all being driven by the cost of feedstocks,” said Adrian Higson, of the National Non-food Crops Centre, who estimates that the industry is enjoying growth rates of nearly 20 per cent per year.

“As oil goes up, petrochemical costs [which form the conventional raw material for plastic] have risen too, whereas the cost of sugarcane, for example, has not changed substantially.”

Mr Higson points out that not all bio-plastics are necessarily any more environmentally friendly than those made from petrochemicals.

Although some claim that the production of polyethylene made from sugarcane or corn creates fewer carbon emissions, the substance itself is chemically identical to that made from crude oil and does not break down any more quickly.

Nevertheless, companies specialising in biodegradable and compostable plastics, such as Innovia - which supplies Tesco, Morrisons and Sainsbury's, as well as organic food companies such as Jordans - are welcoming the move away from oil-based plastics.

Andy Sweetman, Innovia's global marketing manager, said: “We have benefited from rising oil prices and also increased concern about the environment. It's certainly an area we see growing quite strongly.”

Plastic fantastic

— Polyethylene is the most common plastic and the polymer found in everyday items including supermarket bags, shampoo bottles and children's toys

— Despite being very versatile, it has the simplest structure of all commercial polymers

— Polyethylene has a molecular weight of 200,000 to 500,000, but it can be made even higher. Weights of 3 million to 6 million produce fibres so strong that they can be used in bullet-proof vests

— Polyethylene was first synthesised by a German chemist, Hans von Pechmann, who prepared it by accident in 1898 while heating diazomethane

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