SIR RICHARD BRANSON has joined forces with two of America’s top venture capitalists to slake California’s thirst for environmentally friendly fuels.

Branson has injected more than $60m (£32m) into Cilion, a company that will make bioethanol from corn. He is investing alongside Vinod Khosla, the renowned Silicon Valley entrepreneur, and Ron Burkle, a Los Angeles billionaire who counts Bill Clinton among his advisers.

The project is the start of a move by Branson’s Virgin empire into environmental businesses, a plan known internally as the Gaia Capitalism Project, after the environmental theory developed by the British scientist James Lovelock.

Virgin Fuels, the subsidiary used for the Californian scheme, will alone invest $400m in several biofuel schemes, including some in Britain.

“We plan to move into this sector in a big way,” said Branson. “In a few years it will be a major field for us.”

Virgin Fuels is already working with the government on a scheme to make it economic for train companies to use biodiesel. Virgin would also like to develop a biofuel suitable for aircraft engines, although it concedes this could be a decade away.

Branson is understood to be considering other big investments in a range of other alternative-energy technologies, including wind power, hydro-electric and possibly even small nuclear stations. “Nothing is off the agenda,” said a top Branson aide.

The Californian scheme capitalises on an environmental crusade by the state’s governor, Arnold Schwarzenegger.

California already uses bioethanol to fuel cars, but almost all of it is imported from the American Midwest. Earlier this year Schwarzenegger issued an executive order calling for the state to make 20% of the fuel itself by 2010.

Cilion plans to build sufficient refining capacity to meet the target itself. It was set up in June as a $40m joint venture between Western Milling, one of California’s largest grain-milling companies, and Khosla Ventures, Vinod Khosla’s venture-capital company. Khosla, named America’s top venture capitalist by Forbes magazine, is best known as one of the founders of the technology company Sun Microsystems.

In a second-round fundraising completed last week, Cilion raised another $160m, more than $60m of which was provided by Virgin Fuels.

The rest was provided by Khosla, Western Milling and Yucaipa, an American private-equity business led by Burkle.

Yucaipa made its name with a string of big-ticket retail deals, and has on its board the former president Bill Clinton. Virgin’s representative on the Cilion board will be Shai Weiss, a former NTL executive who heads Virgin Fuels.

Cilion is expected to start work on the first of seven bioethanol plants within a few weeks.

It will bring corn from the Midwest by rail for processing, and says its technology makes it competitive with petrol at oil prices as low as $40 a barrel. Having gone as high as $78 this year, Brent crude closed the week at $63.50.

Branson, who attended the recent environmental summit in California between Tony Blair and Schwarzenegger, said he had been plotting a shift into environmental businesses for about two years.

“I have read a number of books on global warming and I am absolutely convinced that this is the biggest crisis that faces Earth and mankind.

“We have to do something about it. I think every company chairman should be thinking about devoting a percentage of his earnings to it.”