Cars could be running on a by-product of human sewage within three years, a report in Japan's Nikkei business daily says.

A consortium backed by car maker Toyota is investigating a process that turns sewage sludge into hydrogen for use in fuel-cell vehicles.

Fuel-cell vehicles are seen by many as a better zero-emissions alternative to plug-in electric vehicles because they offer greater range and don't rely on electricity grids that are often powered by coal. Instead they use an on-board chemical reaction between hydrogen and oxygen to produce electricity. The by-product that comes out of the exhaust pipe is water.

But one of the main obstacles to commercialisation of fuel-cell vehicles is the process of producing hydrogen. The traditional method, which is expensive and complicated, involves extracting it from liquefied natural gas or fossil fuels.

The consortium has told the Nikkei that extracting hydrogen from sewage is cheaper and more environmentally friendly than traditional methods. It claims the process cuts carbon emissions by 75 per cent.

The process involves drying out the sludge to generate methane gas. The methane is then reheated to extract a high concentration of hydrogen gas.

The consortium is aiming to commercialise the process by 2015.

A number of car makers, including Toyota, Honda, Hyundai, Nissan and Mercedes-Benz, are working on fuel-cell vehicles, although significant hurdles – including refuelling infrastructure – remain.

Honda already offers its fuel cell-powered FCX Clarity for lease in the United States.

Nissan will show a fuel-cell concept at the upcoming Paris motor show, while Toyota says it could have a fuel-cell vehicle on sale in the United States by 2015.

The consortium includes Toyota affiliate Toyota Tsusho Corporation, Mitsui Chemicals, Daiwa Lease and Japan Blue Energy. Toyota is not a member but is backing the research.

-Fairfax Australia