The EU said its so-called Solar-Jet project uses concentrated simulated solar radiation as a power source to convert CO2 and water into a form of kerosene.
"This technology means we might one day produce cleaner and plentiful fuel for planes, cars and other forms of transport," European Commissioner for Research, Innovation and Science Maire Geoghegan-Quinn said in a statement. "This could greatly increase energy security and turn one of the main greenhouse gases responsible for global warming into a useful resource."
Simulated sunlight is used in a laboratory setting to convert CO2 and water into a synthetic gas, which is then converted into kerosene using a special technique established by oil company Shell.
The European Commission said the project is in its infancy. A "glassful" of fuel was produced using the process, though it said the results of the experiment "give hope that in future any liquid hydrocarbon fuels could be produced from sunlight, CO2 and water."