SRI International of California and Research Triangle Institute of North Carolina received funding from the Energy Department for research and development projects meant to drive down the cost of producing gasoline, diesel and jet fuels from biomass.
The funding is part of an effort to make biofuels competitive with regular fuels. The Energy Department said it wants to produce a drop-in biofuel that would cost about $3 per gallon by 2017.
Data from 2011 show some biofuels were close to the point at which they'd be competitive with regular fuels.
Energy Secretary Ernest Moniz said the government is looking for ways to increase energy security and reduce greenhouse-gas emissions by advancing a low-carbon economy.
The transportation sector in the United States accounts for nearly 60 percent of domestic oil consumption and 30 percent of overall emissions.