Chemicals giant BASF will invest €16 million (£14.7 million) in Pyrum Innovations, which specialises in pyrolysis of waste tyres.
This investment will help Pyrum expand its facility at Dillingen in Germany.
At the moment, the plant can process 10,000 tonnes of tyres into oil, but the investment will lead to two additional lines by the end of 2022.
BASF intends to replace some of its fossil-based feedstock with this pyrolysis oil and add it to a pyrolysis oil from mixed plastics.
It will then use this to manufacture high quality plastics for industries such as automotive.
Along with additional partners, Pyrum is intending to build 100,000 tonnes worth of capacity for pyrolysis of tyres.
BASF Petrochemical division president Hartwig Michels said: “BASF is committed to leading the transition of the plastics industry to a circular economy. Replacing fossil feedstock through recycled feedstock at the beginning of the chemical value chain is a major lever in this regard.
“With the investment, we have taken another significant step towards establishing a broad supply base for pyrolysis oil and towards offering our customers products based on chemically recycled plastic waste on a commercial scale.”