VELIZY-VILLACOUBLAY, France -- French carmaker PSA Peugeot Citroen (IW 1000/46) unveiled Tuesday a petrol hybrid engine that stores energy using compressed air which it hopes will be a game-changing technology to improve energy efficiency.

The engine, which allows up to 80% driving on compressed air in cities, offers fuel economy of 81 miles per gallon and emits just 69 grams of carbon dioxide per kilometer.

"This breakthrough technology ... represents a key step towards the two liter per hundred kilometer car by 2020," chief executive Philippe Varin said at a press conference unveiling a series of new technologies.

Peugeot said what it calls Hybrid Air technology can be fit into small to midsize cars without any loss to storage space.

Whereas conventional hybrids use electric batteries to store energy, the compressed air system "allows the recuperation of energy from braking and slowing down," said the head of the Hybrid Air project, Karim Mokaddem.

The project, partially financed by the French state, also includes German auto parts specialist Bosch and Faurecia, a car parts firm controlled by Peugeot.

Copyright, Agence France-Presse, 2013