U.S. chemical maker Dow Inc said on Thursday it had signed a long-term supply agreement with bio-conversion company New Energy Blue for plastic materials made from corn residue, in a bid to move towards renewable energy sources for production.

"This collaboration can help redefine how we source raw materials for our products, allowing us to expand to include renewable feedstocks," said Dow Global Sustainability Director Manav Lahoti.

As part of the agreement, Dow will support the designing of New Energy's upcoming facility in Iowa, that is expected to process 275 kilotons of corn stalks and leaves per year to produce ethanol. Nearly half of this ethanol will be turned into bio-based ethylene feedstock for Dow products.

Ethylene, which is generally made from naphtha, is a basic feedstock for petrochemicals that are processed into products such as plastics.

Dow aims to reduce its fossil fuel sourcing for production and subsequent greenhouse gas emissions by using bio-plastic made from agricultural residues, the company said.

The agreement also gives Dow similar commercial supply options for the next four future New Energy Blue projects.

In April, Dow announced a partnership with industrial gas maker Linde Plc for clean hydrogen and nitrogen supply for a proposed net-zero carbon emissions ethylene and derivatives complex in Canada.

(Reporting by Ankit Kumar; Editing by Rashmi Aich)