Companies involved in its production say the 20p-a-litre fuel duty rebate for biofuels is now insufficient to bridge the gap in costs between the new fuel and traditional diesel, according to the Financial Times.
In a separate move, the government is investigating ways to ensure that the production of biofuel is environmentally sustainable and is calling for international co-operation to weed out unscrupulous producers.
Many environmental groups, while welcoming the potential benefit of biofuels, are concerned that the production of crops could mean the loss of vast swathes of rainforest, as Fleet News reported last week.
John Healey MP, economic secretary to the treasury, told an environmental select committee: ‘The Chancellor is taking steps to try to build what might be called a biofuels international partnership. It involves discussions on precisely these sorts of questions and work with countries like Brazil, a major biofuels producing country, over how we can increase the use of biofuels in a way to get the maximum climate change impact.’
Critics argue that there is not enough land in the UK for the government to meet its National Road Transport Fuel Obligation, which requires fuel suppliers to ensure that 5% of UK sales are from renewable sources by 2010.