Soaring world food prices look set to force Gordon Brown into a U-turn over the use of crops such as corn, rapeseed, palm and soya to produce fuel as an alternative to petrol and diesel.
Biofuels were seen as the eco-friendly answer to global warming and rising fuel prices but a report to be published on Monday will force the Prime Minister to rethink his support for using crops to keep Britain's cars and lorries running.
A second report will also force Downing Street to revise its policies on food and the environment – opening Mr Brown to the charge from environmental groups of going soft on the Government's green agenda.
The Prime Minister has been warned in a report by Professor Ed Gallagher, head of the Renewable Fuels Agency, that the rush for biofuels has made a "significant" contribution to the soaring cost of food on the global markets. Corn ethanol and biodiesel derived from vegetable oil were widely seen as important ways of creating fuel and combating carbon emissions which contribute to global warming.
The Gallagher review threatens to knock out an important plank in Mr Brown's environmental strategy. He introduced targets in April in Britain requiring all petrol and diesel to contain 2.5 per cent of biofuels with the intention of doubling it to 5 per cent by 2010. The EU is contemplating a 10 per cent target by 2020. Professor Gallagher's report will say the production of fuels from "biomass" – non-food crops – may be sustainable but it challenges the targets for producing fuel from other crops normally used for food.
Greenpeace said biofuels initially "looked good on paper" but the Gallagher review would conclude that the risks are too great to impose higher targets.
The campaign group called for a moratorium on targets, subsidies and tax breaks for biofuels consumption until it was clear that they could be produced from sustainable sources. Oxfam said: "It is clear that any additional pressure on limited land resources has the potential to drive further agriculture clearance of forests or other habitats and to drive up food prices."
The vast majority of the European biodiesel was made from rapeseed oil, said Oxfam. "As we divert more and more rapeseed crop into fuel, European industry is buying increasing supplies of edible oils from overseas including palm oil.
A second report by the Cabinet Office strategy unit is intended to launch a debate over how Britain uses its land more effectively to produce more food.
In a further blow to the Prime Minister's "green" strategy, ministers are preparing to respond to the pressure from motorists – led by haulage owners who staged a noisy protest around Westminster this week – by bringing forward the announcement by the Chancellor Alistair Darling that the 2p rise in fuel duty in October will be scrapped.