Government claims its hands are tied over harmful biofuels

The Government has claimed that World Trade Organisation (WTO) rules prevent it from banning the controversial use of biofuels that do more harm to the environment than good.

Later this month, officials from the Department for Transport (DoT) will start a consultation on new rules being introduced next year requiring petrol stations to sell petrol and diesel that have been blended with oil from crops such as corn, sugar or palm.

Under this DoT scheme, most stations will have to sell only biofuels, rather than conventional petrol or diesel, by 2010. Because crops can be regrown and absorb carbon, unlike fossil fuels, governments are increasingly turning to biofuels as a way of reducing emissions from cars.

But The Independent on Sunday has learnt that despite protests from environmental groups, fuel suppliers will not have to prove that the biofuels they have bought are from "sustainable" sources.

There is mounting concern in particular over the harmful effects of the cheapest source of biofuel, and one of the most plentiful, palm oil. Huge tracts of rainforest in Indonesia have been cleared and burnt to make way for palm plantations. A recent report blamed the burgeoning demand for biofuels and the resulting deforestation for making Indonesia the third-biggest producer of greenhouse gases.

D1 Oils, the company that makes biofuel using the inedible plant jatropha curcus, said the DoT scheme should reward sustainable biofuels that are made using land which is already in agricultural use.

A DoT spokeswoman said: "There is currently no internationally agreed definition of a 'sustainable biofuel'. If the UK were to invent one, it would be vulnerable to challenge under WTO rules."

She denied claims that fuel suppliers lobbied against rules forcing them to buy only certified sustainable biofuels.

Instead, the Government will operate a "name and shame" voluntary scheme encouraging fuel suppliers to buy only biofuels from sustainable sources.

Ausilio Bauen, director of the sustainable-energy consultancy E4tech, which is advising the Government on the scheme, said: "The thinking is that, by making this information public in some form, through something like 'naming and shaming', public opinion will encourage suppliers to buy biofuels with low carbon intensity and assured sustainability."

But a spokesman for Friends of the Earth, commented: "It's a classic case of where trade policy is impeding the environment."