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The government's changes to bio-fuel regulations announced in this month's Budget have come under fire from both the transport industry and environmentalists. Previously bio-fuel incurred a lower duty rate, but the government has abandoned this in favour of the Renewable Transport Fuel Obligation (RTFO), insisting that by 2010, 5% of fuel sold in the UK must be derived from renewables.

FTA chief economist Simon Chapman says the industry "will have a wobble" over bio-fuels. He tells MT:  "The use of bio-fuel is likely to fall off companies' agendas for two reasons: questions over its sustainability and the government's use of the RTFO means the economics don't stack up. It's more trouble than it's worth."

Meanwhile, a loose coalition of environmental organisations, including Greenpeace and Friends of the Earth, have written to transport secretary Ruth Kelly demanding the introduction of the RTFO be postponed until the government is in possession of all the facts regarding the benefits of the fuel. The letter reads:

"These mandatory RTFO targets have been established with no minimum greenhouse gas or environmental and social sustainability standards in place, nor proper accounting of the impact of major changes in land use that these targets will bring. The lack of such provisions is a disaster." While the RTFO cannot be delayed, as it is an EU law, Kelly has asked the Renewable Fuels Agency to review it.