Ruth Kelly has today invited the UK's newly established Renewable Fuels Agency to lead a study of the wider economic and environmental impacts - particularly the indirect impacts - of different forms of biofuel production. The results of the study will help inform the development of both the UK and EU's policies in this area, and will underpin the consideration of EU biofuel targets after 2010.

Announcing the review, Ruth Kelly said: "Biofuels have the potential to help reduce the impact of transport on the environment, provided they are sustainable. That is why we are introducing the new Renewable Transport Fuel Obligation in April. The RTFO will allow us to gather a wealth of data on the impacts of biofuels, which we will take into account in determining future levels of support for biofuels.

"However, future biofuel targets must also take into account the latest scientific evidence about the environmental effects of biofuel production. There has been much recent debate around the risks associated with overly rapid expansion of biofuel production, with evidence now emerging on the indirect, or "displacement" impacts, of growing demand for agricultural production around the world.

"The UK Government takes this issue very seriously. We are not prepared to go beyond current UK target levels for biofuels until we are satisfied it can be done sustainably. The Review I am announcing today will ensure that the full economic and environmental impacts of biofuel production are taken into account in the formation of UK policy beyond 2010."

In welcoming the announcement Ed Gallacher, chairman of the RFA said; "Iam delighted that we have been asked to lead this importat study. The RFA will draw upon the best evidence, consult widely with all stakeholders and make the results public.

"There are many factors affecting the biofuels market and we are determined to have these properly covered in our reporting systems, specially those affecting sustainability. This review will enable us to assess indirect effects of biofuels including those on land use change."