"In short, the report concludes that the government should amend but not abandon its biofuel policy. I agree with these key findings."

'Stark message'

Biofuels are mainly produced from food crops such as wheat, maize, sugar cane and vegetable oils and are seen as a way to cut greenhouse gas emissions that contribute to climate change.

Critics say that diverting land from food crops to produce biofuels has helped push up global food prices and in some cases has led to the destruction of rain forests.

The European Union's proposal to get 10 per cent of road transport fuels from renewable sources, such as biofuels, by 2020 has faced growing criticism.

Doug Parr, chief scientist of the environmental group Greenpeace, said: "This review sends a stark message - using food crops to fuel our cars risks making climate change worse and increasing food prices for the world's poorest people.

"Gordon Brown must now follow one of the key recommendations of his own report and call for an end to the EU's hastily adopted and potentially damaging biofuel targets."

Clare Wenner, head of biofuels for the RFA, said the measures would create a difficult environment for biofuels investors.

She said: "The slowdown is disappointing but when you couple that with yet more reviews, yet more conditions ... it makes the whole environment very difficult. My big fear is that investors in this country will walk."

The report coincides with a summit of the Group of Eight rich nations in Japan where food prices have been high on the agenda.

Controls needed

Speaking about the report, Gallagher said: "Over the last 12 months, new research has identified that land use change causes significant greenhouse gas emissions, sufficient in many cases to overcome the savings from biofuels for several years.

The EU wants 10 per cent of road fuels from renewable sources by 2020 [AP]

"When we look at that research, we've concluded we need controls in place to make sure those adverse effects don't happen and we need a slow down in the anticipated rate of biofuels growth to get those controls in place."

The current requirement in Britain is that 2.5 per cent of fuel supplied for road transport should be from renewable sources, rising to five per cent in 2010 to 2011, a rate of increase of 1.25 per cent a year.

Gallagher recommended the rate of growth should slow to 0.5 per cent a year, only rising to five per cent in 2013 to 2014, with further expansion only if biofuels are demonstrably sustainable.

The review said current policies, if left unchecked, could lead to higher food prices and increased poverty.

The report estimated that in India, an extra 10.7 million people would drop below the poverty line due to biofuels.

"Our view is in the short term it [the impact on food prices] is significant, in the long term not quite as significant," Gallagher said.