PLEA OVER BIOFUEL SUBSIDIES

The "misjudged" biofuels targets had led to an increase in food prices and deforestation and should be abandoned, the report said.

The £550 million annual cost in lost revenue from the Government's aim of using biofuels to make up 5% of fuel sold on UK forecourts could be better spent on avoiding deforestation, the Policy Exchange report said.

The Renewable Transport Fuel Obligation (RTFO) target would save 2.6-3 million tonnes of carbon dioxide emissions a year.

But investing in preventing the destruction of peatland or rainforests could result in a "50 times greater amount of avoided emission" because the habitats act as a store of carbon which is released into the atmosphere when burned.

The right-leaning think tank said tropical deforestation contributes around 20% of all greenhouse gas emissions - similar to the amounts generated by the USA and China.

Ben Caldecott, head of the environment unit at Policy Exchange and editor of the report said: "The research is clear - if developed countries spent the same amount of money on preventing deforestation and the destruction of peatlands as they do on misguided biofuel subsidies (15 billion US dollars), this would halve the total costs of tackling climate change."

Shadow environment secretary Peter Ainsworth said: "This report is timely and welcome. It is becoming increasingly clear that unless we find a practical solution to the problems caused by deforestation the battle against climate change is in danger of being lost."

A Government-commissioned investigation into the fuels by Professor Ed Gallagher last month concluded that "uncontrolled expansion" in the industry could actually lead to an increased climate change threat if rainforests were felled to make way for biofuel crops.

Transport Secretary Ruth Kelly said the Government would consult on slowing the rate at which the RTFO was introduced, to delay reaching the 5% target from 2010-11 to 2013-14.