The farming industry is hoping that incentives to develop the renewable fuels market will feature prominently in next week’s budget announcement (22 March).

NFU president Peter Kendall said he wanted to see the chancellor make “positive signals” on the Renewable Transport Fuels Obligation (ReTFO) and would also be watching to see if the government would offer capital grants for biomass projects.

The government announced the ReTFO in November 2005 when it said it wanted 5% of all forecourt fuel to come from renewable sources by 2010.

Mr Kendall said he wanted to see an indication of how long the ReTFO will run for and what might happen in the long term.

“It is also important that we know at what level it will kick-in in 2008/09/10.

We think if it is too low it will be possible to meet all the targets with biodiesel, but if it kicks in at 3% in 2008 it will give confidence to domestic producers to build bioethanol plants.”

Paul Temple, NFU vice-president, added that it was important the UK biofuels industry was not left behind by the rest of Europe. France has set a particularly ambitious target.

It has set a goal of achieving up to 10% of fuels from renewable sources by 2015.