From yesterday, 15th April, all petrol and diesel sold in the UK must include 2.5% biodiesel, according to new legislation introduced in this year’s Budget.

The requirement is part of the Renewable Transport Fuels Obligation and will increase to 5% in 2010, despite growing concerns about the environmental cost of producing biofuels – especially in countries were deforestation is taking place to plant biofuel crops such as palm trees.

Any fuel suppliers who cannot demonstrate that their fuels include the required 2.5% of biofuels will have to pay a fee to the Treasury. Although this measure was designed to protect fuel suppliers from sudden fluctuations in the price of biofuel, it also serves as an buy-out clause – fuel companies need not bother with biofuels if they are happy to pay the buy-out price.

According to press reports, the Department for Transport was unable to confirm whether any fuel suppliers had chosen this route or not.

You can learn more about this issue here and here.