"The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits," the OECD said.

"When acidification, fertiliser use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel," it added.

The OECD therefore called on governments to cut their subsidies for the sector and instead encourage research into technologies that would avoid competing for land use with food production.

"Governments should cease to create new mandates for biofuels and investigate ways to phase them out," it said.

The OECD said tax incentives put in place in many regions, including the European Union and the United States, to encourage biofuel output could hide other objectives.

"Biofuel policies may appear to be an easy way to support domestic agriculture against the backdrop of international negotiations to liberalise agricultural trade," it said.

CUT DEMAND

Instead it encouraged members of the World Trade Organisation to step efforts to lower barriers to biofuel imports to allow developing countries that have ecological and climate systems more suited to biomass production.

The OECD also encouraged government to work on cutting demand for transport fuel rather than encouraging production of so-called "green" fuels.

"A litre of gasoline or diesel conserved because a person walks, rides a bicycles, carpools or tunes up his or her vehicle's engine more often is a full litre of gasoline or diesel saved at a much lower cost to the economy than subsidising inefficient new sources of supply," it said.

Biofuels, made mainly from grains, oilseeds and sugar, have been accused of being responsible for a recent surge in farm commodities prices, along with other factors such as lower output and tight stocks.

The OECD, which said in July that it saw biofuels keeping prices at high levels into the next decade, said it would lead to an unavoidable "food-versus-fuel" debate.