LONDON (Reuters) - Britain should reduce its reliance on corn ethanol for renewable fuels and encourage the use of cheaper and more sustainable biofuels such as used cooking oil, a report by a UK think tank said on Tuesday.
It said the government should consider modifying its Renewable Transport Fuel Obligation (RTFO), which has been in place since 2008 and has gradually increased every year to require that 5 percent of Britain's fuel supply by volume is made up of renewable fuels from this April.
The RTFO should instead have an energy content target or set specific targets for ethanol and biodiesel, independent analysis group Chatham House said in the report.
"In its present form the RTFO may not be an appropriate instrument for achieving the (EU target) economically," Chatham House said, adding that it could also result in higher fuel costs for motorists.
The RTFO is Britain's main policy instrument for meeting a wider European Union goal that 10 percent of transport fuel should come from renewable sources by 2020.
The RTFO does not specify the type of renewable fuels but these have to meet certain criteria and cut greenhouse gas emissions by a minimum amount.
A spokesperson from the government's department for transport said any percentage increase this April in the RTFO should have little impact on fuel prices for motorists.
"The government will closely monitor the price at the pumps and the impact this has on families and businesses," the spokesperson added.
In recent years, Britain's biofuel consumption has shifted markedly from biodiesel to ethanol, Chatham House said.
Fuel suppliers are importing increasing amounts of lower-priced ethanol derived from U.S. corn but it has a much lower calorific value than petrol, making it the most expensive form of renewable fuel, it added.
According to government data cited in the report, ethanol increased its share of UK biofuel supply to around 61 percent by 2012 from 41 percent in 2010, while biodiesel's share declined to around 35 percent from around 60 percent.
In 2011-12, supplying 10 percent of transport fuel from renewable sources under EU targets would have cost around $1.8 billion using biodiesel, compared with $2.3 billion using ethanol, the report said.
Corn-based ethanol has also been criticised for competing with agricultural production for land and driving up food prices.
"Our research shows that biofuels derived from agricultural crops offer poor value for money as a means to reduce emissions and can have serious consequences for food prices," said Rob Bailey, senior research fellow at Chatham House and author of the report.
"The UK's heavy reliance on corn ethanol is a particular concern in this regard. Biodiesel produced from waste cooking oil is a more sustainable option and offers cheaper emissions reductions," he added.
(Editing by Clelia Oziel and Keiron Henderson)