OIL companies are to be forced to add fuel made from crops such as oil seed rape and sugar cane to all petrol and diesel sold in Britain.

The Government is preparing to announce a Renewable Transport Fuel Obligation under which 5 per cent of all fuel sold by 2010 will have to come from crops, known as biofuel.

The oil industry is expected to comply by selling a blend which will comprise 95 per cent diesel or petrol and 5 per cent biofuel. All cars can use the 5 per cent blend without modification. Some models, including versions of the Saab 9-5 and Ford Focus, have been adapted to take a blend containing 85 per cent biofuel.

About 2 per cent of fuel currently sold in Britain is biofuel. Ethanol made from Brazilian sugar cane is added to petrol. Oil seed rape and reprocessed vegetable oils are added to diesel.

Ministers have acknowledged that tight controls will be needed on how the crops are produced to avoid the destruction of the Amazon rainforest.

A Whitehall source said: “The obligation will result in soaring demand for sugar cane from Brazil and we don’t want to see rainforest being chopped down in order to grow it.”

The 5 per cent blend will be enough to reduce Britain’s emissions of carbon dioxide, the main greenhouse gas, by more than 1 per cent by 2010.

Thousands of farmers have already either converted fields to growing fuel crops or are planning to do so. The number of hectares of agricultural land in Britain devoted to growing oil seed rape, which turns fields bright yellow in Spring, grew by 100,000 to 1.5 million between 2004 and 2005.

Half of Tesco’s 381 filling stations already sell petrol with a 5 per cent blend of ethanol and 23 sell the diesel version of biofuel.

Sales of “biodiesel” more than doubled to 3 million litres a month in the year to May, according to Department for Transport figures.

Over the same period, “bioethanol” grew from virtually nothing to 7.8 million litres a month.

Both forms of biofuel have been boosted by a 20p a litre tax rebate. However, this only applies to the crop element of the blended fuel, meaning a 5 per cent blend costs only 1p less in tax than conventional fuel.

The UK Petrol Industry Association said that the industry would be capable of meeting the 2010 target without having to raise pump prices.