Tough times ahead for the biodiesel sector Biodiesel, made from vegetable oils (and also animal fats, and recycled restaurant grease) is similar to petroleum diesel, but is cleaner-burning, hence EU targets to encourage its use. The Renewable Energy Directive (RED) holds that biofuels should account for 10pc of land transport fuel by 2020. However, the industry has been faced with a furious food-versus-fuel debate. At the heart of it is the question of whether crops should be used to make fuel, when those products - or the land - on which they are grown could be used to meet the world's food needs. There has also been sniping over the environmental benefits, since producing and burning biofuels still releases carbon. In the wake of the backlash, the authorities have put in place strong sustainability criteria with regards to what land can be used in biodiesel production and have held back from boosting targets for its use. "Increasingly policy is becoming more sceptical," said Amrita Sen, an energy analyst at Barclays Capital. There are other headaches too: elevated prices for the raw materials of rapeseed and palm oil, and competition from elsewhere in the world, such as Asia and South America. The tax system in Argentina, for example, is set up so that it encourages the production of biofuel there rather than for the raw materials to be shipped abroad. There is a also the impact of a reward system embedded in European regulation, whereby if biodiesel is made from used cooking oil, refiners blending fuel can double-count it to reach their biofuel targets. The idea is to incentivise them to use up a waste product, but the downside is that it reduces biodiesel demand. The situation for ethanol, the biofuel made from grain, is not quite so bad, as even with reduced subsidies the fall in the price of corn has protected margins. However, European production of biofuels is dominated by biodiesel, given that cars here are historically more likely to use diesel than petrol than in the US (hence why 40pc of the US corn crop goes to make biofuel). Rodriguez does not see much cause for cheer in the biodiesel industry looking forward, predicting it will have to shrink itself significantly, by at least 25pc. We are already seeing a lot of plants closing. That I think will continue until we see a balance," he said. In the long-term, he expects governments' sustainability criteria to protect their local producers. However, this will not save those already in trouble. Sen predicts that "second-generation" biofuels, such as those derived from algae, will have an increasingly prominent role, despite the expense involved, as they will prove politically more palatable than burning crops. As for the future of the fuel, there is a place for it - it is just perhaps not so prominent as may have been hoped. "It's not an option to replace all of our fuels," said Rodriguez. But 10pc is something more realistic - which will not create a huge disruption in agricultural markets or food markets.