In September, the House of Commons Select Committee described the Government’s approach as piecemeal and lacking in ambition.
Now, the latest study looking at efforts to increase the use of renewable fuels in road transport across the EU has been carried out by the House of Lords European Union committee.
It found Britain behind its target but France, Germany and Sweden on course to meet theirs.
Although the Lords study commends the Government for introducing the National Road Transport Fuel Obligation, which requires fuel suppliers to ensure that 5% of their UK sales are from renewable sources, it urges ministers to consider whether future tax incentives are needed to promote biofuels use.
Committee chairman Lord Renton said: "Within the last few weeks, we have seen Sir Nicholas Stern’s warnings about the environmental consequences of carbon emissions. Increasing Europe’s use of biofuels has a significant role to play in dealing with this problem. Britain is, however, falling short of its targets on the use of biofuels.
"We welcome the Government’s decision to introduce a renewable transport fuels obligation and, indeed, we would urge the European Commission to require all member states to introduce similar measures."
Lord Renton said a number of other European countries offered significant tax concessions to promote the use of, and encourage interest in, biofuels.
A spokesman for the Department for Transport (DfT) said: "We recognise the potential of biofuels to reduce the environmental impact of transport.
"That’s why we’ve introduced the first Renewable Transport Fuels Obligation, predicted to save one million tonnes of carbon a year by 2010.
"The UK is developing a robust carbon assurance scheme to ensure that the obligation promotes the use of environmentally sustainable biofuels."
Last week, we revealed a host of automotive business leaders had written to Chancellor Gordon Brown urging him to cut company car tax in this year’s budget for drivers who switch to biofuel-powered vehicles.