Transport Secretary Ruth Kelly said a review had not recommended a temporary halt to the use of biofuels, which are sourced from organic materials such as palm oil and sugar beet.
But she said that while biofuels had the potential to cut carbon emissions there were "increasing questions" about them and she agreed with the report's recommendations to "amend not abandon" the government's policy.
The review examined the indirect effects of biofuel production such as land use change and the effect on food prices.
It called for biofuels to be introduced more slowly than first planned until controls are in place to prevent higher food prices and land being cleared of forest or agriculture in order to grow fuels.
The study into the indirect effects of biofuels warned current policies may cause greenhouse gas emissions rather than savings and also found biodiversity could be reduced.
The report was less drastic than a World Bank study last week which blamed biofuels for a 75-percent rise in food prices.
But it warned that current biofuels policy could push up grain prices in the European Union by 15 percent, sugar by seven percent and oil seed by 50 percent, while millions more people elsewhere in the world could be pushed into poverty.
The review estimates that an extra 10.7 million people in India could be plunged into poverty, while hundreds of thousands of people in countries such as Kenya, Malawi and Bangladesh could be affected by food price rises caused by biofuels.
But Professor Ed Gallagher, the chairman of the Renewable Fuels Agency, who carried out the review, said the figures did not take into account the impact of climate change on poor people if biofuels were not introduced.
The Gallagher report recommends that biofuel production should target idle and marginal land, and the use of so-called second generation biofuels -- which use waste parts of plants for energy to avoid land use change and reduce competition with food production.
Marginal and idle land could include set-aside land in Britain and eastern Europe where farmland has fallen into disuse, the report's co-author Greg Archer said.
Oxfam welcomed the caution expressed in the report, but said it should have gone further and recommended a complete moratorium on mandatory targets because biofuels were not a "magic bullet" for climate change.
The charity's Stephen Doughty said: "Given the clear link between biofuels and rising food prices, and evidence of higher emissions from biofuels production than previously thought, the report should have gone further and called for the complete repeal of existing targets.
"It is obvious that biofuels are not a magic bullet for climate change, and may actually make things worse. In light of this, neither the UK nor the EU should have compulsory targets."
© 2008 AFP
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