Darling puts finishing touches to green budget

Speculation is mounting that chancellor Alistair Darling is poised to deliver Labour's greenest ever budget, including a raft of measures designed to reduce car emissions.

However, environmentalists are likely to be disappointed over proposals to further boost biofuel use and the Chancellor's apparent refusal to levy a windfall tax on energy companies to fund green spending.

According to a series of reports over the weekend, Darling is set to present the results of Professor Julia King's report on "decarbonising road transport", which was commissioned by the Treasury last autumn. The report is expected to include proposals for a "showroom tax" on the most polluting vehicles of up to £2,000 and a colour coding road tax disc system that would designate different cars' emission levels and potentially enable differentiated rates for parking charges.

In the interim version of her report, released last autumn, King argued it was currently possible to cut emissions from cars by a quarter by selecting the most efficient models and predicted emissions could be cut by 80 per cent by 2050 using new technologies. It concluded that it would be possible to attain an "almost complete decarbonisation of road transport" within the next 40 years.

The study estimated improvements in fuel efficiency would initially add £1,000 to £1,500 to the price of new cars, but predicted that these innovations would become standard within five years leading to a reduction in costs.

It remains unclear how many of King's recommendations Darling will adopt, but he is set to announce a consultation with the car industry on ways to make it clearer to buyers how much carbon different vehicles emit.

He is also said to be standing by the planned 2p a litre rise in fuel duty planned for April, despite calls to scrap the tax increase.

Controversially, Darling is expected to step up the government's attempts to bolster use of biofuels. Up to now biofuels have been promoted through a lower fuel duty than conventional fuels, but the new policy will instead mandate oil firms to double the five per cent the share of biofuels in petrol and diesel.

The move is likely to infuriate environmental campaigners who have been calling for a moratorium on biofuels, citing concerns over increased food insecurity and deforestation resulting from increased demand for fuel crops.

The Treasury is also reported to be resisting calls for a windfall tax on energy companies and is instead attempting to broker a voluntary agreement with utilities to better support those suffering from "fuel poverty".

The reports come as the government's new Climate Change Committee prepares to meet for the first time to discuss how the government will meet its target of cutting emissions by 60 per cent by 2050 and whether that target should be toughened.

The Committee, chaired by former CBI boss Lord Adair Turner, will deliver its first report by the end of the year on whether the emissions targets should be raised to an 80 per cent cut by 2050 and whether international aviation and shipping should be included in the government's emissions calculations.