"The expanded use and production of biofuels will not necessarily contribute to reducing greenhouse gas emissions as was previously assumed," Food and Agriculture Organisation Director General Jacques Diouf told a news conference.

The FAO also warned that massive subsidies in wealthy countries limit opportunities elsewhere to profit from the boom in biofuels.

"Trade policies vis-a-vis biofuels discriminate against developing-country producers of biofuel feedstocks and impede the emergence of biofuel processing and exporting sectors in developing countries," the FAO's annual flagship report said.

Diouf, unveiling the report, urged a review of policies on subsidies, tax incentives, tariffs and mandated blending of biofuels with fossil fuels.

The FAO also predicts that food prices will continue to rise as demand grows for biofuels despite their limited importance in terms of global energy supply.

"The risks for food security concerns loom large," Diouf said.

"While some of the other factors may subside, growing demand for agricultural products for the production of biofuels will continue to put upward pressure on food prices for a considerable time to come," he added.

Biofuel production using agricultural commodities more than tripled from 2000 to 2007, and now covers nearly two percent of the world's consumption of transport fuels.

The report, titled "Biofuels: Prospects, Risks and Opportunities," finds that while biofuels will offset only a modest share of fossil energy use over the next decade, they will have much bigger impacts on agriculture and food security.

"We hope that, in general, countries that are pushing for rapid expansion of biofuels will reconsider the pace of that expansion," said FAO expert Keith Weibe.

Diouf also voiced concern that the financial crisis sweeping the world will divert attention as well as "capacity, willingness (and) priority that governments will be giving to the issue of food security."

Brazil's sugarcane-based ethanol is the only biofuel that can compete with fossil fuels, the report said, noting that its production costs are the lowest.

"Even taking into account recent rises in oil prices, among the major producers only Brazilian sugarcane ethanol currently appears to be competitive with fossil fuel counterparts without subsidies."

Wiebe told the news conference: "Our analysis shows that if support measures (subsidies) were reduced or eliminated, global levels would fall but Brazil's would increase."

The FAO report also discussed the environmental impact of changes in land use.

"Possible negative environmental effects -- on land and water resources, as well as on biodiversity -- occur largely because of changes in land use," it said. Biofuel production "strongly enhances the risk of large-scale land-use change and the associated environmental threats," it said.

"The challenge is to reduce or manage the risks while sharing the benefits more widely," Diouf said. "The outcome depends on the specific context of the country and the policies adopted."

The FAO chief wrote in the report: "The emergence of biofuels as a new and significant source of demand for some agricultural commodities -- including maize, sugar, oilseeds and palm oil -- contributes to higher prices for agricultural commodities in general, and for the resources used to produce them.

"For the majority of poor households who consume more food than they produce, higher prices can pose a serious threat to food security -- especially in the short term," he said.

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