"Enhancement of our biofuels supply chain will be a prevalent feature in budgets from now on, " said Cowen.

The goal is to promote a viable domestic alternative to reduce dependence on imported fossil fuels, stimulate the rural economy and provide incentives for younger, progressive farmers to remain on the land.

In his budget address last week, Cowen announced payments to farmers raising energy crops in what was described as the first step in developing a biofuels supply chain.

Grants to establish growth of willow and miscanthus, also known as elephant grass, were announced in last week's budget, as were increased payments of 80 per hectare. That payment would be on top of EU payments of 45 per hectare. Grants will also be made available for additional harvesting machinery. The measures will cost 6m in 2009.

While the biofuels incentives were welcomed in some quarters, including among farmers and NTR bioenergy subsidiary Bioverda, critics said they did not go nearly far enough.

Cowen's commitment to further incentives will be met with scepticism until future plans are more concrete, it is thought.

Also included in the budget was an extension of the corporate tax deduction for investment in renewable energy including biomass, solar, wind or hydro.

Announced in last year's budget but cited by Cowen as an example of the government's commitment to further developments in the alternative fuels sector was the 205m excise duty relief scheme for biofuels over five years.

Some producers have complained that the scheme focuses too much on maintaining a reliable tax source on fuel and fails to promote innovation adequately.

And some environmental advocates were disappointed that the budget did not move towards making blended fuel, made in part from biomass sources, mandatory at a future date.

Other measures included a carbon labelling system to be applied to vehicle tax beginning in January 2008, which could offer incentives to drivers to move towards lower-emission and hybrid vehicles.