It used to be a matter of good intentions gone awry. Now it is plain fraud. The governments using biofuel to tackle global warming know that it causes more harm than good. But they plough on regardless. In theory, fuels made from plants can reduce the amount of carbon dioxide emitted by cars and trucks. Plants absorb carbon as they grow - it is released again when the fuel is burned. By encouraging oil companies to switch from fossil plants to living ones, governments on both sides of the Atlantic claim to be "decarbonising" our transport networks.

In the budget last week, Gordon Brown announced that he would extend the tax rebate for biofuels until 2010. From next year all suppliers in the UK will have to ensure that 2.5% of the fuel they sell is made from plants - if not, they must pay a penalty of 15p a litre. The obligation rises to 5% in 2010. By 2050, the government hopes that 33% of our fuel will come from crops. Last month George Bush announced that he would quintuple the US target for biofuels: by 2017 they should be supplying 24% of the nation's transport fuel.

So what's wrong with these programmes? Only that they are a formula for environmental and humanitarian disaster. In 2004 I warned, on these pages, that biofuels would set up a competition for food between cars and people. The people would necessarily lose: those who can afford to drive are richer than those who are in danger of starvation. It would also lead to the destruction of rainforests and other important habitats. I received more abuse than I've had for any other column - except for when I attacked the 9/11 conspiracists. I was told my claims were ridiculous, laughable, impossible. Well in one respect I was wrong. I thought these effects wouldn't materialise for many years. They are happening already.

Since the beginning of last year, the price of maize has doubled. The price of wheat has also reached a 10-year high, while global stockpiles of both grains have reached 25-year lows. Already there have been food riots in Mexico and reports that the poor are feeling the strain all over the world. The US department of agriculture warns that "if we have a drought or a very poor harvest, we could see the sort of volatility we saw in the 1970s, and if it does not happen this year, we are also forecasting lower stockpiles next year". According to the UN food and agriculture organisation, the main reason is the demand for ethanol: the alcohol used for motor fuel, which can be made from maize and wheat.

Farmers will respond to better prices by planting more, but it is not clear that they can overtake the booming demand for biofuel. Even if they do, they will catch up only by ploughing virgin habitat.

Already we know that biofuel is worse for the planet than petroleum. The UN has just published a report suggesting that 98% of the natural rainforest in Indonesia will be degraded or gone by 2022. Just five years ago, the same agencies predicted that this wouldn't happen until 2032. But they reckoned without the planting of palm oil to turn into biodiesel for the European market. This is now the main cause of deforestation there and it is likely soon to become responsible for the extinction of the orang-utan in the wild.

But it gets worse. As the forests are burned, both the trees and the peat they sit on are turned into carbon dioxide. A report by the Dutch consultancy Delft Hydraulics shows that every tonne of palm oil results in 33 tonnes of carbon dioxide emissions, or 10 times as much as petroleum produces. I feel I need to say that again. Biodiesel from palm oil causes 10 times as much climate change as ordinary diesel.

There are similar impacts all over the world. Sugarcane producers are moving into rare scrubland habitats (the cerrado) in Brazil, and soya farmers are ripping up the Amazon rainforests. As President Bush has just signed a biofuel agreement with President Lula, it's likely to become a lot worse. Indigenous people in South America, Asia and Africa are starting to complain about incursions onto their land by fuel planters. A petition launched by a group called biofuelwatch, begging western governments to stop, has been signed by campaigners from 250 groups.

The British government is well aware that there's a problem. On his blog last year the environment secretary David Miliband noted that palm oil plantations "are destroying 0.7% of the Malaysian rainforest each year, reducing a vital natural resource (and in the process, destroying the natural habitat of the orang-utan). It is all connected." Unlike government policy.

The reason governments are so enthusiastic about biofuels is that they don't upset drivers. They appear to reduce the amount of carbon from our cars, without requiring new taxes. It's an illusion sustained by the fact that only the emissions produced at home count towards our national total. The forest clearance in Malaysia doesn't increase our official impact by a gram.

In February the European commission was faced with a straight choice between fuel efficiency and biofuels. It had intended to tell car companies that the average carbon emission from new cars in 2012 would be 120 grams per kilometre. After heavy lobbying by Angela Merkel on behalf of her car manufacturers, it caved in and raised the limit to 130 grams. It announced that it would make up the shortfall by increasing the contribution from biofuel.

The British government says it "will require transport fuel suppliers to report on the carbon saving and sustainability of the biofuels they supply". But it will not require them to do anything. It can't: its consultants have already shown that if it tries to impose wider environmental standards on biofuels, it will fall foul of world trade rules. And even "sustainable" biofuels merely occupy the space that other crops now fill, displacing them into new habitats. It promises that one day there will be a "second generation" of biofuels, made from straw or grass or wood. But there are still major technical obstacles. By the time the new fuels are ready, the damage will have been done.

We need a moratorium on all targets and incentives for biofuels, until a second generation of fuels can be produced for less than it costs to make fuel from palm oil or sugar cane. Even then, the targets should be set low and increased only cautiously. I suggest a five-year freeze.

This would require a huge campaign, tougher than the one which helped to win a five-year freeze on growing genetically modified crops in the UK. That was important - GM crops give big companies unprecedented control over the foodchain. But most of their effects are indirect, while the devastation caused by biofuel is immediate and already visible.

This is why it will be harder to stop: encouraged by government policy, vast investments are now being made by farmers and chemical companies. Stopping them requires one heck of a battle. But it has to be fought.

You can join the campaign at www.biofuelwatch.org.uk. www.monbiot.com