The requirement will lead t? a 20-fold increase in biofuels use, which currently stands at about 0.25 percent of all road fuel sales, and the announcement received a largely positive response from the farming and renewable energy sectors.
"I’m very positive (about the announcement). It is unusually unambigous and that is a great step forward," said Andrew Owens, chief executive officer of UK biofuels supplier Greenergy.
The measure, known as the Renewable Transport Fuels Obligation, should save around one million tonnes of carbon dioxide emissions in 2010, the equivalent of taking a million cars off the road, Darling said in a statement.
"I think it (five percent) is realistic. We’re delighted," said Malcolm Shepherd, managing director of biofuels company Green Spirit Fuels Plc.
Biofuels use in the UK has been growing during the past few months, with supermarket giant Tesco Plc among those expanding sales at its forecourts.
"This is a big step forward in the UK’s effort to combat climate change," Clare Wenner, head of biofuels at the Renewable Power Association, said.
The RPA, however, expressed disappointment at the five percent requirement, which is a volume target and is the equivalent of 3.5 percent on energy content.
The European Union biofuels directive released in 2003 calls for a target of 5.75 percent on the basis of energy content.
DISAPPOINTMENT
"It is disappointing that the government has gone only as far as five percent. Still, we are confident the figure will increase over time so that motorists can do more to save carbon in the future," Wenner said.
Oil companies that sell more than the five percent obligation will be able to sell credits to other companies.
Greenergy’s Owens said that was an important feature of the measure as it would be impossible to ensure all areas reached the five percent level.
The UK government also proposed a scheme requiring companies to supply details on the level of carbon savings achieved.
Owens said that requirement might be challenging for some palm oil suppliers but it was not clear how much generally it would benefit domestic producers at the expense of imported supplies as producers such as Brazil could produce bioethanol often with huge carbon savings.
The UK relies heavily on Brazilian bioethanol to meet its current use of biofuels.
British crops such as wheat, sugar beet and rapeseed could be used to supply biofuels.
"We have been pushing government for a while now to introduce a meaningful target for biofuel use and we are delighted they have now done so," National Farmers Union Scotland vice-president Bob Howat said in a statement.
"Whilst a five per cent target sits just below the EU- recommended level, this is still an extremely significant move," he added.