The government is to consult on a new framework for the tax treatment of green fuels.

"The government believes that economic prosperity must be achieved while protecting the environment to ensure a better quality of life for everyone," said the Treasury.

The aim is to increase usage and promote investment in new fuel efficient technologies. "The Budget will also introduce incentives for rebated low sulphur fuel and gas oils," said Gordon Brown.

The chancellor will also examine the prospects for recycling revenues from landfill tax and extending eligibility for 80 per cent reductions from the climate change levy.

There will also be help for Northern Ireland, with an extension until 2012 of an eighty per cent discount on the aggregates levy.

Brown also announced that the government will consult on plans to tackle diffuse water pollution.