The FT reports, commercial production has started at the UK's first large biodiesel plant, making environmentally friendly fuel from animal fat and used cooking oil. The "green" fuel will be sent from Motherwell in central Scotland to refineries at Grangemouth and Teesside, where it will be mixed with mineral diesel. The resulting blend - 5 per cent biodiesel, 95 per cent mineral diesel - will be marketed under the Bio-plus brand, and requires no change to vehicle engines.

The �15m plant's first production was welcomed by Downing Street, the Department for Transport and the Scottish executive, which gave the project a �1.2m regional selective assistance grant.

The Motherwell plant, which employs 16 people, will be able to produce 50,000 tonnes a year - twice the output of the world's current biggest plant in Austria. Argent Energy, the London-based company that built the plant, believes it will enjoy a commercial advantage because it can buy used cooking oil from the catering industry for 175 a tonne, compared with 375 for rapeseed oil and 325 for soya.

Although biodiesel attracts a 20p per litre discount on the usual fuel duty rate of 48.5p, it accounts for less than 0.1 per cent of total diesel sales and less than 0.05 per cent of combined petrol and diesel sales.

Hamish Curran, chief operating officer at Argent, said: "Producing biodiesel from these raw materials at this scale has never been done before.

"We are developing plans for expansion and looking at the possibility of setting up at least two more plants in other parts of the UK."

Stephen Thomason, marketing director of Petroplus, the Netherlands-based refiner which has signed a contract for biodiesel with Argent, said: "It improves engine lubrication and fuel efficiency and burns more completely, reducing emissions, and it's virtually sulphur-free. Above all, bio-diesel reduces carbon dioxide - the main gas responsible for global warming."