The plan is part of the centre-right government's long-term energy strategy for 2025 due to be presented soon.

The government plans to add two percent bio-ethanol to petrol and diesel by the end of the year, before raising the level to six percent in 2010, according to the Liberal Party spokesman on energy issues, Lars Christian Lilleholt.

"The goal is to make Denmark more 'green' and to adapt our transport sector progressively, reasonably and in a financially profitable way so that it uses more bio-fuels," he said.

The increased use of bio-ethanol will enable Denmark to reduce its dependence on fossil fuels, in particular from politically unstable regions, and to pursue other alternatives, such as wind power, a field where Denmark is a world leader.

The transport sector accounts for 60 percent of the petrol used in Denmark. The country is self-sufficient owing to its oil reserves in the North Sea, but "there will come a day when that will no longer be the case," Lilleholt said.

The Danish government had until now been opposed to the use of first generation bio-ethanol, arguing that the environmental benefits were limited and preferring to wait for the second generation of bio-ethanol currently under development.