While they reduce reliance on fossil fuels, crop-based biofuels are made from agricultural products such as sugar or rapeseed oil that could otherwise be used for human consumption or animal feed, leading to criticism that they cause indirect changes in land use.

According to the European Commission's proposal, the maximum contribution from liquid biofuels to the EU renewable energy target should fall to 3.8 percent in 2030 from 7 percent in 2021. At the same time, the Commission is proposing an increase in the level of so-called advanced, or second-generation, biofuels made from waste coming from agriculture or forestry industries.

An EU source close to the matter said the Commission will propose for the share of second-generation biofuels to rise to 5.5 percent by 2030 from 1.5 percent in 2021.

"A progressive reduction of food-based biofuels and their replacement by more advanced biofuels will realize the potential for decarbonising the transport sector," the Commission said in the draft proposal, part of a set of rules aimed at ensuring goals are met for cutting emissions by 2030.

European farmers have argued that reducing crop-based biofuels will have unwanted effects, saying they help farmers to rotate crops and reduce imports of livestock feed.

The European renewable ethanol association ePURE said the Commission's proposal risked harming investments in second-generation biofuels.

"A phase out will lead to more and more biofuel investments, in first and second-generation biofuels, taking place outside of Europe," said ePURE's secretary genera,l Robert Wright.

Others said the Commission's proposal did not go far enough.

"Biodiesel from virgin vegetable oil leads to around 80 percent higher emissions than the fossil diesel it replaces," Brussels-based Transport and Environment said. "Biodiesel should be phased out well before 2030 given its devastating impacts on the world's climate and tropical forests."

In 2012, the EU dedicated 3 percent of its total cropland to the production of feedstock for biofuels consumed within the 28-member bloc. Biofuels are largely compatible with today's vehicles and can be blended with current fossil fuels. According to ePURE all petrol sold in the EU typically contains up to 5 percent ethanol.

In its draft, the Commission does not distinguish between bioethanol made mostly from sugar beet and cereals and biodiesel made from oilseed crops, mainly rapeseed, but says member states can make such a distinction themselves when implementing the rules.

Source: Reporting by Robert-Jan Bartunek, Sybille de La Hamaide and Alissa de Carbonnel; editing by Hugh Lawson and Alexandra Hudson of Reuters, via the Thomson Reuters Foundation