Ms Kelly said the government acknowledged "that biofuels can have an important role in reducing carbon emissions and combating climate change".
But she said: "We need to proceed cautiously until we can be certain that their expanded growth and use maximises the benefits and minimises the risks to our world."
Environment Secretary Hilary Benn said: "To tackle climate change we will need to develop new, cleaner fuels - but that doesn't mean pushing forward indiscriminately on biofuels that may do more harm than good."
For the Conservatives, shadow transport secretary Theresa Villiers said a "mere slowdown" of the targets would not address problems.
She added: "The rainforest is under threat right now. The orang-utans' habitat is being wiped out right now by palm oil plantations."
Lib Dem transport spokesman Norman Baker said Ms Kelly's statement had not gone "far enough", adding: "It has done nothing to close the loopholes which support unsustainable and inefficient US corn-based ethanol."
A panel of government experts, chaired by Professor Ed Gallagher, head of the Renewable Fuels Agency, has looked at the impact of energy policy on land use.
Its report calls for biofuels to be introduced more slowly than planned until controls are in place to prevent higher food prices and land being switched from forests or agriculture.
It predicts that current policies could see grain prices in the EU rise by 15%, sugar by 7% and oil seed by 50%.
The review estimates that an extra 10.7 million people in India could find themselves in poverty, while countries such as Kenya, Malawi and Bangladesh could see hundreds of thousands affected.
Prof Gallagher said the figures did not take into account the impact of climate change on poor people if biofuels were not introduced, or the help they could provide to rural economies or the fluctuating oil price.
His review says biofuel production should be focused on idle and marginal land and the use of so-called second generation biofuels.
These use waste parts of plants for energy to avoid land use change and reduce competition with food production.
Paul Temple, vice-resident of the National Farmers' Union told the BBC that members were keen to produce biofuel crops.
He said: "In the UK we have a great opportunity of doing this really well because we produce these crops sustainably.
"We have additional land there to produce these crops and what we want to see is investment in the technology to make that first step."
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