Yahoo News 24 Mar 10;
KUALA LUMPUR (AFP) – Malaysia, the world's second-largest palm oil producer, will make it mandatory for all vehicles to use biofuel from next year, the government announced Wednesday.
Malaysia's plans to shift to biofuel -- a mixture of diesel with five percent processed palm oil -- have been delayed over the past few years due to price fluctuations.
The plan will now be implemented in stages in several central states from June 2011, the Plantation Industries and Commodities Ministry said in a statement, adding that the extra cost will be borne by petroleum companies.
The policy "will benefit the country as biofuel is environmentally friendly and it will reduce our dependence on petroleum diesel," the ministry said.
"It will also strengthen the palm oil prices and enable the planters, especially smallholders, to benefit from the stronger palm oil price."
The ministry said it will discuss the implementation mechanism with petroleum companies, while the government will set up six petroleum depots with blending facilities.
The government has said the switch to biofuel will help reduce the cost of fuel in Malaysia, where petrol is subsidised, but conservationists have criticised oil palm plantations for destroying wildlife habitats.
Commodities Minister Bernard Dompok defended the move, although he conceded the biofuel industry is facing "increasing pressure from negative public opinion on biofuels".
"One of the challenges is meeting the sustainability criteria that are being debated worldwide," the minister said in a separate statement.
"Many studies have shown that the use of biodiesel reduces greenhouse gas emissions as compared to the use of petroleum diesel," he said.
"It is universally recognised that fossil fuel reserves are finite and fast depleting. As such, renewable energy sources need to be found to complement the needs of energy requirements."
Dompok said Malaysia -- which aims to be the global leader in biodiesel -- has approved 56 licences for biodiesel production, which account for a production capacity of 6.8 million tonnes.
The fortunes of Malaysia's biofuel industry waned in late 2008 when the price of crude oil tumbled, triggering a crash in the palm oil price which made supply uncertain, jeopardising the long-term contracts the industry needs. Malaysia is the world's second-largest exporter of palm oil after Indonesia, and the two countries account for 85 percent of global production.
