11/10/2007 (Sydney Morning Herald) - The rush to replace carbon-emitting petroleum with "clean green" biofuels is threatening to stall in the face of rising food prices, Federal Government disincentives and growing opposition from environmental groups sounding the alarm about large-scale deforestation to support fuel crops.

Now a planned $30 million biodiesel plant in Port Botany is under attack by the Greens because it will use palm oil from Indonesia and Malaysia. Its future is up in the air as the developer, Natural Fuels Australia, decides whether it should go ahead. The chairman of the company, Barry Murphy, said yesterday that the Federal Government clean fuels grant did not in reality encourage the use of pure biodiesel from crops and therefore "makes the economics difficult". He also acknowledged the price of feedstock and the global issues around climate change and deforestation made the decision a tough one.

The Greens state MP Ian Cohen is demanding that NSW reject the planning request by Natural Fuels for the biodiesel plant, saying the minister, Frank Sartor, has failed to consider its effect on rainforest destruction because of the plant's proposed use of palm oil. Mr Cohen has written to Mr Sartor saying the plant, rather than helping climate change, "may worsen the global crisis whilst hastening the destruction of tropical forests".

A spokesman for the Planning Department said the importation of palm oil was a Federal Government matter.

This week Natural Fuels found itself at the centre of a political storm over its planned importation of palm oil for use in its plant in Darwin, which will come on line in December.

The Federal Environment Minister, Malcolm Turnbull, announced Australia would push for international action on the sustainable sourcing of palm oil at the United Nations climate talks in Bali in December.

The Federal Government provides a 38 cents a litre subsidy for biofuels, including those made from palm oil, as part of its push to encourage clean green fuel. But at the same time Mr Turnbull has pledged $200 million to stop deforestation in South-East Asia, caused partly by a huge expansion in palm oil plantations.

Earlier this year the UN reported that the drive for new palm oil plantations was one of the greatest threats to the rainforests and the endangered orang-utans in the region. "In Indonesia and Malaysia it is now the primary cause of permanent rainforest loss," the report found. Plantations in Indonesia have expanded from 600,000 hectares in 1985 to an estimated 6.4 million hectares this year, the Palm Oil Action Group says.

The devastation of rainforest and peatlands has caused some big European biofuel companies to shun palm oil as a source. But companies like Natural Fuels are anxious to create a "sustainable" source of palm oil and have joined forces with large companies such as Cadbury Schweppes and Unilever, and the environment group WWF, to form the Roundtable on Sustainable Palm Oil.

At a meeting next month in Kuala Lumpur, the group will call on growers, wholesalers and retailers to accept a code of practice curbing destructive activities, including the clearing and burning of rainforest. Mr Murphy has been heavily involved in the reforms and said the company realised "these are real issues and need to be addressed".

But several environmental groups, including Greenpeace, say the roundtable group is dependent on self-regulation and will be incapable of enforcing sustainable production.