29/3/2006(Reuters)   - The European vegetable oil producers and processors federation (Fediol) has predicted that biodiesel production within the EU could grow to more than six million tonnes by the end of next year, Reuters reports.

Tax incentives and high prices for crude oil have stimulated the production of green fuels such as biodiesel, which is made from vegetable oils such as rapeseed oil.

And Fediol chairman Pascal Cogels told Reuters that biodiesel production capacity was set to top four million tonnes by the end of 2006.

In terms of actual production, this year's figures were likely to increase to 3.1 to 3.3 million tonnes from 2.6 million last year.

The EU has set a target for 5.75 per cent of transport fuels to be biofuels, such as biodiesel, by 2010, with different kinds of vegetable oil likely to play a greater part in the future.

"We see a trend of increased usage of soy oil and palm oil to produce biodiesel," he said. This is due to the rising price of rapeseed oil.

Biodiesel is quickly gaining in popularity as more vehicle manufacturers switch to green fuels in a bid to curb emissions and stave off climate change.

Finnish-based company Neste Oil has plans to develop a large biodiesel production facility in Austria, while trials are beginning in the UK to investigate the green fuel's suitability to power fishing vessels.