11/12/2007 (Business Spectator), Carey Island, Malaysia - The Netherlands has warned it will not renew subsidies for palm-based biofuel until global producers meet its environmental requirements.

The world's biggest palm-oil producers, including Malaysia and Indonesia, may take about two years to meet the needed levels, Dutch Environment Minister Jacqueline Cramer said, following a meeting with Malaysian Commodities Minister Peter Chin.

The Netherlands, the largest consumer of palm oil in the European Union, will renew its subsidy system for green energy next year, but will mandate stringent criteria to help limit environmental damage.

The Netherlands fears the destruction of tropical forests for palm oil cultivation will increase greenhouse gas emissions, worsen plant loss and reduce animal diversity.

"Until the problems are solved, there will be no subsidy for palm oil," Ms Cramer told reporters at Carey Island palm estates, some 100 km from Kuala Lumpur.

"We hope to solve the problem in two years."

Global demand for biofuels has soared as countries look for alternatives to fossil fuels to fight climate change and solve energy security problems.

"It makes no sense to use palm oil for bio-energy purposes while the carbon dioxide produced is more than what we are actually trying to save, particularly when you cut down peatforests," she said.

The Netherlands is particularly vulnerable to climate change fuelled by carbon-dioxide emissions as two-thirds of its territory is below sea level. - Reuters -