A new study by the British government has determined that using fossil fuel in vehicles is better for the environment than so-called green fuels made from crops.
According to a report in The Times, the findings show that the UK Department for Transport's (DfT's) target for raising the level of biofuel in all fuel sold in Britain will result in millions of acres of forest being logged or burnt down and converted to plantations.
The study determines that some of the most commonly-used biofuel crops fail to meet the minimum sustainability standard set by the European Commission (EC).
Under the standard, each litre of biofuel should reduce emissions by at least 35 per cent compared with burning a litre of fossil fuel.
Yet, the study shows that palm oil increases emissions by 31 per cent because of the carbon released when forest and grassland is turned into plantations.
The DfT commissioned E4tech, a consultancy, to investigate the overall impact of its biofuel target on forests and other undeveloped land.
The EC hopes to protect its biofuel target by issuing revised standards that would give palm plantations the same status as natural forests.
Officials appear to have accepted arguments put forward by the palm oil industry that palms are just another type of tree.
A draft of the new rules, obtained by The Times, states that palm oil should be declared sustainable if it comes from a "continuously forested area", which it defines as areas where trees can reach at least heights of 5m, making up crown cover of more than 30 per cent.
"This means, for example, that a change from forest to oil palm plantation would not per se constitute a breach of the criterion," it added.
Clearing rainforest for biofuel plantations releases carbon stored in trees and soil.
It takes up to 840 years for a palm oil plantation to soak up the carbon emitted when the rainforest it replaced was burnt.
The expansion of the palm oil industry in Indonesia has turned it into the third-largest CO2 emitter, after China and the US.
Indonesia loses an area of forest the size of Wales every year and the orang-utan is on the brink of extinction in Sumatra.
Last year, 127 million litres of palm oil was added to diesel sold to motorists in Britain, including 64 million litres from Malaysia and 27 million litres from Indonesia.
According to Kenneth Richter, biofuels campaigner for Friends of the Earth, "The billions of subsidy for biofuels would be better spent on greener cars and improved public transport."