The Malaysian government has made it mandatory for vehicles to run on biofuels from 2011.
According to the Agence France-Press, the country is the world's second-largest palm oil producer and the new plans will be phased in throughout different states from June next year.
The Plantation and Commodities Ministry said the proposals "will benefit the country as biofuel is environmentally-friendly and it will reduce our dependence on petroleum diesel".
Along with Indonesia, Malaysia accounts for 85 per cent of the global production of palm oil and the government noted the move towards mandatory biofuels for automobiles will strengthen prices for the industry, benefiting smallholders and plantations.
Commenting on the issue, commodities minister Bernard Dompok said: "Many studies have shown that the use of biodiesel [also] reduces greenhouse gas emissions."
Shell recently announced it will be supplying biofuels for the Ferrari Formula One team for this year's World Championships, with the energy source containing derivatives of straw.
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