* EU energy chief to detail biofuels standards on Thursday
* Draft document warns on biofuels from deforested land
(adds detail, background)
By Pete Harrison
BRUSSELS, June 9 (Reuters) - Palm oil grown on recently deforested land is unlikely to be acceptable for use in European biodiesel, a draft report from the European Commission shows.
The environmental standards add to a growing list of challenges for Asia's palm industry, including Indonesia's $1 billion climate deal with Norway last month [ID:nSGE65209C] and consumer worries about deforestation [ID:nSGE62O0AG].
The European Union aims to get 10 percent of its road fuels from renewable sources by 2020, and 7 percentage points are expected to come from land-using crops such as grains, palms or sugar cane.
Within the next decade, that could create a $17-billion-a-year market, eyed by Asian producers such as Indonesia's PT SMART (SMAR.JK), Singapore's Wilmar (WLIL.SI) and Malaysia's Sime Darby (SIME.KL) and IOI Corp (IOIB.KL).
But critics charge that the multi-billion-dollar market will compete with food crops, forcing up grain prices and encouraging deforestation.
The EU's executive arm has responded with a set of environmental standards, which will be announced by Energy Commissioner Guenther Oettinger on Thursday.
The development of the rules has been closely watched by Malaysia and Indonesia, especially as early drafts appeared to remove all barriers to palm plantation expansion by defining the plantations as another type of forest.
But a more recent draft seen by Reuters on Wednesday ruled that out.
"Any change in land use, including for example a change from forest to palm plantation, must be taken into account in the calculation of the greenhouse gas impact," it says.
An EU source said the draft was not the final version to be launched by Oettinger on Thursday, but its meaning was the same.
"You cannot chop down forests and convert them to palm plantations and use those fuels to meet the EU's biofuel targets," the official said on condition of anonymity.
"Oettinger is trying to make certain that the EU biofuels strategy is credible."
For the EU, the priority is to ensure that biofuels make a genuine contribution to cutting emissions of carbon dioxide, the main gas blamed for climate change.
Burning forests to clear land can pump vast quantities of climate-warming emissions into the atmosphere, enough to cancel out any of the theoretical benefits the biofuels were meant to bring in the first place.
The new rules lay down criteria to reduce such impacts in the future and during in the time since the EU biofuel target was first proposed in January 2008, although they do not tackle the most complex impacts known as "indirect land-use change".
"Raw material should not be obtained from wetland, continuously forested areas, areas with 10 to 30 percent canopy cover and peatland if the status of the land has changed compared to its status in January 2008," says the draft.
(Reporting by Pete Harrison, editing by Dale Hudson)