KUALA LUMPUR, Jan 18 (Reuters) - Malaysia on Thursday criticized the European Union for backing a ban on the use of palm oil in biofuels, calling the move a protectionist trade barrier and a form of "crop apartheid."
European lawmakers approved draft measures on Wednesday to reform the power market there and reduce energy consumption to meet more ambitious climate goals. The plan includes a ban on the use of palm oil in motor fuels from 2021.
Malaysia is the world's second-biggest palm oil producer after Indonesia, and the two countries together account for nearly 90 percent of global output. Exports of the edible oil are a key source of revenue for Malaysia, with the European Union its No.2 export market.
Palm oil can be used as a substitute for crude oil to make biofuel. A large portion of European palm oil imports are used to make biofuels, giving the palm industry cause for concern as they fear overall demand will fall.
"The EU Parliament's plan would allow all other oilseed crops to continue operating under the RED (Renewable Energy Directive), whereas palm oil will be excluded," Malaysia's plantations minister Mah Siew Keong said in a statement.
"This is a clear case of discrimination against palm oil producing countries. The EU is practicing a form of crop apartheid," Mah said.
Benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange opened 0.7 percent lower on Thursday.
Palm oil producing countries will take action to protest the EU move, Mah told reporters at an industry conference in Kuala Lumpur.
"Don't expect us to continue buying European products," he said.
Malaysia has in the past threatened to cut off trade with countries that have vowed to reduce palm oil consumption. In July last year, Malaysia said it may review its trade with France after Paris decided to limit the use of palm oil in biofuels.
The palm oil industry has come under fire in Europe over its impact on forest destruction.
The rules endorsed by the EU on Wednesday are not final. The European Parliament, the executive European Commission and EU national governments must now negotiate a final draft of the legislation and approve it.
Mah said Malaysia's ambassadors in the 28 EU member countries will raise objections.
"We will work closely with Indonesia to ensure no jeopardy of the palm oil industry and its smallholders," Mah said. (Reporting by Emily Chow; Writing by A. Ananthalakshmi; Editing by Tom Hogue)