Mandated usage of 'clean fuels', to individually allocated levels, have been imposed on European states. Since these states do not have sufficient land to grow the crops required for biofuel production, they're attempting to meet their biofuel quota through imports from developing countries like Malaysia and Indonesia instead.

The fate of these forests did hang momentarily in the balance some time ago, but in an horrific example of the power of the WTO (World Trade Organisation) to overpower local considerations, the chainsaws were effectively given the go-ahead:

In the report it published last month, when it announced that it will obey the European Union and ensure that 5.75% of our transport fuel comes from plants by 2010, it admitted that “the main environmental risks are likely to be those concerning any large expansion in biofuel feedstock production, and particularly in Brazil (for sugar cane) and South East Asia (for palm oil plantations).” It suggested that the best means of dealing with the problem was to prevent environmentally destructive fuels from being imported. The government asked its consultants whether a ban would infringe world trade rules. The answer was yes: “mandatory environmental criteria … would greatly increase the risk of international legal challenge to the policy as a whole”. So it dropped the idea of banning imports, and called for “some form of voluntary scheme” instead. Knowing that the creation of this market will lead to a massive surge in imports of palm oil, knowing that there is nothing meaningful it can do to prevent them, and knowing that they will accelarate rather than ameliorate climate change, the government has decided to go ahead anyway. - Monbiot

For more info on the huge influence world trade is having on our environment, see The Corporation. But for now, let's see the latest on the Palm Oil nightmare:

Just a few years ago, politicians and environmental groups in the Netherlands were thrilled by the early and rapid adoption of “sustainable energy,” achieved in part by coaxing electrical plants to use biofuel — in particular, palm oil from Southeast Asia.

Spurred by government subsidies, energy companies became so enthusiastic that they designed generators that ran exclusively on the oil, which in theory would be cleaner than fossil fuels like coal because it is derived from plants.

But last year, when scientists studied practices at palm plantations in Indonesia and Malaysia, this green fairy tale began to look more like an environmental nightmare.

Rising demand for palm oil in Europe brought about the clearing of huge tracts of Southeast Asian rainforest and the overuse of chemical fertilizer there.

Worse still, the scientists said, space for the expanding palm plantations was often created by draining and burning peatland, which sent huge amounts of carbon emissions into the atmosphere.

Considering these emissions, Indonesia had quickly become the world’s third-leading producer of carbon emissions that scientists believe are responsible for global warming, ranked after the United States and China, according to a study released in December by researchers from Wetlands International and Delft Hydraulics, both in the Netherlands.

“It was shocking and totally smashed all the good reasons we initially went into palm oil,” said Alex Kaat, a spokesman for Wetlands, a conservation group.

The production of biofuels, long a cornerstone of the quest for greener energy, may sometimes create more harmful emissions than fossil fuels, scientific studies are finding. - New York Times

It's interesting how this is phrased - "scientific studies are finding", as if this is a recent discovery. Even as far back as 1979 a U.S. government initiated study concluded that the EROEI (Energy Returned Over Energy Invested) made biofuel production unviable, but those studies clashed with industry interests at the time - and ever since.

I'm relieved that this topic is starting to get a little attention. But why, why, why, does it take environmental disasters to bring it home to policy-makers? The results of importing palm oil into Europe for biofuels should have been astonishingly easy to predict, and, indeed, were predicted. Regardless, governments have encouraged the destruction of rainforests by not only subsidising their use in Europe, but, worse, allowing their importation from outside her borders - where environmental regulations are virtually non-existent or difficult to enforce.

As a result, politicians in many countries are rethinking the billions of dollars in subsidies that have indiscriminately supported the spread of all of these supposedly eco-friendly fuels for vehicles and factories. The 2003 European Union Biofuels Directive, which demands that all member states aim to have 5.75 percent of transportation run by biofuel in 2010, is now under review.

... Biofuelswatch, an environment group in Britain, now says that “biofuels should not automatically be classed as renewable energy.” It supports a moratorium on subsidies until more research can determine whether various biofuels in different regions are produced in a nonpolluting manner.

Beyond that, the group suggests that all emissions arising from the production of a biofuel be counted as emissions in the country where the fuel is actually used, providing a clearer accounting of environmental costs.

The demand for palm oil in Europe has soared in the last two decades.... The increasing demand has created damage far away. Friends of the Earth estimates that 87 percent of the deforestation in Malaysia from 1985 to 2000 was caused by new palm oil plantations. In Indonesia, the amount of land devoted to palm oil has increased 118 percent in the last eight years.

In December, scientists from Wetlands International released their calculations about the global emissions caused by palm farming on peatland.

Peat is an organic sponge that stores huge amounts of carbon, helping balance global emissions. Peatland is 90 percent water. But when it is drained, the Wetlands International scientists say, the stored carbon gases are released into the atmosphere.

To makes matters worse, once dried, peatland is often burned to clear ground for plantations. The Dutch study estimated that the draining of peatland in Indonesia releases 660 million ton of carbon a year into the atmosphere and that fires contributed 1.5 billion tons annually.

The total is equivalent to 8 percent of all global emissions caused annually by burning fossil fuels, the researchers said. “These emissions generated by peat drainage in Indonesia were not counted before,” said Mr. Kaat. “It was a totally ignored problem.” For the moment Wetlands is backing the certification system for palm oil imports.

But some environmental groups say palm oil cannot be produced sustainably at reasonable prices. They say palm oil is now cheap because of poor environmental practices and labor abuses.

“Yes, there have been bad examples in the palm oil industry,” said Arjen Brinkman, a company official at Biox, a young company that plans to build three palm oil electrical plants in Holland, using oil from palms grown on its own plantations in a manner that it says is responsible.

“But it is now clear,” he said, “that to serve Europe’s markets for biofuel and bioenergy, you will have to prove that you produce it sustainably — that you are producing less, not more CO2.” - New York Times

Great, Europe is learning an important biofuel lesson. But, unfortunately, this doesn't get the rainforests in southeast Asia replanted.

Intergovernmental memo: Please learn to think ahead.

Further Reading:

• Biofuels - It's Getting Annoying Now
• Biofuels - From the Frying Pan into the Fire?
• As Corn Ethanol Threatens, Algae Makes Promises
• Biofuel Nightmares - Indonesian Palm Plantations