Vietnam approves plan to use biofuels

HANOI (Reuters) - Vietnam, which has a technology-sharing pact with leading ethanol producer Brazil, on Thursday approved the production and use of biofuels as it seeks to diversify its energy sources.

Vietnam's Deputy Prime Minister Hoang Trung Hai said in a directive that biofuel output, including ethanol, would reach 250,000 tons by 2015 and 1.8 million tons by 2025, meeting 5 percent of the energy-hungry Southeast Asian country's total fuel demand.

The government would create favorable conditions to promote the transfer of biofuel technology and investment, including tax incentives and low-interest loans, the directive said.

The economy of underdeveloped Vietnam is growing at more than 8 percent a year, and forecast to expand between 8.5 percent and 9 percent in 2008, boosted by infrastructure and energy projects.

Fears about climate change have fueled a boom in biofuels which has diverted some food crops into fuel production, pushing up cereal prices.

But some environmentalists and food experts say any major use of biofuels, especially wood, as an alternative to burning fossil fuels could lead to further deforestation and hunger.

In May, Vietnam signed an agreement with Brazil, the world's leading ethanol exporter, to share ethanol fuel technologies.

A subsidiary of state-run oil monopoly Petrovietnam plans to have an ethanol plant up in 2009.

The subsidiary, Petrosetco, has teamed up with Japan's Itochu Corp. to produce ethanol from tapioca chips at a cost of $100 million.

(Reporting by Nguyen Nhat Lam, editing by Grant McCool, Valerie Lee)