(Adds dropped title, name of minister in paragraph 3)
KUALA LUMPUR, Sept 3 (Reuters) - Malaysia will launch a green scheme for palm oil firms by 2014, a government official said on Tuesday, as the world's No.2 producer looks to boost demand and counter criticism its tropical oil supply harms the environment.
The Malaysian Sustainable Palm Oil (MSPO), which will be used as the national standard from 2014 onwards, will outline criteria that industry players need to meet before their products can be certified as "sustainable".
"To move forward in the palm oil industry, we decided to have our own Malaysian standard. This will be the branding that we hope to make for Malaysian palm oil," Malaysian plantation industries and commodities minister, Douglas Uggah Embas, told reporters in Kuala Lumpur after talks with industry players.
"The MSPO will address a lot of anti-palm oil sentiment in the European and U.S. markets," he added.
At the moment green standards are set by the Roundtable on Sustainable Palm Oil (RSPO), an international body made up of plantation firms, consumers and green groups that promote palm oil supply from estates that do not harm wildlife or cut forests to expand.
But the RSPO is expensive to comply with and poses disadvantages to local stakeholders, Embas said.
"The RSPO is more of a burden to the industry. It has certain conditions that are too stringent, it is very costly, and they keep changing their goals. The premium that we get is also minimum," he added.
Indonesia, the world's top palm oil producer whose output is expected to hit around 28 million tonnes this year, will introduce its own mandatory certification system by the end of 2014.
The Indonesia Sustainable Palm Oil (ISPO) scheme aims to regulate, audit and examine Indonesian palm oil firms, forcing them to adopt green standards and sustainability policies as the country faces intense international pressure to limit deforestation and destruction of its carbon-rich peatlands.
Malaysia's scheme will be voluntary but the government plans to make it a compulsory standard for all industry players in stages, Embas said.
Malaysian palm oil stocks currently stand at 1.66 million tonnes, having eased 37 percent from the record 2.63 million tonnes hit at the end of 2012. Industry regulator the Malaysian Palm Oil Board will release data on August inventories on Sept. 10.
By 0644 GMT, the benchmark November contract on the Bursa Malaysia Derivatives Exchange had eased 1.0 percent to 2,404 ringgit ($730) per tonne as a stronger ringgit lowered the tropical oil's appeal for overseas buyers.
($1 = 3.2740 Malaysian ringgit) (Reporting by Anuradha Raghu; Editing by Michael Perry)