Palm oil producers will set up a joint fund to counter critics of the industry, a Malaysian government official said on Tuesday, amid growing scrutiny of a commodity which is accused of causing widespread environmental damage.

The cultivation of palm oil, which is used in everything from ice cream to lipstick, is blamed for mass deforestation in Southeast Asia and endangering wildlife such as orang-utans and pygmy elephants.

Tan Yew Chong, secretary-general of the Malaysian Ministry of primary industries which oversees palm oil production, told a conference that the new fund will be run by the Council of Palm Oil Producing Countries (CPOPC), an industry body set up by major producers Indonesia and Malaysia.

"We want to go big on that (the fund) to overcome the anti-palm oil issue," Tan said at the industry conference in Kuala Lumpur, the Malaysian capital.

The fund will implement a new communication and public relations strategy for the industry, among other measures, he said.

Palm oil has come under particular scrutiny this year as the European Union has launched efforts to introduce a law to limit the use of the vegetable oil in biodiesel.

The bloc enacted a law this year to phase out palm oil from renewable fuel by 2030 because of the commodity's links to deforestation. It is also discussing increasing regulations on food - the palm oil industry's main source of revenue.

Malaysia, the second-biggest producer of palm oil, this year launched a global public relations and lobbying effort to boost the image of palm oil, especially in Europe, Reuters reported.

The campaign is propagated by platforms which say they represent small-scale farmers but is created and run by public relations firms hired by a government agency responsible for promoting palm oil.

Indonesia and Malaysia have been increasing biodiesel usage domestically to boost consumption of palm oil.

Malaysia increased the proportion of palm oil used in biodiesel to 10 percent from 7 percent last December and aims to implement a "B20" programme with 20 percent palm oil content next year.

Tan, the government official, said that Malaysia would start implementing the B20 programme in stages from early next year, and will aim to introduce B30 in a few years.