Malaysia formulated the National Biofuel Policy with envisions to put the biofuel as one of the five energy sources for Malaysia, enhancing the nation’s prosperity and well being. This is in line with nation’s Five-Fuel Diversification Policy, a national policy to promote renewable energy (RE) as the fifth fuel along with fossil fuels and hydropower. The National Biofuel Policy was implemented in March 2006 to encourage the production of Biofuels, particularly biodiesel from palm oil, for local use and for export. However, in 2007, the Government has announced that the implementation of the whole biodiesel project has been put on hold indefinitely owing to the current high price of refined, bleached and deodorized palm olein.

Recently, the Government of Malaysia launched new strategy to promote the biofuel through the National Biomass Strategy 2020 on year 2011. The aim of National Biomass

Strategy 2020 is to create higher value-added biomass economic activities that contribute towards Malaysia’s gross national income (GNI) and creating high value jobs for the benefit of Malaysians. This Strategy outline the production of bioethanol produced from lignocellulosic biomass particularly the oil palm biomass as a starting point with extended to include biomass from other sources such as wood waste. The palm oil sector correspondingly generates the largest amount of biomass, around 80 million dry tonnes in 2010. This is expected to increase to about 100 million dry tonnes by 2020, primarily driven by increases in plantation area. A conservative estimation of utilising an addition 20 million tonnes of oil palm biomass for bioethanol has the potential to contribute significantly to the nation’s economy while at the same time reduce the green house gasses emission.

The National Biomass Strategy 2020 proposes a mandate of bioethanol blending of 10 percent in petrol fuel in Malaysia by 2020 to cut down the green house gasses emissions. This would generate a domestic demand for one million tonnes of bioethanol per annum with the first bioethanol from lignocellulosic biomass plant is expected to be commercially viable between 2013 and 2015 [34]. As a result, much attention has been focuses on generating bioethanol from oil palm biomass and wood waste.

As mentioned early, bioethanol utilization as automobile fuel is especially promising as the United States, Brazil and Europe has introduced. However, low-cost supply associated with high bioethanol yield of the bioethanol is indispensable for its wide use. The discussion of economic feasibility of bioethanol production from lignocellulosic biomass in Malaysia in this paper was based on the experimental data through laboratory worked done by [35] and [36] and comparison was made with sugarcane and corn.