The Use of Palm Oil As Biofuel and Biodiesel

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E. Europe/ C. Asia

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Some of these CDM projects include renewable energy projects, hydro and biomass from oil palm industry. Currently, only 20 out of 406 palm oil mills nationwide are involved in CDM-related projects. There is huge CDM potential awaiting to be explored.

As Malaysia is the world’s largest exporter of palm oil, it produces some massive 168 million tons of palm oil biomass annually, the equivalent of about 330 million barrels of oil. Palm oil biomass offers  great opportunities to be Clean Development Mechanism projects under the Kyoto Protocol. If this potential is fully tapped, the future promise will be far and wide for Malaysia and for our climate.

By December 2008, 14 biodiesel plants have been established with total annual biodiesel installed capacity of 1.7 million tonnes, with additional four waiting to commence production. The production of biodiesel rose by 32% to 171,700 tonnes in 2008, compared to 129,715 tonnes 2007.  Exports of biodiesel increased by 91.7% to 0.18 million tonnes in 2008 against 0.09 million tonnes recorded in 2007. USA was the largest biodiesel importer from  Malaysia, accounting for 71,324 tonnes or 39.2% of total biodiesel exports, followed by the EU with 70,273 tonnes or 38.6%.

In Malaysia, biodiesel is an emerging industry, encouraged under the new five-fuel diversification policy, with deliberate inclusion of renewable energy as the fifth fuel.

Scientists studied activities at palm plantations in Indonesia and Malaysia discovered extensive deforestation and excessive use of chemical fertilizers due to increase in demand for palm oil. This has caused concerns among importers of palm oil from EU countries, and they view it necessary to review the role of palm oil in renewable energy generation.

Palm oil export to the EU will thus be caught in a Catch 22 dilemma, encountering unfavorable targeting from  hastily shaped and rigorous sustainability standards in the EU, aimed specifically to shrink the import of palm oil into Europe and price competitiveness. To adhere to these requirements, oil palm plantation players need to pay extra costs for Roundtable on Sustainable Palm Oil ( RSPO ) certification. For example, in Malaysia, planters fork out around US$3 - US$8 per tonne of crude palm oil for certification. Despite this, the recent demand for certified palm oil has slowed down due to lesser demand in times of global economic downturn ( late 2008 - early 2009), and preference for a cheaper alternative of non certified palm oil for the food and oleo chemical industries.

Those who are more prepared to pay higher premium for RSPO certified are bioenergy related companies and power generation plants, as they can offset part of the premium with the carbon credits. WWF, one of RSPO's initiators, will assess the world's major palm oil purchasers, highlighting supporters of sustainable palm oil and exposing those who do not comply.

Meanwhile, Indonesia and Malaysia have to recognize that the path to the large and growing EU market may prove a tougher challenge in the coming years, as they take additional initiatives to ensure stricter compliance in sustainable cultivation of oil palm.

References and related news:

Bullish Outlook for M'sia's Palm Oil: Dailyexpress.com April 08, 2005Palm Oil Headquaters.comIndonesia Palm Oil: Pecad.fas.usda.gov - 2007Biofuel from Palm Oil: MPOB.gov.myMalaysian Generating Renewable Eenery from Palm Oil Waste: UNDP.org