PUTRAJAYA: The growth of the palm biodiesel industry will stimulate local demand for crude palm oil (CPO) and empower it to set prices rather than follow market trends, says Deputy Prime Minister and Minister of Plantation and Commodities Datuk Seri Fadillah Yusof.

Fadillah said the national biodiesel blending programme started in 2010 with 5% palm methyl ester (B5) and gradually rose to 20% by 2020. The implementation of the B30 programme in the country is expected to take place by 2025.

“Our current B10 implementation in the transport sector is just the beginning, as we envision moving towards nationwide B20 implementation, which will significantly increase CPO consumption to over one million tonnes per annum.

“We are also exploring the expansion of B10 usage in the industrial sector,” he said during his keynote address at the fourth Palm Biodiesel Conference.

Nevertheless, Malaysian Biodiesel Association president UR Unnithan said the palm biodiesel industry still continues to face headwinds with palm oil delegated regulations from the European Union (EU).

He urged all the stakeholders to work on a global consensus to prove that the commodity will not cause deforestation and is truly a sustainable source.

“The EU Renewable Energy Directive (RED) III and the United States Environmental Protection Agency guidelines still singles out palm biodiesel as the non-sustainable source for production.

“This is unfair and I like to use this platform to urge all of us including the governments of Malaysia, Indonesia, Thailand and oil producing countries around the world to build a global consensus around the big elephant in the room which is the indirect land use change (ILUC).

“The ILUC is the one reason that palm biodiesel has been singled out and banned for export,” he said in his opening address yesterday. To date, the total palm biodiesel consumed by the national biodiesel programme exceeds well over 5.5 million tonnes.

Based on a conservative estimation on greenhouse gases (GHG) savings of 60%, this represents about 10.5 million tonnes of carbon dioxide emissions saved compared with burning fossil diesel.

“The use of palm biodiesel will help fulfil Malaysia’s commitment to the Paris Agreement of UNFCCC during the COP 21 in France, which is to reduce 45% GHG emissions intensity to gross domestic product by 2030 (based on emissions intensity in 2005),” Unnithan said.

Dr Puah Chiew Wei, director, strategy and policy of Council of Palm Oil Producing Countries, said palm oil is the only vegetable oil crop classified as high ILUC risk and feedstock with high ILUC risk will be phased out by 2030.

“Some of the biofuel mandates by EU member states have already started to phase out the palm oil based biofuels in accordance with the RED II as well as the delegated regulations. For Austria, palm oil based biofuels are excluded since July 1, 2021. Czech Republic has 0% biodiesel since 2021.

“Additionally, in Denmark, palm oil based biofuels were to be phased out by 2022 unless certified as low ILUC risk feedstock. For Denmark, all high ILUC risk biofuels are to be phased out by 2025,” she said in her presentation yesterday.

Puah revealed that in 2022, the EU was the second largest importer of palm oil after India, importing about 13% of global palm oil. As such, the mandates (as mentioned above) in the EU member states have significantly impacted the use of palm oil and the trade of palm biodiesel which has shown declines from 2019 to 2020.

In view of these challenges, Puah said there is the need to transform the renewable energy sector, particularly for palm biodiesel, in order for it to remain competitive. This includes changing the renewable energy mix to use waste fat and oils such as used cooking oil, the implementation of sustainable aviation fuel as well as the role of the global biofuels alliance.

“Hence, there is the declining demand of palm oil based biodiesel from the EU, there will still be the continued demand for this kind of fuel from emerging economies.

“For advanced economies, growth is only expected in the renewable diesel sector.

“However, for the emerging economies, we can see a lot of growth from Indonesia in palm oil based biodiesel and in Brazil for soybean oil based biodiesel. Additionally, countries like Malaysia and Thailand are expected to contribute to biodiesel growth as well,” she said. Separately, Fadillah said the ministry has proposed to the Ministry of Finance that the existing 3.0% windfall profit levy (WPL) rate for Sabah and Sarawak be reduced to 1.5% under Budget 2024.

“This was one of the things that the industry players had raised during a dialogue session. They are not objecting to the WPL. They want to look at how the levy, should it be imposed, benefit the industry. This includes incentives and programmes such as oil palm replanting,” he said.