What Is The Biodiesel Mandate In Malaysia?

Malaysia has been a pioneer in implementing biofuel policies, particularly biodiesel, in Southeast Asia. The country introduced its National Biofuel Policy in 2006 which mandated the use of biodiesel blended with petroleum diesel, commonly known as B5 biodiesel. This policy aimed to reduce dependence on fossil fuels, support the palm oil industry, and meet environmental goals.

The biodiesel mandate requires diesel fuel sold in Malaysia to contain a minimum 5% palm oil-based biodiesel. This B5 biodiesel blend has been mandatory across the country since 2011. Malaysia plans to increase the minimum biodiesel content in phases, reaching B10 in 2020 and B20 in 2025. The biodiesel policy has transformed the diesel market in Malaysia and created strong domestic demand for palm oil. However, the program also faces challenges such as maintaining cost competitiveness and engine compatibility at higher blend levels.

History

The biodiesel mandate in Malaysia started in 2011 when the government implemented the B5 mandate, requiring all diesel to contain 5% palm oil-based biodiesel. This mandate was part of the National Biofuel Policy introduced in 2006 with the goal of reducing dependence on fossil fuels, supporting the local palm oil industry, and reducing greenhouse gas emissions.

The B5 mandate made Malaysia one of the first countries in Southeast Asia to implement a biodiesel blending mandate nationally. The program started with trials in some areas beginning in mid-2011 before full nationwide implementation by the end of that year.

In 2014, Malaysia raised the minimum palm biodiesel blend to 7% (B7). And in early 2020, the mandate was increased again to 10% palm biodiesel blend (B10), making Malaysia’s blend mandate among the highest in the region.

Objectives

The Malaysian government introduced the biodiesel mandate in 2006 with several key objectives in mind:

– Reduce dependence on fossil fuels: Malaysia is a net importer of fossil fuels like diesel and gasoline. By mandating biodiesel blending, the government aimed to displace some petroleum fuel demand with domestically produced biodiesel.

– Promote Malaysia’s palm oil industry: As the world’s second largest palm oil producer after Indonesia, Malaysia saw the biodiesel mandate as a way to boost demand for palm oil within the country. Biodiesel in Malaysia is primarily produced from palm oil.

– Reduce environmental impact: Using biodiesel, which is renewable and biodegradable, instead of regular diesel was expected to lower emissions and pollution from transportation and industry. The Malaysian government touted the environmental benefits as a motivation for the mandate.

– Spur rural development: Increased palm oil demand and biodiesel production was seen as an opportunity to create jobs, income and infrastructure, especially in rural regions where oil palm cultivation is concentrated.

– Increase energy security: Producing and using more biodiesel domestically would reduce Malaysia’s vulnerability to global oil price shocks and instability in fossil fuel markets.

Blends

The Malaysian government has mandated the use of biodiesel blends in the transportation sector. The biodiesel blending mandate requires diesel to contain a specified percentage of palm oil-based biodiesel. The biodiesel content in the blends is referred to as “BXX”, where “XX” represents the percentage of biodiesel.

The biodiesel blending level has increased progressively over the years. Initially, the government mandated a 5% blend, known as B5, to be implemented nationwide by 2008. This was followed by B7 in 2011 and B10 in 2014.

Currently, the mandate is for B10 biodiesel for the transportation sector and B7 for the industrial sector. However, further increases have been proposed with a goal to implement B20 by 2020. The gradual increase in biodiesel content enables adaptation by engine manufacturers and consumers.

Feedstocks

The main feedstocks used for biodiesel production in Malaysia are palm oil, jatropha oil, and waste cooking oil. Palm oil accounts for over 90% of the feedstocks, with the rest coming from jatropha and waste cooking oil.

Palm oil is by far the dominant feedstock due to Malaysia being the second largest producer of palm oil in the world after Indonesia. The abundant supply of palm oil makes it economical to be used as a feedstock for biodiesel production.

Jatropha oil is seen as a potential replacement for palm oil due to jatropha’s ability to grow on marginal land unsuitable for food production. However, jatropha cultivation is still limited in Malaysia.

Waste cooking oil from the food service industry is being collected for recycling into biodiesel. This helps divert waste oil from being improperly disposed of, providing environmental benefits.

Research is ongoing into other potential oil-bearing crops that can be grown sustainably as biodiesel feedstocks in Malaysia.

Production

Malaysia has significantly increased its domestic biodiesel production capacity over the past decade to meet the rising blending mandate. The country’s total installed biodiesel production capacity grew from around 580,000 tons per year in 2011 to around 2.2 million tons per year by 2021. Major domestic producers include companies like Carotino Sdn Bhd, Smart Diesel Sdn Bhd, Global Green Synergy Sdn Bhd, Titan Biofuel Industries Sdn Bhd and RNG Biofuels Sdn Bhd. These companies operate biodiesel plants across Peninsular Malaysia and East Malaysia, often co-locating production near palm oil refineries to take advantage of infrastructure and feedstock supply.

While domestic production capacity has expanded rapidly, it has generally lagged slightly behind the rising B10 and B20 blending mandates. This gap has periodically been filled by biodiesel imports, mainly from neighboring Indonesia. However, the Malaysian government has provided incentives for further domestic capacity expansion to reduce reliance on imports. If biodiesel blending rates continue rising as planned towards B30 and higher levels, Malaysia will need to bring even more domestic production capacity online.

Consumption

Malaysia has high demand for diesel fuel, primarily from the transportation and industrial sectors. Diesel consumption has risen steadily over the past decade, reaching over 12 billion liters in 2020. Meanwhile, biodiesel consumption has also increased significantly since the mandate was introduced. In 2020, biodiesel consumption reached 930 million liters, representing about 7% of total diesel demand. This consisted of 730 million liters of B7 biodiesel and 200 million liters of B10 biodiesel.

The biodiesel mandate aims to progressively increase the biodiesel blend in diesel from the current B10 to B20 by 2020. At B20 blending, biodiesel consumption is projected to reach 1.9 billion liters. Achieving this target would mean displacing 20% of fossil diesel demand with renewable biodiesel, reducing carbon emissions and dependence on imported oil.

Challenges

Malaysia has faced challenges in meeting its biodiesel mandate targets. The B10 mandate (10% palm oil blend) was supposed to be fully implemented by the end of 2019, but full implementation has been delayed. Some of the key challenges include:

– Insufficient domestic supply of palm oil. Malaysia is the world’s second largest palm oil producer but domestic supply has not been enough to meet the B10 target. Some biodiesel producers have had to continue blending at B7 due to lack of feedstock.

– Logistical and infrastructure issues. Distributing and storing B10 nationwide requires significant investment in logistics and infrastructure upgrades. There have been challenges in timely transportation of palm oil to biodiesel plants and delivery of blended fuel to stations.

– Resistance from oil companies. Some petroleum companies have been reluctant to make investments required to produce and distribute B10 on a large scale. They have cited challenges such as clogged filters and engine parts.

– Cost issues. Due to the above factors, the cost of producing biodiesel has been higher than anticipated. This has made it difficult to implement B10 without increasing fuel prices for consumers.

Impact

The biodiesel mandate in Malaysia has had both environmental and economic impacts on the country. On the environmental side, increased use of biodiesel has reduced Malaysia’s dependence on fossil fuels and lowered greenhouse gas emissions from the transportation sector. Biodiesel emits less carbon dioxide, sulfur dioxide, and particulates compared to conventional diesel. The widespread adoption of B10 biodiesel blend has contributed to Malaysia meeting its goals under the Paris Climate Agreement.

Economically, the biodiesel mandate has stimulated growth in Malaysia’s palm oil industry. As the largest producer of palm oil globally, Malaysia has leveraged its robust supply to become a major biodiesel producer. This has created jobs in oil palm cultivation, biodiesel production, and related sectors. However, the increased focus on palm oil for biofuels has raised concerns about overproduction and incentivizing environmentally destructive practices. Efforts are underway to promote sustainable palm oil farming and ensure biodiesel growth does not come at the expense of forests and ecosystems.

Future

The Malaysian government has plans to extend and increase the biodiesel mandate in the coming years. In 2018, the National Biofuel Policy was approved with the goal of increasing biodiesel blend levels to 10% by 2020 and 20% by 2025. This is part of Malaysia’s overall strategy to reduce dependence on fossil fuels and promote renewable energy.

To support the higher blend levels, investments will be needed in biodiesel production capacity as well as ensuring adequate and sustainable feedstock supplies. More research will also be conducted on the effects of B20 and higher blends on engine performance and durability. Outreach programs are planned to educate consumers and address any concerns about using higher biodiesel blends.

Malaysia is well-positioned to achieve a B20 mandate by 2025 given its strong palm oil industry and biodiesel production infrastructure. However, the government will need to provide incentives and support to biodiesel producers and feedstock suppliers to facilitate this transition. Overall, the biodiesel mandate extension demonstrates Malaysia’s commitment to adopting renewable fuels and reducing environmental impacts from the transportation sector.