Palm oil to reduce dependence on fossil fuel
Oil palm plantations feed a growing global demand for cheap vegetable
oil used in the production of food, cosmetics and fuel. Compared to the
year 2000, demand for palm oil is predicted to more than double by 2030
and to triple by 2050.
Experts worldwide expect the demand for edible vegetable oil in
general, and biodiesel in particular, to continue growing. As the demand
is anticipated to greatly exceed the supply in the foreseeable future,
prices are expected to rise.
The factors stimulating the growing demand for biofuels include:
Combating global warming
The fact that greenhouse gas emissions are a principal cause of
global warming in no longer being disputed, and the need to reduce these
emissions has become both widely recognized and increasingly urgent.
International treaties have been signed, and federal and state
legislation has been enacted with the purpose of achieving this goal.
Some countries and states also offer incentives to encourage such
worldwide expect the demand for edible vegetable oil in
general, and biodiesel in particular, to continue growing
Current legal requirements include, among others:
The Kyoto Protocol to the International Framework Convention on
Climate Change, which aims to reduce emissions of carbon dioxide and
five other greenhouse gases to levels specified for each county in the
treaty. Countries maintaining or increasing their emissions of these
gases are required to engage in emissions trading. This obligation is
also important in view of the limited availability of low carbon
substitutes for transport fuels; for example, road transport segment GHG
emissions represent nearly 20% of the EU total.
The EUís Biofuels Directive specifies the reference values for the
percentage of biofuels that should substitute transport fuels in the EU;
the indicative target set is 5.75% for 2010. New EU regulations also
require that 10% of the European energy market needs will be satisfied
by green energy sources by the year 2015.
In the USA, the Energy Independence and Security Act of 2007 calls
for a substantial increase in the production of renewable fuels for use
in the countryís fuel supply. It requires the production of 36 billion
gallons (more than 136 billion liters) of such fuels by the year 2022 -
nearly a fivefold increase from current production levels.
Additionally, public pressure to reduce harmful emissions is
continuously increasing, and companies taking action to develop energy
sources that are reusable, biodegradable and environmentally safe are
looked upon favourably.
Security of supply
The number of countries that are in a position to supply mineral fuel
is small, and that some of these resort to price hikes or political
pressure to advance their interests, is perceived as a threat by many
developed and developing countries. Consequently, there is a real need
to reduce dependence on oil imports and to secure the supply of energy
from alternative sources.
Support for the agricultural sector
The fact that biofuels are produced from agricultural products
provides countries with the opportunity of reinforcing their
agricultural sectors, creating new jobs and strengthening the national
economy as a whole. Countries also benefit by gaining greater control
over their energy sources due to the fact that raw material serving as
feedstock for biofuels production originates within their boundaries,
and the production itself is carried out on their territory.
The palm oil market
Crude palm oil is a commodity traded internationally, usually within
the edible oils market. Palm oil presently accounts for a 21% share of
the global edible oil market, and is therefore the second most consumed
edible oil in the world, preceded only by soy oil.
Palm oil imports into the EU doubled in the recent years, mostly to
substitute for rapeseed oil that was diverted from food to serve as
feedstock for biofuels production.
In view of its increased use as feedstock for the biodiesel industry
- in addition to its use by the food, health and cosmetics industries,
it benefits from increased demand. The scope of trade in palm oil is
therefore anticipated to continue growing.
The palm oil industry
Palm oil plantations exist, and continue to be established, mainly in
tropical regions. The two main oil palm producing countries are located
in Asia; they are Malaysia and Indonesia - each with more than two
million hectares of oil palm plantations.
Malaysia is responsible for 50% of world production (of which it
exports 85%); Indonesia is the second largest producer, responsible for
close to 30% of the global production (exporting 40%).
Oil palm plantations in Malaysia are expected to expand, however at a
reduced rate due to scarcity of land.
The countryís yield levels are stagnant or rising only slightly. In
Indonesia, available land poses less of a constraint; however, the costs
of establishing new plantations is expected to rise due to the gradual
enforcement of legislation that imposes environmentally sustainable
expansion and cultivation methods.
In view of the growing demand for palm oil, other countries are
embarking on large-scale oil production, mainly Thailand, with more than
200,000 hectares. Papua New Guinea (with the third largest area covered
by oil palm plantations) is also looking to further expand its
plantations. Papua New Guinea Thailand, Philippines, India, Cambodia and
Sri Lanka among others, are presently in the process of expanding their
palm oil production.
Figures for Africa are difficult to obtain, since oil palms are
native to many West African countries, and not all areas covered by oil
palms are intended for industrial use. Nigeria, for example, has between
1 and 3 million hectares of oil palm plantations; however only a small
share of them are industrially used.
However, it is significant to note that the focus is now shifting. In
2007, some of the most important leaders in the global palm industry,
such as Olam and Willmar (which, untill now, have been active primarily
in the Far East), have recognized the development potential in West
Africa and have announced their intention to initiate activities in this
region. One of these companiesí first investments was made in Ivory
As Biofuel and Biodiesel
Due to the increasing global urgency to reduce dependence on fossil
fuels, palm oil biomass offers great potential as a cost-effective
feedstock for biodiesel. In this capacity, it is capable of reducing
carbon dioxide emissions by more than 80%.
There are constraints also, when palm oil is used as feedstock for
biodiesel. As palm oil constitutes 80% to 90% of the biodiesel
production cost, price fluctuations play a decisive role in the
biodiesel vs. fossil fuel diesel competition. Price is very much
affected by the ever increasing demands from overseas, crude oil price
and climate variations.
R & D have demonstrated that palm diesel is a cleaner energy than
fossil diesel, emitting less carbon dioxide, black smoke of carbon
particulates, carbon monoxide and sulphur dioxide. Fuel switch from
fossil to palm diesel is easy and economical as palm diesel can be used
directly in unmodified diesel engines including stationary engines,
passenger cars, buses and trucks. It gives good engine performance.
The palm biodiesel can be used neat or blended with petroleum diesel
in any proportions. Recently, to overcome the long-standing pour point
problem, (pour point = 15ÝC), Malaysia Palm Oil Board ( MPOB ) has
developed a process to produce low pour point palm biodiesel (-21ÝC to
0ÝC) which is suitable for temperate countries.
For many years, the aviation industry has been criticized for its
high carbon GHG emission. Of the total global emissions, 56 % comes from
burning of fossil fuels and 17 % from agriculture.
The aviation industry alone contributes 649,000,000 tonnes of GHG
emission annually which represents 2 to 3 % of the total globally! The
Boeing Company and other aviation industry operators held a Forum in
Kuala Lumpur recently to explore new sources of renewable biofuels for
the aviation industry.
In comparison, calculations reveal that emissions from the oil palm
industry are indeed very small. The world oil palm area of 14 million
hectares is only 0.25% of global agricultural land. Therefore, the GHG
emission from the oil palm industry is 0.25% x 17% or 0.04% of the total
global GHG emission.
At a country level, for example, Malaysiaís oil palm cultivated area
of 4.85 million hectares represents 34.6% of the worldís oil palm
cultivated area and hence its GHG footprint is 34.6% x 0.04 % or 0.014%
of the global GHG emission. Even doubling the cultivated area for oil
palm in Malaysia would see a negligible increase of its GHG footprint to
0.028% of global emission. The negligibly small GHG footprint of the oil
palm industry has attracted the aviation industry operators to consider
the use of palm oil biofuel to help reduce emission levels from the
aviation industry. As indicated above, doubling the production of palm
oil in Malaysia will not add much to the carbon footprint of the oil
palm industry, instead, it will provide 18 million tonnes or 8.6 billion
gallons more of potential jet biofuel.
Total consumption of aviation fuel per year is estimated at 70
billion gallons. A 12 % replacement of the world aviation biofuel can be
achieved if the Malaysian production can be doubled to cater to this
A road map proposed by Malaysia for inclusion of biofuel in aviation
fuel begins modestly with an initial blend share of 1 % by 2015. This is
expected to be increased gradually with an improvement of 1% additional
biofuel in the fuel blend annually so that GHG emissions will be
maintained at current levels despite exponential growth in future global
It has been said that Malaysian palm oil potentially fits the road
map due to its ability to replace a moderate (12%) percentage of world
aviation biofuel demand. Palm oil from other sources could also be
considered until a long-term plan by the aviation industry to meet its
target replacement of 50% blend of biofuel in aviation fuel is achieved.
Such large demand for bio-renewable aviation fuel can be supplemented
if the biomass generated by the oil palm industry can be harnessed for
conversion into aviation biofuel. Palm oil makes up only 10% of the
biomass produced by the oil palm tree.
The remaining 90% (dry weight basis) can be partly converted into
biofuel using BTL technology or bio-refinery which is being developed
rapidly around the world.
Only palm oil can provide a solution for practical consideration.
Other oilseeds cannot produce the quantities envisaged because of the
inherent low yield per hectare per year of between 5 to 11 times less
than that of palm oil.
Countries that are capable of supplying excess vegetable oil into the
world market are limited to Malaysian and Indonesian palm oil producers.
With doubling of production through productivity and hectarage
expansion, and employing other palm biomass for further conversion into
aviation fuel, the availability could well meet the future target of
having 50% blend of biofuel into the aviation fuel mixture.
Palm oil meets the certification criteria for sustainability as many
producers have volunteered to participate in the certification schemes
and have obtained their certificates from certifying bodies such as the
RSPO and ISCC.
A minor obstacle to the successful implementation of the aviation
biofuel plan is the relatively high cost of biofuel in comparison to
petroleum derived aviation fuel.
Lack of an excess supply from other vegetable oils and a high demand
for palm oil for food will cause market forces to price palm oil above
petroleum fuel. Otherwise, palm oil will be burned as fuel. This will
ensure that its price will remain above the price of petroleum fuel and
petroleum price will be the floor price for palm and other vegetable
With the expansion of oil palm production, the necessary increase in
supply to meet the needs of the aviation industry can be achieved.
The food versus fuel debate does not apply as the main consideration
is which profitable crop to plant on a scarce available agricultural
land (large areas of degraded land not under forest reserves) where oil
palm can be grown.
Non-food oil crops such as jatropha can also be grown on degraded
land but it yields only 20% that of oil palm and is far more expensive
to produce thus making it a much less attractive solution.
Consumers worldwide must be willing to pay the cost to reduce carbon
GHG emission from the aviation industry.
Plans by EU to impose carbon tax on the aviation sector are a step in
the right direction. It is imperative that the money raised goes to
compensate farmers who toil to produce the extra supply of raw material
for the aviation fuel industry.
Currently, much emphasis has been placed on the certification process
for sustainability that the administrative charge consumes up to 80% of
the money raised to incentivize the production of renewable biofuel.
Ironically, the cost for employing auditors and paying for membership
fee of certification bodies is more than the rate of compulsory research
funding imposed on the palm oil industry! New opportunities for an
increased supply of palm oil based aviation biofuel can be realised
through more research.
However, if the cost of certification is higher than the investment
in research, and if the carbon tax benefits only the bureaucracy, this
will result in a slow development of aviation biofuel from oil palm
Development of aviation biofuel from other vegetable oils will be
next to impossible. Oil palm is the only viable solution in the long
The choice is limited for the aviation industry. It cannot harness
hydro, wind or solar power to fly jet planes.
Most other plant biomass has low output to input energy ratio of 3:1
compared to 9:1 for oil palm. Oil palm is the best and only choice so
far until miracles occur or algae technology becomes successful. Even
petroleum fuel is not the most viable choice in the long-term; its
supply is finite and will start to decline in a few years.
By then almost everything will be expensive except sustainably
produced raw materials such as palm oil if future development in
production capacity is well planned with adequate upfront investment in
R & D.
The rosier outlook lies in its future utilization as feedstock for
second generation biofuel, where the entire waste biomass can be
harnessed in the production of renewable energy, cellulosic ethanol,
biogas, biohydrogen and bioplastic.
This energy is not only cheaper but also more efficient and
environment-friendly than fossil fuels. The carbon credits derived under
the CDM Kyoto Protocol increase the economic viability of palm diesel as
a renewable fuel.
According to the UNEP - Year End (2010) Snapshot of the CDM, there
are 4237 projects, that are either registered or in pipeline (see table
1). Some of these CDM projects include renewable energy projects, hydro
and biomass from oil palm industry. There is huge CDM potential awaiting
to be explored.
Table 1: CDM projects registered or in pipeline with the UNFCC, end
Country CDM registered/pipeline (2010)
Meanwhile, large oil palm cultivators have to recognize that the path
to the large and growing EU market may prove a tougher challenge in the
coming years, unless they take additional initiatives to ensure stricter
compliance in sustainable cultivation of oil palm.