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Challenges Await Biodiesel Producers |
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Written by Martin Kho
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Wednesday, 25 March 2009 09:59 |
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Page views: 645 |
While the price of oil is now relatively low, and the cost of producing biofuels remains high, Asian producers stand united to ensure that the commodity can someday be integrated into the already established oil markets.
Challenges face new biodiesel producers, such as Malaysia and Indonesia, in the year 2009. These include the confronting of impediments due to unfair legislations set in markets such as the United States and the European Union (EU), sustainability issues, feedstock cost, as well as internal infrastructure investments related to storage, blending and distribution of biofuels.
Currently, Malaysian biodiesel producers are struggling to look for buyers willing to take up some of their palm methyl ester (PME) given that the price of biofuel stands at RM2.80 per liter, compared to regular diesel which fetches a sound amount of RM1.70.
Perhaps the only consolation left for Malaysia is that come 2010, their mandate of B5 kicks in for domestic consumption. This will reduce the stockpile of palm oil.
Indonesia, on the other hand, is going to pay subsidies for biofuel producers to encourage them not to leave the industry. This will ensure the survival of the industry especially if something similar to last year’s skyrocketing of oil prices happens again. There is a catch, however. Indonesia will only pay the subsidies when the price of biofuels is higher than domestic fuels.
Asian markets are export-oriented markets. The biggest challenge will be the "unfair" directive on biofuel content, which encompasses regulations on carbon emissions.
The directive is to be made into national law within the next 17 months, and is perceived as a tactical business practice and a non-tariff trade barrier move by the European Union on the pretext of “sustainability and environment” requirements designed to reduce greenhouse gas emissions.
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