The Rise of Biodiesel in Malaysia and Indonesia

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What is biodiesel?

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The 21st century has seen a rise in the demand for renewable energy leading to more entrepreneurs venturing into the biodiesel manufacturing. Biodiesel fuel is considered to be a renewable biodegradable alternative fuel. The process through which biodiesel is manufactured is referred to as transesterification. Biodiesel can be manufactured domestically or industrially from organic materials such as animal fats, vegetable oils, and from recycled restaurant grease. Biodiesel is seen as a replacement for petroleum products and it has the ability to achieve the need for renewable energy and reduce the market demand for renewable fuels. The big share of the biodiesel in Indonesian and Malaysia involves the extraction of bio fuels from palm oil.

What are the benefits of biodiesel?

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• Biodiesel is described as a carbon neutral fuels, it means that when burned, the amount of carbon it releases no net carbon in terms of carbon (IV) oxide. This means that it absorbs the similar amount of carbon when burned as it is combusted. 

• It is cost efficient and renewable: Biodiesel is manufactured from plant and animal products that can be re-planted making it a renewable source of energy.

• It does not require conversion: Biodiesel is compatible with diesel engines and it can burn without any modifications being made to the diesel engine. 

• It boasts a fast flash point: A flash point of a volatile material describes the lowest point at which vapors of a fuel can be ignited if an ignition source is introduced.

What are the reasons behind the rise of biodiesel in Malaysia and Indonesia?

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The projections of the biodiesel output by Indonesia and Malaysia is expected to increase this year with an estimated output of about 3.5 million tones and 0.9 million tons respectively. This increase has been attributed to various factors. Some of the factors have been discussed below:

• The prices of biodiesel have been stabilization of biodiesel prices globally. This year the prices of palm oil that is used to manufacture bio components have reduced by about 1.5 percent at about $ 640.94 per ton. This ensured that the demand for biodiesel increased, which promises brighter days for the biodiesel industry.

• Government subsidies: Both the Malaysian and Indonesian governments have formulated policies and legislation that seek to improve the biodiesel industry. Legislation and research sponsored by both governments have been advanced with the aim of increasing the usage of the fuels.

• The need for cleaner fuels: Malaysia in particular is pushing for cleaner sources of energy that are likely to reduce environmental pollution especially air pollution that has become a major environmental issue in this developing economy. The Malaysian government approximates that the adoption of the B10 biodiesel fuels have the potential to reduce the emission of pollutants into the air that are similar to the pollution that is caused by about 100,000 vehicles.

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• Both governments see a potential to make significant savings on foreign exchange through the exploitation the biodiesel industry. The Indonesian and Malaysian economies are propelled by fossil fuels especially petroleum products that are imported. These countries aim to reduce over reliance on fossil fuels and ensuring safety of their foreign exchange volatility by maximization of the biodiesel sector.

• For two countries that are large-scale producers of palm oil, biodiesel industry would support the oil palm sector. Oil palm is an integral part of biodiesel and governments of both Malaysia and Indonesia see a potential of empowering palm oil farmers and creating for them a ready market by ensuring the success of the biodiesel industry.

What are the challenges facing the biodiesel industry in Malaysia and Indonesia?

There are various challenges that the biodiesel industry in Indonesia and Malaysia has to overcome. Some of the challenges that inhibit the increased commercialization of the industry include:

• The increased production mining of petroleum that has led to low crude oil prices globally. Since the mid 2014, global oil prices have been going down and this has increased competition for the biodiesel industry since many users prefer consuming petroleum products to biodiesel. 

• The limited profits in the biodiesel industry have kept many potential investors at bay. The president of the Malaysian Biodiesel Association is quoted attributing the low prices for biodiesel fuels as a reason behind the minimal profits for those in this industry.

• There are concerns by various manufacturers on the potential reliability of embracing biodiesel fuels. This perception continues to ensure that the rate of people who adopt biodiesels still remain relatively low.

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