BIOFUELS - AT WHAT COST ?

The report finds that Malaysia's ambitions to become a global biodiesel producer have been undermined by volatile feedstock prices and the high cost of production relative to petroleum diesel. While the government provided limited support through soft loans and tax incentives, a proposed B5 blending mandate would likely increase the national subsidy burden. The industry's profitability is precarious, relying heavily on exports to the EU and US, where it may benefit from subsidy loopholes. Environmentally, the report argues that the presumed carbon benefits of biodiesel are offset by greenhouse gas emissions from deforestation and peatland conversion, while socially, global biofuel demand has contributed to rising food prices.

• The Malaysian government's vision for a sustainable biofuel industry has been undermined by global market forces, as high feedstock prices have made biodiesel economically unviable for most domestic producers.
• Domestic biodiesel production is significantly lower than planned capacity; as of September 2008, only eight of 14 functional plants were producing biodiesel, with total production estimated at 130,000 tonnes.
• Implementing a B5 mandate (replacing 5% of petroleum diesel with biodiesel) would increase the government's subsidy burden rather than reduce it, potentially adding RM 395 million per year at 2008 prices.
• Malaysian biodiesel is largely export-oriented and may be exploiting a U.S. legislative loophole that allows blenders to claim a US$ 1 per gallon subsidy for imported biodiesel that is then re-exported to the EU.
• The environmental benefits of biodiesel are negated by the 'carbon debt' created when rainforests or peatlands are converted to oil-palm plantations, with some peatland conversions requiring 840 years to repay the carbon debt.
• Global biofuel production has contributed to a surge in demand for vegetable oils, driving up palm oil prices and contributing to a global food crisis that has pushed millions of people into poverty.
• Government support for the biodiesel industry has been limited, consisting primarily of RM 60 million in low-interest loans in 2004 and RM 12 million in federal grants for demonstration projects in 2006.
• Biodiesel only becomes economically competitive with petroleum diesel when crude palm oil (CPO) prices are low (below RM 1,500) and crude oil prices are high (US$ 75 per barrel or higher).

APA

Lopez, G. P., & Laan, T. (2008). BIOFUELS - AT WHAT COST ? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/biofuels_subsidies_malaysia.pdf

Chicago

Lopez, Gregore Pio, and Tara Laan. BIOFUELS - AT WHAT COST ? International Institute for Sustainable Development, 2008. https://www.iisd.org/system/files/publications/biofuels_subsidies_malaysia.pdf.

Wikipedia

{{cite report |last1=Lopez |first1=Gregore Pio |last2=Laan |first2=Tara |title=BIOFUELS - AT WHAT COST ? |publisher=International Institute for Sustainable Development |date=September 2008 |url=https://www.iisd.org/system/files/publications/biofuels_subsidies_malaysia.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lopez2008biofuels, author = {Lopez, Gregore Pio and Laan, Tara}, title = {{BIOFUELS - AT WHAT COST ?}}, institution = {International Institute for Sustainable Development}, year = {2008}, month = sep, url = {https://www.iisd.org/system/files/publications/biofuels_subsidies_malaysia.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }