EU Demand for Palm Oil-based Biofuel May Evaporate before End-2030: Sumwin CEO

Business News/Analysis, European Union (EU), Feedstocks, Field/Orchard/Plantation Crops/Residues, Indonesia, Malaysia, Marketing/Market Forces and Sales, Opinions, Policy, Sustainability

March 29, 2021

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by Amir Imran Husain Safri (The Sun Daily) Palm oil-based biofuel demand from the European Union (EU) might disappear before the end-2030 implementation deadline imposed by Europe’s Renewable Energy Directive II (RED II), according to Sumwin Group’s founder and CEO, U.R. Unnithan.

The directive’s indirect land-use change (ILUC) risk criteria dictate that the global production area of the feedstock should not increase more than 1% annually and more than 100,000 hectares after 2008 and not more than 10% of such expansion has taken space on land with high carbon stock.

The EU has stated that only palm oil fits such criteria and thus palm oil will be phased out from the biofuel market in the union.

“This decline will start with the implementation of RED II by the union’s member states in June 2021, culminating in zero palm biodiesel use by end-2030,” Unnithan said in his paper titled “Biodiesel Market Outlook 2021” at Bursa Malaysia’s Palm and Lauric Oils Price Outlook Conference & Exhibition on Tuesday.

“But the reality is, that with many member states within the EU pushing for a non-palm biofuel agenda, one might see palm biofuel exports into the EU drop before 2030.”

Unnithan pointed out that Malaysia and Indonesia are dependent on the EU for their biodiesel exports as nearly 80% of the two country’s combined volume goes to that market.

Outside the EU, he said, the demand for palm oil biofuel is dictated by a favourable palm oil-gas oil (pogo) spread – which determines voluntary biodiesel blending based on the prices of palm oil and heating oil to do so.

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In Malaysia, the B20 biofuel mandate has been a key driver since it was implemented in Sarawak last year. This will be followed by its implementation in Sabah in June this year, and Peninsular Malaysia by December. READ MORE

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