The Malaysian Minister of Plantation Industries spoke exclusively to the World Refinning Association ahead of the Asian Biofuels Roundtable to be held in Malaysia at 23-25 March.
It is interesting that there is no discussion of prior informed consent of the people who live in the land and who may not be farmers. He is exactly right though in terms of the EU’s sustainability criteria and how they should integrate with WTO and be science based. Should the Malaysian position on biodiversity be equally science based. If it isn’t and it is probably debateable tot he degree that it does conform to prinicples of sustainabilty and biodiversity, does that matter if it is a case of feeding people and ensuring economic prosperity?
The press release follows…
“Sustainability criteria must be science based verifiable and WTO- compatible”, says the Malaysian Minister of Plantation Industries and Commodities
Kuala Lumpur, 24th February, 2009
Just a few weeks before the Asian Biofuels Roundtable, 23-25 March in Kuala Lumpur, the Hon. Datuk Peter Chin Fah Kui, MINISTER OF PLANTATION INDUSTRIES AND COMMODITIES/ MALAYSIA spoke with exclusivity to the World Refining Association. “We urge the EU to ensure that its sustainability scheme does not discriminate against third country producers and that the criteria used are science based, verifiable and WTO- compatible” said the Minister.
The Minister believes the long term future remains bright for the Asian Biofuels Industry. However, he highlighted “2009 will be a challenging year because of the issues confronting the industry in the world market, namely exports of subsidized US biodiesel to EU which is distorting biodiesel prices and trade, the EU Energy Directive and the global economic slowdown which might impact on our exports”.
The Minister who will give a keynote address during the Asian Biofuels Roundtable also announced that “discussions with the biodiesel producers and petroleum companies are ongoing on areas critical to the implementation namely logistics and financing mechanism”.
WRA: The World Refining Association and the participants of the Asian Biofuels Roundtable are delighted with the opportunity to listen directly from you during the event, Could you tell us the main points you will discuss during your opening keynote address? What are your expectative about the Roundtable?
Hon. Datuk Peter Chin Fah Kui MINISTER OF PLANTATION INDUSTRIES AND COMMODITIES: I am very delighted to be invited to give the Keynote Address in the Asian Biofuels Roundtable 2009. The biofuels scenario is constantly changing. I would probably cover the issues and challenges facing biofuel producers, particularly in Malaysia and the implementation of the B5 programme in Malaysia. These would include: Impediments to market access to major markets such as EU and USA due to unfair legislations and other actions;B5 implementation in Malaysia, the issues and challenges; the need to move into next generation biofuels based on non-food biomass and the need for biofuel producers to act together to face these challenges including issues on sustainability.
I sincerely hope the Roundtable will come up with ideas and actions that can address these issues.
WRA: How do you see the key challenges and issues affecting the Asian Biofuels Industry?
Minister: In spite of the benefits that biofuels bring in terms of energy security, reducing greenhouse gases (GHG) and contributing towards socio-economic development of rural communities, there are several challenges that confronts us such as:
Feedstock: There are concerns that the cost of producing biofuels is more costly than the price of fossil fuels. As a major cost of biofuel is the cost of feedstock, rising prices of vegetable oils could put pressure on the cost of producing biofuels. In a country which subsidises its fuel in the retail market, the rise in the cost of biofuels is an additional cost burden for the government.
Infrastructure Investment: there are challenges in integrating biofuels into the established currents fuel market related to storage, blending and distribution of biofuels. It is clear that the development of a domestic biofuel market requires up front investment in the biofuel infrastructure which is critical to support large scale biofuels operations.
Sustainability: the issue on sustainability has taken into a new dimension when the EU introduced a renewable energy directive which introduces minimum GHG saving thresholds and it is compulsory for biofuel produced by the producing countries to be sustainable and not damaging the ecosystems such as land with high biodiversity value and high carbon stock ( e.g. peatland). We urge the EU to ensure that its sustainability scheme does not discriminate against third country producers and that the criteria used are science based, verifiable and WTO- compatible.
WRA: As we know, 2008 was a very hard year for the biofuels industry. What are the trends for the next 12 months? Can we be optimistic?
Minister: In Malaysia, the Government has started implementing the B5 programme starting with Government Agencies (having their own depots), followed by the industrial sector and later the mass transport sector. Full implementation is expected in early 2010. With full implementation, we are expected to consume 500,000 tonnes of palm oil annually for the implementation of B5 in the domestic market.
In 2008, the country exported 182,108 tonnes of palm methyl ester (PME) valued at RM610.7 million. In January 2009, we exported 12,731 tonnes of PME valued at RM30.19 million, which is promising. However, on the whole I think 2009 will be a challenging year because of the issues confronting the industry in the world market, namely exports of subsidized US biodiesel to EU which is distorting biodiesel prices and trade, the EU Energy Directive and the global economic slowdown which might impact on our exports.
WRA: What are your expectations regarding the B5 for the transport industry and what are the perspectives to move gradually to other industries?
Minister: The Government has started implementing the B5 programme starting with Government Agencies (having their own depots), beginning 1st February 2009. The first two Government Department that have started using B5 is The City Hall of Kuala Lumpur (Dewan Bandaraya Kuala Lumpur) and The Malaysian Armed Forces (Angkatan Tentera Malaysia) in the central region. The implementation of B5 will be further extended to other Government Agencies which have their own depots. We are also working with PETRONAS to make available some retail stations to supply B5 to Government Departments. Besides the Government Agencies, the next phase of implementation would be the industrial sector, followed by the mass transport sector.
Discussions with the biodiesel producers and petroleum companies are ongoing on areas critical to the implementation namely logistics and financing mechanism.
WRA: the B5 was very welcome by the Malaysian Biofuels Industry. Which other initiatives is the government looking at to reduce the current oversupply of palm oil and help support palm oil prices.
Minister: the other measures undertaken by the Government are as follows:
The Oil Palm Replanting Incentive Scheme: the Oil Palm Replanting Incentive Scheme was launched in December 2008 as one of the government strategies to reduce the nation’s high palm oil stock to ensure the stability of palm oil prices.
The Scheme with an allocation of RM200 million is aimed at felling 200,000 hectares of oil palm trees aged 25 years and above. An incentive of RM1,000 per hectare will be paid after the palms are felled. The felling of 200,000 hectares of oil palm area will reduce palm oil supply by 700,000 tonnes annually in the short term. All estates, organised smallholders schemes under Felda, Felcra, Risda and State Agencies and independent smallholders are eligible to apply under this scheme. The incentive is effective from 1st December 2008 and the closing date is on 30th June 2009. The palm trees must be felled before 31st March 2010. To date, we have approved 63,000 hectares under this Scheme.
Increasing CPO Duty Free Exports: the Government has also increased the quantum of CPO duty free exports to 3.0 million tonnes in 2009 to cater to markets which prefer CPO. Encouraging offtakes would reduce our stocks in the short term.
WRA: Nowadays, sustainability is one of the main topics when we talk about Biofuels. What are the strategies of the Malaysian Government to product Biofuels in a sustainable way?
Minister: Malaysia is always promoting development of the palm oil industry in a sustainable way. We support initiatives by the industry such as the Roundtable for Sustainable Palm Oil. Government through Malaysian Palm Oil Board (MPOB) has instituted codes of practices for the Industry to provide a guide for the industry to adopt sustainable practices. At the same time, we are engaging countries such as the EU and USA that are coming up with legislations which impose sustainability criteria on our palm and biofuel products. This includes the EU Directive on Renewable Energy.
WRA: How do you analyze the impact of the global financial crisis on the Asian Biofuels Industry?
Minister: the sharp drop in crude oil prices coupled with the global financial crisis could slow the development of the biofuel industry in terms of stalling new investments. In addition, there are fears that the global recession would slow demand for fuel, which we are already seeing today. Despite, the bearish scenario and challenges these temporary conditions present, the long term future of the Asian Biofuel industry remains bright on its ability to meet future demand for fuel.
The Malaysian biodiesel industry has both the production capacity to a tune of 1.67 million tonnes and feedstock available to meet market demand both in the domestic and world market. It will remain an important component of the country’s overall energy policy.
WRA: What is the position of the Malaysian government in the debate “Food vs. Fuel”?
Minister: One of the biggest concerns in the use of biofuels is its impact on food security which has been blamed on rising food prices. As far as the Malaysian Government is concerned, the local mandate B5 if fully implemented will require only 500,000 tonnes annually or a mere 3% of our national production of CPO. In fact, 90% of Malaysian palm oil is used for traditional applications such as foodstuffs and oleochemicals (soap and cosmetics), while only a small fraction is destined for biofuel production.
On the other hand, there must be a right balance for use of palm oil and other vegetable oils for food and fuel. For Malaysia, we have limited 6 million tonnes per year of palm oil for biofuel. Currently, annual production of palm biodiesel is below 200,000 tonnes. We do not foresee that the food versus fuel issue will be a problem as it is now.
I view biofuels have only a minor influence on the rising food prices. There are other more influential factors such as increasing world population and increased demand for food, high price of oil , price speculation and hoarding activities, effect of natural disasters and productivity losses.
Having said that, I think the more basic issue is not simply competition between use of a commodity for food or fuel, but the use of land for food or non-food crops. To put it simply, wouldn’t it be better to use good land to plant oil palm (which can be used both for food and fuel) rather than a fuel crop (such as Jatropha) which cannot be used as food? Hypothetically, if a food crisis indeed develops, palm oil used for biofuels could be diverted for food use whereas Jatropha for fuel cannot be diverted for food.
If we plant palm oil, we can use policies and legislation to ensure that the palm oil produced is sufficient for food uses and maintain the price at a reasonable level.
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Since 1997 the World Refining Association has achieved worldwide recognition for the organisation of high level, strategic and technical conferences within the energy sector worldwide.
With a strong regional focus, the Asian Biofuels Roundtable, on 23-25 March 2009 – will provide a detailed view of all the latest developments within the Asian Biofuels market and will offer to the attendees the opportunity to hear from a panel of leading industry experts within all areas of the biofuels industry including governments, agribusiness companies, biofuel producers, investment and project finance companies, automotive manufacturers and cutting edge technology suppliers.
The participants will also have the opportunity to attend a site visit hosted by Sime Darby Biodiesel Plant on 23 March.