Southeast Asia Stumbles on Biofuels

Although countries in Southeast Asia have respectfully committed to reduce greenhouse gas emissions under the landmark pact adopted in Paris in 2015, regional economic and political developments have either slowed or halted the momentum for biofuel production and slowed the development of other renewable energy sources.

These countries, collectively growing at a 5 percent annual clip, contribute 9 to 10 percent of the total global emissions, a significant portion of which is coming from its booming transport sector. The development and production of alternative fuel sources for reducing emissions from its large vehicle fleet is key for any national or regional climate change mitigation plan, which is important for achieving the 1.5 degree C. limit for global temperature increase.

Biofuels have emerged as an alternative to fossil fuel-based products for powering vehicles since they emit less carbon dioxide than petroleum or oil. Advocates say they look to be an ideal substitute in Southeast Asia, whose reliance on agriculture for economic growth also provides an advantage as the materials needed for biofuel production can be sourced from its farmlands.

“In reality, two of the key reasons or drivers on the use of biodiesel is to reduce CO2 emissions, greenhouse gas. That’s why Europe is introducing biodiesel. In other countries, it is energy security, reducing independence to importation of oil”, Shell Global Solutions scientist Mae Ascan said.

In Indonesia and Malaysia, the world’s top palm oil producers in the world, the rapid decrease in crude oil prices has made it difficult for both countries to fulfill their plans for palm oil-based biofuel production. The high global demand for palm oil has made it more economically viable to be sold directly into international markets instead of using it to produce biofuels, which is now twice as expensive as the fossil fuel alternative.

Malaysia and Indonesia aim to increase the organic content of its biofuel to 10 and 20 percent, respectively, which requires government subsidies corresponding to $260 million and $900 million. Potential government policies to accumulate these funds, such as imposing a tax on palm oil exports, may cause political and economic instability in these countries, which has hampered government efforts for meeting their production targets.

Thailand is also experiencing difficulties from palm-oil based biodiesel costing more than fossil fuel products. This provides a huge obstacle for a country attempting to increase the use of biofuels on its vehicles through palm-oil biodiesel and gasoline blended with molasses and cassava. As such, its government has planned to implement a feed-in tariffs for renewables-based electricity-generating development, with biomass-fuelled projects a top priority under this system.

The Philippines faces a similar dilemma. Under the Biofuels Act of 2006, coconut-based biodiesel requires a 2 percent bio blend. While an increase to five percent has been targeted for 2015, the decline in coconut oil production due to infestations, the onslaught of typhoons in the past decade, and the current El Niño-induced droughts throughout the country have made the world’s top coconut oil producer unable to meet this target.

As a result, Philippine energy officials are campaigning for investments in the biofuels market to comply with the mandated 10 percent ethanol blend and increase the coconut blend. Aside from reducing greenhouse gas emissions, more investments can result in lower fuel imports and more value-added income to farmers in the country.

Another issue for biofuel production rests on its impacts of local ecosystems and communities. Disputes over available lands for feedstock cultivation have been documented between private investors and the communities in these lands. Ancestral lands belonging to indigenous peoples in the Philippines were reportedly taken over by expanding oil palm plantations, depriving them of their lifestyle and cultures protected under the law.

Only 1 percent of land conflicts have been investigated by the Indonesian authorities, ranging from complaints by local communities about the increased impact on nearby water resources due to expanded palm oil production to systemic failures in government regulations and corporate self-regulation.

Across Southeast Asia, clear incentive structures have been devised to increase investments in the sector, as well as regulatory and policy frameworks to ensure thriving agribusinesses and feedstock sectors within their jurisdiction. However, governments have not implemented the necessary safeguards to ensure that these investments are sustainable. Issues such as poverty, more extreme weather events, and bureaucratic inefficiencies may have compromised their capacity to effectively implement these regulatory and policy frameworks.

All of these factors have effectively slowed down what was once perceived as a viable alternative to fossil fuels in the region. As a result, biofuels is projected to only meet up to 15 percent of the total transport fuel demand in Asia by 2030.

Problems associated with stimulating the growth of biofuel production in Southeast Asia moving forward needs to be immediately addressed. Such policies need to start with the government strengthening efforts to empower local communities for their own planning and decision making processes. Doing this should help them develop their own ideas about future development paths with regards to large-scale land conversion and agribusiness projects.

Addressing disputes about biofuels expansion projects requires placing efficient mechanisms for a fair resolution of such conflicts, although this can prove to be a challenge in several Southeast Asian countries with bureaucratic inefficiencies.

As Southeast Asia attempts to balance its continued economic development with fulfilling its commitment to reducing carbon emissions, developing biofuels as a cleaner energy source will play an even more crucial role in its development plan for the next few decades. Maximizing this potential will only work through a strong collaboration between the government, the private sector, civil society groups, and local communities.