Institutional and regulatory framework for biodiesel production: International perspectives and lessons for South Africa

Abstract

Biodiesel is produced from a range of feedstock including oil seeds (canola/rape and soya beans), as well as used cooking oil. This is done by converting the oil to methyl esters in a transesterification process that yields glycerine as one of the by-products. Biodiesel production is largely dependent on the policy and the institutional framework put in place by host economies. This paper examines the institutional and regulatory frameworks established in leading biodiesel producing countries and compares them to the situation in South Africa. It also analyses the interactions of biodiesel industry players at government and producer levels to ascertain the degree of economic viability of proposed and current projects against legislation. There are two broad findings that the paper brings to the fore. Firstly, policy regime and regulatory frameworks have been essential ingredients in the promulgation of biodiesel in the energy mix. Biodiesel policies have been driven by market expansion and technological change. Secondly, functional institutions are key enablers in the production and distribution of biodiesel. A key lesson for South Africa is that it has to make a clear choice on which form of renewable energy to use, as uptake of the technology is mainly driven by subsidies and incentives which require huge capital injections. If South Africa embraces the subsidy route it needs to come up with a policy that can survive the post-subsidy era. More importantly, South Africa needs to find a way that will make the costs of biodiesel competitive when compared to fossil fuels.