Biodiesel Mandate Research Articles

Economic impacts of biodiesel policy in Indonesia: a computable general equilibrium approach

The Government of Indonesia has been promoting the advancement of the biodiesel sector to fulfill its commitment to support clean energy, energy security, and rural development. This paper examines the economic impact of the biodiesel sector using a computable general equilibrium model. Besides analyzing the impacts on the national macroeconomic conditions, other sectors, and household incomes, our model has also included a regional block to capture the impact of the biodiesel mandate on regional growth. Two simulations were performed: (1) fulfillment of the 30% biodiesel blending target (B30 mandate), and (2) Simulation 1 combined with the European Union's biodiesel trade ban resulting in an export reduction of 5.18%. The results show that the two simulations provide positive impacts on macroeconomic variables, including real gross domestic product and real wages. However, the B30 mandate and the combined effect of the EU trade ban still yield an inflationary effect in the short term. They also potentially reduce the production of several agricultural products—such as sugarcane, fruits, vegetables, and soybeans—leading to an increase in food prices. The policy implications highlight that the current B30 mandate and EU ban cannot automatically improve the fuel trade balance.

Transmission of variations in the biodiesel mandate for Brazilian biodiesel market

To preserve the environment, several countries have promoted the insertion and expansion of biodiesel into their energy matrices through mandates (mandatory blending of biodiesel and fossil diesel). This study analyzed the short- and long-term effects of changes in biodiesel mandates on certain representative variables in the biodiesel industry, including biodiesel demand, fossil diesel imports, and the retail price of diesel B. Three potential scenarios (growth, stability, and decline) were established to forecast future fluctuations in biodiesel mandates from September 2021 to December 2023. The short-term and long-term equilibrium relationships were determined using the vector error correction model with an exogenous variable (VECX), considering the biodiesel mandate as an exogenous variable. The results of this study are as follows. (i) The time series analyzed were non-stationary and cointegrated. (ii) In the long term, the 1% increase in biodiesel mandate caused increases of 1.1946% in the demand for biodiesel, 1.1967% in the price of diesel B, and only 0.7712% in fossil diesel imports. (iii) In the short term, the 1% increase in biodiesel mandate caused increases of 0.9249% in biodiesel demand, 0.7659% in the price of diesel B, and only 0.0361% in fossil diesel imports.

Effects of the Change in the Biodiesel Mandate on Variations in Biodiesel Demand, Fossil Diesel Imports and the Price of Diesel B

Effects of the Change in the Biodiesel Mandate on Variations in Biodiesel Demand, Fossil Diesel Imports and the Price of Diesel B

Effect of COVID-19 on Biodiesel Industry: A Case Study in Indonesia and Malaysia

Indonesia and Malaysia are currently holding prominent roles in the global palm oil market. Both countries are the top two palm oil producers in the world and have ambitious targets to increase the palm oil-based biodiesel mandate. In Indonesia, the current programme of blending 20 per cent palm oil into 80 per cent diesel (B20) increases to B30 in 2020. Likewise, Malaysia plans to increase its biodiesel mandate from B10 to B20 in 2020. However, the outbreak of COVID-19 has infected millions and brought the global economy to a near-deadlock. The effect is particularly severe in the fuel industry owing to movement restrictions and the historic drop in oil prices. Evaluating the impact of the COVID-19 on the biodiesel industry is crucial for policymakers but challenging as the pandemic has evolved with intense speed. This article aims to discuss the impact of COVID-19 on the Indonesian and Malaysian biodiesel industry. In addition to that, a number of possible solutions to overcome the challenges were addressed and proposed. Despite severely affected by COVID-19, both Indonesia and Malaysia can use this momentum to improve and strengthen their biodiesel sector. Given its fiscal deficit, Indonesia should postpone its biodiesel blending mandate as the subsidy to support the programme can worsen the country’s financial stability. In Malaysia, where labour shortage is prevalent, modernising plantations with automated equipment, for instance, could potentially remove the dirty and dangerous stereotypes associated with plantation works, thus attracting more locals to work in the palm oil plantation and solving the labour shortage. This paper also briefly addresses the adoption of Industry 4.0 and Circular Economy for the palm oil biodiesel industry.

The capacity of major countries in Southeast Asia in meeting biodiesel mandates and pursue higher blends based on available major feedstocks

Major economies in Southeast Asia have been pressing the use of renewable diesel (RD) as an alternative to petroleum diesel. Currently, the major RD produced and consumed in Southeast Asia is biodiesel (BD), produced from edible oils. The use of edible oils produced by Southeast Asian countries is also consumed in various industries. This gives rise to the need to have a quantitative long-term assessment of their potential availability for BD production. In this study, the potential existing major raw material that could be tapped for biodiesel production in Southeast Asia was identified. Future demands for biodiesel and the amount of biodiesel that could potentially be produced were also estimated. These are to provide a practical assessment of the readiness of the Southeast Asian countries in the use of BD. Only Indonesia and Malaysia have surplus oils from oilseeds for BD production. However, if the trade of resources is limited within major countries in Southeast Asia, the blending of BD could be increased up to 50 to 70% in diesel fuels until the year 2040. The minimum biodiesel production potential in Southeast Asia is 36 Mm3 per year to as much as ∼61 to 87 Mm3 by 2040.

Biodiesel produced from palm oil in Indonesia: Current status and opportunities

Biodiesel is one potential solution to the challenge of sustainable energy development, especially in the industrial and transportation sectors. Since 2006, Indonesia has issued regulations regarding the use of biofuel as a substitute for fossil fuels. In 2018, the Indonesian government approved regulations regarding the use of biodiesel as a substitute for fossil fuel across all economic sectors. However, there are only a few studies that are focusing on the current status, future potential, barriers and opportunities of biodiesel development in Indonesia. The research reported here reviews the history of governmental policy relating to biodiesel, while also analyzing the current status of this fuel and the opportunities for its exploitation in Indonesia. This study finds that Indonesia has been promoting biodiesel commercialization using national strategy by make government mandate and providing financial incentives. Biodiesel distribution mechanism and related actors in the Indonesian biodiesel supply chain have been described in this study. The study concludes that the recent Indonesian government mandate to mix 20% biodiesel with 80% fossil fuel (B20) produced a positive effect on the economic, social and environment. However, this policy still represents a work-in-progress which can be brought to the optimum conclusion, despite the numerous challenges ahead. One such challenge constituting the focus of this research relates to the respective delivery points of the biodiesel and fossil fuel industry distribution networks remaining problematic. This situation can influence the mode of transportation employed by the storage refinery resulting in variations of either transportation or investment costs. This research provides recommendations regarding current policy and future research relating to the successful implementation of the biodiesel mandate in Indonesia.

Crop Rotation and the Impact of Biodiesel Mandates on Deforestation

Crop Rotation and the Impact of Biodiesel Mandates on Deforestation

Maximizing Crude Palm Oil Production in Malaysia: A Search for an Optimal Policy Using System Dynamics and Genetic Algorithm Approach

Palm oil industry in Malaysia is experiencing a stagnant crude palm oil (CPO) production and has been lagging as compared to Indonesia. This situation can jeopardize Malaysia’s position in world palm oil marker since Malaysia needed to secure its export revenue and fulfilling increasing demand of palm oil both locally and globally in the future. The factors that influence the CPO production are many. Among others are the scarcity of plantation area, labour shortage, and demand from palm-based biodiesel industry. This study presents an integrated of system dynamics (SD) and genetic algorithm (GA) (SD-GA) model to find the optimal policy to improve CPO production in Malaysian palm oil industry. SD offers the platform to evaluate and to test policy while GA facilitate the process of searching the best solutions to achieve the maximum CPO production in 2050. The proposed model has produced five optimal values for five policy variables namely average replanting rate, mechanization adoption rate, and biodiesel mandate in transportation, industrial and other sectors respectively. The best solution suggested that CPO replanting rate need to be increased to 251743.5 hectares per year to decrease the accumulation of ageing area by optimizing all these policy variables. This study is expected to help policy makers in designing related policies and drawing the road map towards improving CPO production in Malaysian palm oil industry.

Evaluating the palm oil demand in Indonesia: production trends, yields, and emerging issues

ABSTRACTThis paper investigates the development of domestic and international demand for Indonesian palm oil, in line with national biofuel mandates and established export markets. Domestic demand for palm oil for (i) achieving biodiesel targets and (ii) meeting food and industrial uses will reach 20 million tonnes by 2025, equivalent to 61% of Indonesian production in 2014. Thus, it is possible for Indonesia to be self-sufficient, reaching the biodiesel targets without increasing plantation areas. However, to meet both domestic and international demand, a total 51 million tonnes of crude palm oil will be needed in 2025. This requires additional land of up to 6 million hectares with current yields. The expansion of oil palm plantations in Indonesia has led to debates related to deforestation, threatened biodiversity, and greenhouse gas emissions. We show that increasing agricultural yields could serve the purpose, benefiting biodiesel production while reducing the need for new land. Therefore, we recommend that the ambitious Indonesian biodiesel mandates are pursued in combination with a strategy for increased productivity in palm oil production, utilization of degraded land to contain greenhouse gas emissions, and use of palm oil biomass residues for energy production.

The Welfare Effects of Ethanol and Biodiesel Mandates on Edible Oil Uses in the United States

The purpose of this study is to analyze the welfare effects of the ethanol and biodiesel mandates on edible oil, gasoline and corn uses in the United States, as well as potential price increase caused by such mandates and policies. Despite all the claims that the federal mandates and policies have caused the prices of corn and vegetable oils to increased, the literature lacks the evidence and information needed to deduce any results and arrive in a an inclusive conclusion.

The interaction between EU biofuel policy and first- and second-generation biodiesel production

We build a tractable partial equilibrium model to study the interactions between the EU biofuel policies (mandate and double-counting of second-generation biofuels) and first- and second-generation biodiesel production. We find that increasing the biodiesel mandate results in a higher share of first-generation biodiesel in total diesel fuel, but leads to a lower share of second-generation biodiesel. The double-counting policy supports the production of second-generation biodiesel at the expense of a lower share of first-generation biodiesel, and increases the consumption of fossil diesel as compared to treating first- and second-generation biodiesel equally. Finally, improved collection of used cooking oil reduces the price of oilseeds and oils thereof, the prices of both biofuel types, and negligibly also the consumer fuel price.

Effects of biodiesel blends on lubricating oil degradation and piston assembly energy losses

Fuel is considered a major influencing parameter for engine oil condition during extended engine operation. Its effects on engine oil performance is required to be investigated with the implementation of the worldwide biodiesel mandate in various countries. This research monitored the influence of biodiesel on the condition of engine lube oil by long duration testing on three fuels: DF as the baseline; 20% palm biodiesel and 80% DF (PB20); and 20% jatropha biodiesel and 80% DF (JB20). The tests were carried out on a single-cylinder CI engine. Sump oil samples were collected at regular intervals during 200-h tests, after which the rheological, tribological, and chemical properties of the samples were investigated. Results showed that the B20 fuels decreased the viscosity and increased the acidity of the engine oil. Piston ring-cylinder and piston skirt-cylinder tests, in which a high-stroke reciprocating test rig was used, showed a slight increase in friction and wear losses near the intervals of oil draining for the B20 fuels. Chemical analysis by Fourier transform infrared spectroscopy and ASTM standard testing showed a decrease in soot loading but an increase in the fuel residue, corrosiveness, and oxidation of the engine oil samples for B20 fuelled engine tests.

Producing biodiesel from soybeans in Zambia: An economic analysis

Facing a huge fiscal burden due to imports of its entire petroleum demand in the face of ample supply of agricultural land to produce biofuels, Zambia has recently introduced a biofuel mandate. However, a number of questions, particularly those related to the economics of biofuels, have not been fully investigated yet. Using an empirical model, this study analyzes the economics of meeting the biodiesel mandate using soybean oil. The study finds that meeting the biodiesel mandate would reduce social welfare, mainly because of the welfare loss to fuel consumers and net reduction in foreign exchange earnings due to soybean oil imports. However, if Zambia increases its domestic soybean supply, as well as oil yield, soybean-based biodiesel is likely to be welfare-beneficial. The country’s welfare is found to be the highest under expanded soybean production and its domestic processing but with no biodiesel mandate.

Mid-Year Update on Biodiesel Production Profits

In previous farmdoc daily articles on biodiesel production profits (September 18, 2013; September 25, 2013; March 19, 2014; October 30, 2014; January 28, 2015), a feast or famine pattern of profitability was highlighted. For example, the biodiesel industry experienced the feast side of the ledger in 2013 with record large profits, while losses placed the industry in 2014 on the famine side of the books. The feast or famine pattern is closely tied to policy incentives through the biodiesel tax credit and RFS mandates. The tax credit was reinstated late in 2014 for the 2014 calendar year. Reinstatement is uncertain for 2015. The EPA’s recent proposal for RFS standards included rising biodiesel mandates over 2014-2017 and appeared to signal a willingness to continue increasing the biodiesel mandate through the remaining life of the RFS in 2022 (farmdoc daily, June 17, 2015). The purpose of this article is to update estimates of biodiesel production profits thru June 2015 and analyze whether the EPA proposal released at the end of May has had a measurable impact on profitability.

A detailed survey of the palm and biodiesel industry landscape in Malaysia

This paper provides a critical review of the palm biodiesel landscape in Malaysia. The palm industry is a key source of revenue for the country, where in 2009 the industry was responsible for generating 8% of the gross national income per capita. The interest in palm-based biodiesel can be traced back to the early 1980s however it was only in 2006 that Malaysia officially formulated its first National Biofuel Policy as a strategic government intervention to drive development and implementation of palm biodiesel as substitute to regular fossil-based diesel. As at January 2013, the implementation of the biodiesel mandate (at 5% concentration) has been limited to the Klang Valley central region only. But there are plans for a much wider roll-out and at higher concentration blends in 2014. The policy in its current form assumes that all biofuels are sustainable and therefore fails to provide assurances that the fossil diesel will be replaced by a more sustainable energy source. Here it has been argued that a market-based policy approach would be better than a technology-forcing mechanism.

The effect of biodiesel policies on world biodiesel and oilseed prices

A theoretical and empirical model is developed to analyze the effect of a biodiesel mandate, a tax exemption (tax credit) and an exogenous diesel price shock on world soybean and canola markets. The jointness in crushing oil and meal from the oilseed reduces the size of the link between biodiesel and oilseed prices. A diesel price shock with a mandate results in a smaller change in oilseed prices compared with a tax exemption. Higher diesel prices increase biodiesel prices under a tax exemption but lower them with a blend mandate. When both canola and soybeans are used to produce biodiesel, an increase in the diesel price leads to higher canola prices, but the effect on soybean prices is ambiguous and depends on relative elasticities of meal demand and canola supply because canola produces more oil than soybeans.

Impacts of US Biodiesel Mandates on World Vegetable Oil Markets

Impacts of US Biodiesel Mandates on World Vegetable Oil Markets

Biofuels, tax policies and oil prices in France: Insights from a dynamic CGE model

The 2009 Renewable Energies Directive (RED) has set up ambitious targets concerning biofuel consumption in the European Union by 2020. Nevertheless, budgetary constraints and growing concerns about the environmental integrity of first-generation biofuels have imposed a phasing out of the fiscal instruments to promote them. Focusing on France, this paper combines an exogenous increase in oil prices and tax policies on fossil fuels. The objective is to determine the efficiency of an alternative incentive scheme for biodiesel consumption based on a higher price of the fossil fuel substitute. Policy simulations are implemented through a dynamic computable general equilibrium (CGE) model calibrated on 2009 French data. The results show that the 10% biodiesel mandate set by the RED would not be achieved even if the fixed taxes on diesel reach the same level as those on gasoline. Although integrating the rise in oil prices into the fiscal framework improves the biodiesel penetration rate, it remains below the target. Moreover, we find that the effects of biofuel consumption are limited to the biofuel chain sectors. In other agricultural sectors, the substitution effect of biodiesel with diesel is partially offset by the pricing effect induced by higher energy production costs.

Impacts of biodiesel on the Brazilian fuel market

This paper investigates market effects of the Brazilian biodiesel law, which made the use of biodiesel, blended with petroleum diesel, mandatory in Brazil. The study estimates the demand curve for diesel fuel (biodiesel and petroleum diesel) and the industry supply curve of biodiesel. These two pieces of information have been used in a static analysis to draw scenarios with different biodiesel mandates. The results show that the current proportion of biodiesel in the diesel mixture (5%) increases consumers' price by 1.7% and decreases the consumption by 1.5% compared to the scenario without biodiesel. Also, an increase in the biodiesel percentage to 10% would raise the price by 3.5% and reduce the consumption by 3%.

Instrumental Analysis of Biodiesel Content in Commercial Diesel Blends: An Experiment for Undergraduate Analytical Chemistry

The potential of replacing petroleum fuels with renewable biofuels has drawn significant public interest. Many states have imposed biodiesel mandates or incentives to use commercial biodiesel blends. We present an inquiry-driven experiment where students are given the tasks to gather samples, develop analytical methods using various instrumental methods, such as HPLC, 1H-NMR, and ATR-FTIR, make measurements, and analyze the results to determine the volume percent of biodiesel in commercial diesel blends. The project develops students’ appreciation of the usefulness of chemistry by working with “real” samples from their daily lives, and skills to critically compare and contrast the strengths and weaknesses of various instrumental techniques for quantitative analysis.