LIKE many of you who are reading this, I sit in an air-conditioned office, with high-speed internet in front of a fully-charged laptop sipping on a warm cup of coffee. All of which requires electricity. 

In Malaysia, the production of much of this electricity can be attributed to coal importation and the country’s tremendously large natural resource endowment of oil and natural gas.

But how long can Malaysia sustain an economy so reliant on fossil fuels for power generation? Perhaps not as long as you imagine.

Malaysia’s reserves of oil and natural gas are gradually declining, with natural gas expected to last for 36 years and oil for another 19 years, at the current rate of production.

Unfortunately, Malaysia is more reliant on coal and as a consequence, coal is expected to replace the void left when oil and natural gas run out; leaving Malaysia in a troublesome predicament. 

In 2016, the Malaysian government signed the Paris Agreement with the aim of decreasing their carbon emissions to help reduce global warming. But with the potential increase in the usage of coal, this goal is unlikely to be met. 

Malaysia also faces alternative problems regarding its energy generation. With technological advancement and a growing population, energy demands are expected to increase by 6-8% per year.

As a result, the government needs to find ways of producing more clean energy to meet the growing demand. With the Paris Agreement and Pakatan Harapan’s commitment to renewable energy in mind, this should encourage the growth of Malaysia’s renewable energy sector. 

A potential solution to this dilemma is the development of the countries biofuel industry. Why biofuels, you may ask?

Biofuels are non-fossil fuels derived from organic matter such as plant material and animal waste which can act as replacements for fossil fuels.

Malaysia produces 39% of the worlds palm oil; an estimated 71.3 million tonnes of palm oil a year; of which, 19 million tonnes is organic waste with biodiesel potential.

However, the industry works far below full capacity, only producing an approximate 1.1 billion litres of biodiesel, of an estimated total capacity of 2.5 billion litres per year. 

Numerous reasons contribute to the industries inefficiency. Primarily, a number of unfavourable policies concerning export taxes and subsidises.

Malaysia enforces a relatively high export duty of 30% compared to other competing countries such as Indonesia which enforces a 2% export duty, making it considerably cheaper to export their biodiesels to lucrative foreign markets. 

The industry also struggles because of the price volatility of both crude palm oil and oil, particularly with the recent low price of the latter. This is further compounded by the Malaysian government’s subsidy on oil, consequently making it cheaper to use. 

Another issue facing the industry is the viability misconception surrounding higher blends of biodiesel such as B10 biodiesel in vehicles. This has lowered utilisation rates and consequently delayed its introduction to the domestic market. 

Currently, Malaysia exports 83% of its total biodiesel exports to the European Union (EU). However, recent legislation by the European Parliament approved the introduction of a certification scheme for palm oil entering the EU by 2020, resulting in unsustainable or non-certified palm oil products being banned from the EU markets. 

This controversial ruling has its sight set on the long-term future, as it hopes to prevent further large-scale deforestation of South East Asia’s matured rainforests. 

While the EU ruling is a potential hit to Malaysian exporters, it also provides an opportunity for the government to curb its fossil fuel consumption as it transitions to conform with the new quality and sustainability standards, by introducing previously exported palm oil-based biodiesels to the domestic market, and amending and implementing new policies. 

Across the globe, there are a number of countries who have successfully employed biofuel policies to encourage greater domestic consumption.

For example, in Germany, the government enforces an eco-tax on fossil fuels and a tax exemption on certain biofuel blends. As a result, the price of biodiesel is lower than fossil fuels, encouraging energy production using biodiesels.

A similar policy could easily be introduced into Malaysia if the subsidy on oil was reduced or removed. Currently, our domestic consumption of biodiesels stands at a mere 5% of yearly production, possibly due to the more favourable pricing of fossil fuels.  

Another lesson in successful biofuel policy practice may be drawn from the USA, which developed an insurance programme in which farmers may purchase crop insurance and revenue insurance to protect against revenue losses.

While Malaysia has its own crop insurance scheme, this scheme does not include crops which could be used for biofuels such as palm oil, sugar cane and rubber.

By extending this scheme, the uncertainty regarding the price of crude palm oil and other biofuel sources would be removed, encouraging new entrants into the market.

With Malaysia’s fossil fuel reserves quickly running out, it’s imperative the nation finds an alternative clean energy source.

As palm oil biodiesel emits 62% fewer greenhouse gases than fossil fuels, a larger and more efficient biofuel industry would enable Malaysia to take considerable steps towards meeting their commitments to the Paris Agreement. 

The growth of the industry would lessen the need to import coal and oil, reducing the stress on the countries limited foreign currency reserves, whilst providing the nation with greater energy security for life after fossil fuel. – July 24, 2018.

* Andrew Wells is an Intern at the Penang Institute in Kuala Lumpur. He holds a Bachelor’s degree in Earth Sciences from University College London and his interests peak in topics regarding the current environmental and climate crisis facing Malaysia and the rest of the world.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.