PRESENTATION OUTLINE

1. Fourth Biomass-Asia Workshop POLICY AND LEGISLATION ON BIOFUEL UTILISATION by:Datu Dr. Michael Dosim LunjewSecretary General Ministry of Plantation Industries and CommoditiesMalaysia20 November 2007, Grand Blue Wave Hotel, Shah Alam

2. PRESENTATION OUTLINE • BIOFUEL DEVELOPMENT IN MALAYSIA • POLICY AND LEGISLATION ON BIOFUEL • CHALLENGES • CONCLUSION

3. BIOFUEL DEVELOPMENT IN MALAYSIA • Malaysia being a major palm oil producer has undertaken R&D on palm-based biofuel • In 1992, palm biodiesel production technology was sucessfully developed including winter-grade biodiesel • Currently, overseas trials on methyl ester include running diesel-powered commercial trains in Germany withPE Arriva

4. BIOFUEL DEVELOPMENT IN MALAYSIA (cont) • Palm biodiesel successfully evaluated as diesel substitute in the 1990s with extensive field trials • No engine modification is required • Results in terms of engine performance, fuel consumption, exhaust emission, repair and maintenance were promising • Palm biodiesel meet the international standards (EN 14214 & ASTM D6751)

5. BIOFUEL DEVELOPMENT IN MALAYSIA (cont) • Domestic production: • 91 licenses issued • 4 companies in operation with annual production of 300,000 tonnes • 7 companies undergoing production trials with annual production of 621,000 tonnes

6. BIOFUEL DEVELOPMENT IN MALAYSIA (cont) • Biofuel currently exported to United States, European Union, Australia and Japan • Aug – Dec 2006, 47,986 tonnes exported • Jan – Sept 2006, 73,146 tonnes exported

7. POLICY AND LEGISLATION ON BIOFUEL • The Malaysia National Biofuel Policy launched on 21 March 2006 envisions: - use of environmentally friendly, sustainable and viable sources of energy to reduce the dependency on depleting fossil fuels; and - enhanced prosperity and well-being of all the stakeholders in the agriculture and commodity based industries through stable and remunerative prices.

8. POLICY AND LEGISLATION ON BIOFUEL(cont) • The policy is primarily aimed at reducing the country’s dependence on depleting fossil fuels, promoting the demand for palm oil as well as stabilising its prices at a remunerative level. • The Policy is underpinned by five strategic thrusts: - Thrust 1: Biofuel for Transport - Thrust 2: Biofuel for Industry - Thrust 3: Biofuel Technologies - Thrust 4: Biofuel for Export - Thrust 5: Biofuel for Cleaner Environment

9. POLICY AND LEGISLATION ON BIOFUEL(cont) The implementation of the policy is divided into: • Short Term which includes - The Malaysian Standard specifications for B5 diesel will be established - Selected Government departments with their fleets of diesel vehicles will participate in trials for using B5 diesel

10. POLICY AND LEGISLATION ON BIOFUEL(cont) • Medium Term which includes - The Malaysian Standard specifications for palm oil based methyl ester biofuel for domestic use and export will be established. - Efforts will be made to get engine manufacturers to extend their warranties to the use of B5 diesel. Extensive B5 diesel testing shall be carried out to facilitate the granting of such engine warranties. - Legislation to mandate the use of B5 diesel will be passed and enforced.

11. POLICY AND LEGISLATION ON BIOFUEL(cont) • Long Term which includes - The proportion of processed palm oil in the diesel blend will be gradually increased - Greater uptake of biofuels technology by Malaysian companies and foreign companies abroad

12. POLICY AND LEGISLATION ON BIOFUEL(cont) • Biodiesel is included in the list of products / activities that are encouraged under the Promotion of Investments Act 1986. Biodiesel projects are therefore eligible to be considered for Pioneer Status or Investment Tax Allowance

13. POLICY AND LEGISLATION ON BIOFUEL(cont) • The Malaysian Biofuel Industry Act 2006 has been approved for implementation • The Act provide for activities relating to the mandatory use of biofuel and licensing of activities relating to production, storage and trade

14. CHALLENGES • Feedstock price - Biodiesel is competitive if CPO price is below RM1,422/tonneagainst crude petroleum price of USD80/barrel - To promote biodiesel, some form of subsidy needs to be provided • Issue of food vs fuel - Concerns that palm oil could be channelled for energy purposes, thus depriving its usage for food - Palm oil has other uses namely industrial and pharmaceuticals - Need to ensure enough feedstock for purposes

15. CHALLENGES (Cont) • Sustainability issues - Currently Roundtable on Sustainable Palm Oil (RSPO) focuses on food - EU emphasises on sustainable production of feedstock for biofuel: sustainable sources including addressing carbon emission by oil palm plantations. d. Acceptance by engine manufacturers - Only methyl ester is accepted - Blend of palm olein with diesel is not accepted - Palm olein is 40% cheaper than methyl ester

16. CHALLENGES (Cont) • Limited land available - Focus is on increasing productivity f. Second generation biofuels - New technologies must be scientifically proven and commercially viable - need for further R&D - no restriction on the type of raw materials used • New non-tariff barriers - Importing countries establishing barriers in the form of standards for biofuels including factoring in sustainable sources - Excluding palm based biofuels from domestic tax credits

17. CONCLUSION • Biofuel Programme is important to support the palm oil industry and contribute towards reduction of green house gases. • The Government will continue to promote development of new technologies to harness biofuels from existing and new feedstocks. • Malaysia will continue to expolre new sources of biofuel including the production of bioethanol from new sources: jathropa, nipah, sago and oil palm biomass.

18. THANK YOU