biodiesel overview on global production and policy

8/18/2019 Biodiesel overview on global production and policy

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Biodiesel Overview on

Global production and policy

November 2005

Nathan Hancock - Grain Development Officer

Trade and Development, Department of Agriculture Western Australia


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Table of Contents

Executive Summary .....................................................................................3

1. Introduction...............................................................................................4

2. Overview: Alternative Biofuels Market......................................................4

3. The Ideal Biodiesel Crop ..........................................................................5

4. Biodiesel Production by Country ..............................................................7

4.1 European Union..................................................................................7

4.2 Germany...........................................................................................10

4.3 France...............................................................................................11

4.4 Italy ...................................................................................................11

4.5 Austria...............................................................................................12

4.6 United Kingdom ................................................................................12

4.7 Netherlands ......................................................................................13

4.8 United States ....................................................................................14

4.9 Australia............................................................................................15

4.10 Asia.................................................................................................16

4.11 Brazil...............................................................................................17

5. Conclusion..............................................................................................18

6. Glossary .................................................................................................19

7. References.............................................................................................20


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Execut ive Summary

It is estimated world production of biodiesel reached 3 billion litres per year in

2005/06 and could be 3.7 billion litres per year in 2006/07. Biodiesel production has

been driven in the European Union (EU) and the United States (US), however otherregions are adopting biofuels at a rapid rate. The US and EU markets are supported

by government legislation, which has in affect created the market for biodiesel, as it

is still not as economical to produce as mineral diesel.

The Australian biodiesel market is driven by the private sector, as the Australian

Government, unlike its peers is not as supportive of the biodiesel industry with its

legislation. In fact, it could be argued that there is very little support of this fledgling

industry. There is no protection of biodiesel or its feedstock from cheap imports, and

the introduction of a full fuel tax excise in 2012 albeit in incremental stages, will have

an adverse affect on saleability of biodiesel.

The major biodiesel producing countries are driven by similar goals; reduced

pollution, increased jobs in the rural sectors and a reduced reliance on imported

mineral fuels. Each country has strong lobby groups which reflect each of these

causes.

Malaysia and Indonesia are gearing up to supply the global market with relatively

inexpensive crude palm oil as a feedstock, and more recently plans have begun to

build biodiesel plants on several sites in the Association of South East Asian Nations

(ASEAN) region.

This report finds that there is a case for further research into the development of

relatively inexpensive feedstocks in Australia. In particular mustard, as the oil is

suitable for use as biodiesel and there is evidence that markets for the mustard meal

residue could be developed. The key to a successful agricultural based biodiesel

industry in Australia is the development of a cost effective feedstock.


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1. Introduction

The purpose of this report is to:

• Outline commercial biodiesel production throughout the world;

• Discuss government policy affecting biodiesel throughout the world; and

• Draw conclusions on the potential for commercial production of biodiesel

from vegetable oil (canola, mustard) in Western Australia.

2. Overview: Alternative Biofuels Market

There is much debate in Australia about the benefits to be gained from introducing

biofuels into Australia’s transport fuel market. There is already pressure on the Australian oil industry to reduce the benzene content and the sulphur content in

petrol, which should encourage the search for a new source of octane. Bioethanol

can provide a win-win solution for petroleum producers. Reduction in sulphur content

in diesel has already altered that market and biodiesel has the potential to further

reduce greenhouse gas emissions. Added to that pressure has been the recent call

by the Prime Minister John Howard to request action plans from the major oil

companies that outline how they will achieve the 350 million litre target set by the

government.

Both bioethanol and biodiesel are more biodegradable than their fossil fuel

counterparts. They are compatible as corresponding blends of E10 (ethanol 10 per

cent, petrol 90 per cent) and B20 (biodiesel 20 per cent, diesel 80 per cent) which

have been accepted by virtually all modern engine manufacturers. By comparison

with LPG, which requires engine and vehicle modification plus a separate LPG

market distribution network, both bioethanol and biodiesel are “drop in” fuels – in that

they can be blended into the existing market infrastructure without modification to

either the vehicle or the distribution network (Hamilton 2004). It should be noted that

vehicles with carburettors can be adversely affected by ethanol blends as high as 10

percent and the government is running further tests to determine the safety to older

vehicles at an E5 blend.

In addition to being a renewable alternative fuel for diesel engines, biodiesel has

positive performance attributes such as increased cetane, high fuel lubricity, and high

oxygen content. At a two percent blend fuel lubricity is significantly increased which

makes it a preferred blending stock with ultra-low sulphur diesel (NBB 2005).


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World interest in biodiesel production is expanding rapidly. Large-volume production

is occurring mainly in Europe, with production now exceeding 1.6 billion litres per

year. However, projects and proposals are being announced in many countries with

a wide variety of oil sources as the feedstock input. It is estimated that the combined

world production has reached 3 billion litres per annum.

The percentage benefit of biodiesel in the reduction of Green House Gases (GHG)

varies from 26 per cent to 90 per cent depending on the author and study. However,

all agree that the reduction in GHG is substantially more for biodiesel than ethanol.

Biodiesel does have one flaw; it produces slightly higher amounts of nitrogen oxides

(N2O) in some engine types. N2O emissions contribute to localised formation of smog

and ozone from pure B100. However, biodiesel’s lack of sulphur allows the use of

N2O control technologies in new vehicle engines that cannot be used withconventional diesel engines. Additionally, an American company has developed an

additive to reduce N2O emissions in biodiesel blends (www.biodiesel.org). N2O is

predominantly produced when the engine is cold, as all the fuel is not burnt, allowing

gases to escape through the exhaust.

3. The Ideal Biodiesel Crop

Having identified potential supply problems with ‘traditional’ crops grown for

biodiesel, Tyson, Brown & Morra (2000) began to search ‘the perfect oilseed crop’,

and identified that the following objectives were important:

• To supply 6 -12 billion gallons (22-44 billion litres) of feedstock oil;

• Raw crushed oil should be produced for US10 cents per pound (AU7.5

cents per kg) or less;

• The oil must contain more than 90 per cent mono-saturates;

•

Oil must be inedible for humans and livestock and possess no high valuefor industrial use;

• Non oil portion of the crop must possess high market value;

• Non oil portion of the crop must face expanding market demand;

• Market demand for non oil portion of the crop must be large enough to

absorb thousands of tonnes of material;

• The crop must be suitable for large scale production, not limited to small

regions;


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• The crop should be low input and offer significant rotation or other

environmental benefits;

• The crop should not be in basic research stage of development, but

preferably in a early commercial production stage;

• Suitable production and crushing technology should be available;

• Crop yields per hectare should be comparable to commercial crops and

offer the potential to expand;

• The oil yield should be at least 25 per cent to 40 per cent of the crop

product; and

• The crop should be profitable to farmers and crushers.

US scientists have researched heavily the development of mustard as an alternative

oilseed crop, as it meets or has the potential through breeding to meet all of the

above criteria. In particular, the potential development of markets for the by-products

- mustard meal or cake is strong. The ideal scenario is to make the value/demand for

the by-product greater than the demand for biodiesel itself.

Mustard has agronomic potential as an alternative break crop to canola for Western

Australian growers, with field trials indicating good potential yields, requiring fewer

inputs such as fertiliser or swathing than canola. Plunket and Hancock (2005)

estimate that yields would need to reach a minimum of 1.3 tonnes per hectare for

mustard to be competitive as a feedstock for biodiesel production. It is suited to the

drier regions of the wheatbelt, and is an alternative crop for farming enterprises in the

eastern districts due to its disease break characteristics such as those found with

canola use.

The residue from crushing mustard, the meal (or mustard cake as it is known in

India) is a tradeable commodity particularly in that country, and is used mainly as an

animal feed source. Preliminary studies have shown benefits of mustard meal over

canola meal in pigs, with a 5% increase in weight gain (Zijlstra, Patience & Hickling).

The meal must be washed, to remove the glucosinolates and dried before it can be

sold as a feed, which adds cost. Some growers report that pigs fed untreated

mustard meal from weaning adapt to the taste. The size of the market for meal as a

feed source would need to be considered, and the flow on effect of displacing canola

meal should also be factored in.

Mustard has high levels of glucosinolates which release biocidal isothiocyanates

(ITC’s) when glucosinolates are hydrolysed. This means that when water is washed


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through the meal, it releases ITC’s which have fungicidal and insecticidal properties.

Glucosinolates by themselves are not biologically active but must be hydrolysed with

enzymes (in this case myrosinase) to produce allelochemicals (plant produced

chemicals toxic to other plants) which are capable of suppressing weed seeds and

pathogens (Brabban & Edwards 1995 in Al-Turki & Dick 2003).

Research in the US has found a process to maximise and regulate the release of

ITC’s, thus making the meal a registrable, reliable product, with huge possibilities for

use in organic farming for example (pers com Morra 2005) . This comes at a time

when horticultural farmers are looking for alternative soil fumigants to methyl bromide

and could also have a use in broad-acre cropping (Kirkegaard et al 2000). Industry

sources report that there are currently small tonnages of imported Indian mustard

meal being landed in Queensland at AU$300/t, for use as a biofumigant in high valuehorticultural enterprises and turf farms. Mustard meal has also been used as an

active ingredient in snail pellets and has found a niche as a pet friendly product in

this market.

Recent research indicates that glucosinolates from Brassica’s are anticariogenic,

anti-mutagenic and have been shown to repair damaged DNA. All isothiocyanates

have also shown a clear inhibition of human leukaemia cell proliferation (Thiyam

2003).

The Department of Agriculture Western Australia is interested in on farm uses for

meal and glycerine. Economic research into the benefits of returning these products

to the paddock is being conducted to determine the possible savings in fertiliser.

Glycerine is highly likely to be adaptable to use as a wetting agent, engine degreaser

and hand wash on farm.

4. Biodiesel Production by Country

4.1 European Union

In 2003, European Parliament and the Council of the European Union adopted EU

Directive 2003/30/EC "Promotion of the use of biofuels or other renewable fuels for

transport". This directive sets out national targets for biofuels of two per cent% and

five point seven five percent (5.75%) (in accordance with the Kyoto Treaty) of the

fuels placed in the market by 2005 and 2010 respectively. The ‘market’ is calculated

on the basis of the energy content of all petrol and diesel used for transport

purposes.


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Biodiesel production in the EU has been increasing at about 35 per cent per year

since 2002. Germany, France and Italy were the main contributors to the EU’s 2

million tonne biodiesel industry in 2004.

In 2004, rapeseed/canola-oil continued to represent the leading feedstock in Europe

used for biodiesel production. This position was further strengthened by the

expansion of the European Union to the EU-25 in May 2004. Germany was the

largest rapeseed growing nation in the EU for biodiesel production in 2004.

Mielke (2005) reports that the EU 25 has increased demand for rapeseed oil to the

point that in 2006 it is likely to be a net importer of rapeseed. The 2005/06 production

is estimated at 15 million tonnes and consumption is predicted to exceed supply. This

is not the major factor affecting biodiesel production however, as Mielke (2005)

highlights the lack of crush capacity is the limiting factor, with crush capacity not likely

to increase until late 2006.

The European standards where built on canola as the primary feedstock, however a

clear trend to a larger variety and to intelligent blends of different feedstock sources

has been observed, and sourcing different feedstocks have begun from non-EU-25

countries.

Figure 1: Major EU Biodiesel Producers versus total EU Production

Source EBB 2005. Note: 1 tonne biodiesel equals 1,143 litres.


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EU 2004 Production by Country

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Germany France Italy Austria

Spain Denmark United Kingdom Sweden

Czech Republic Slovak ia Lithuania


EU 2004 Production Capacity

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A major influence on the amount of land used for biodiesel rapeseed was the

introduction of ‘set aside’. Set aside was introduced as part of a program for tackling

the over production of cereals within the EU, after a review of the Common

Agricultural Policy (CAP) in 1992. As a result, subsidies paid to farmers for cereals

were reduced by thirty five per cent over three years. To compensate farmers for

their loss of income, the Arable Area Payments Scheme (AAPS) was introduced.

Under this scheme, producers must 'set aside' part of their arable land, taking it out

of production for food crops. This has created an increase in land used to grow non-

food crops, predominantly rape/canola for the biodiesel market. Producers still get

the subsidy, plus the value of the crop. Set aside area is set at 10 per cent total


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arable land (there are allowances for smaller land owners). This legislation applies to

all EU countries.

4.2 Germany

Germany is aiming at a target of at least two per cent for biofuels in total fuel

consumption, and by 2003 they had reached a one point four per cent (1.4%) share

of biofuels in total fuel consumption. The Union for the Promotion of Oil and Protein

Plants (UFOP) predict production to peak at 1.7 billion litres by 2005/06 in Germany

with a further increase of 572 million litres by 2006/07 (Bockey & Schenk 2004).

There are 10 biodiesel plants in full production and plant capacity ranges from 14

million litres to 540 million litres, with four plants having a capacity over 320 million

litres. The question in Germany is how much more rapeseed can be grown; anestimated 840,000 hectares was planted in 2004 (Mielke 2005).

The German government amended the Mineral Oil Duty Act on 1 January 2004 to

allow for full exemption from duty of biofuels. This act covers both pure biofuel and

the biofuel portion of any biofuel blend. Since 2004, rapeseed methyl ester has been

blended with fossil diesel. However, biodiesel continues to be chiefly used as a pure

fuel in Germany (EBB 2004). Biodiesel was a true no name product in Germany a

decade ago, but it is now a marketed specialty brand, promoted heavily by UFOP

(Bockey 2004).

As a result of the amended agricultural diesel ruling, UFOP launched an information

campaign in January 2004 about the use of biodiesel in agriculture. The market

potential for B100 in agriculture is estimated at around 343 million litres – excluding

forestry. In the last 10 years, there has been an almost fifty-fold increase in biodiesel

sales in Germany. In 2004, an estimated 476 million litres were sold at German fuel

stations; 32 per cent more than in the previous year. This quantity was enough to

satisfy the annual requirement of approximately 300,000 cars. Biodiesel is availableat 1,900 filling stations across Germany, which means that it in some regions it is no

longer inconvenient for consumers to choose biodiesel as their primary fuel (Bockey

& Schenk 2004).

However, not all biodiesel plants in Germany have been a success story. In spring

2004, a biodiesel plant at Brandenburg went bankrupt, and the state government

removed biodiesel from the list of investments that it would back. On top of this, as

part of the Mineral Oil Act, the government is due to review the industry and it is


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widely tipped that a 5c and 10c tax will be applied to B100 and B5 respectively to

remove any unfair advantage (Bockey & Schenk 2004).

The biodiesel industry in Germany is largely driven by UFOP. UFOP is both a

political lobby group and an agricultural research group. It conducts variety trials,

develops new biodiesel markets and is the public face of the biodiesel industry in

Germany. The activities of UFOP are funded mainly by contributions of the breeders

of rapeseed, sunflower and protein plants, and by membership subscriptions. The

most important element of UFOP funding is a levy paid by producers which provides

operational funds (http://www.ufop.de)

4.3 France

The French government encourages biodiesel use and research, and gives arelatively high priority to the development of biofuels; mainly to support the

agricultural sector, and for research purposes. There are four plants producing

biodiesel in France. There are restrictions on the use, with a maximum B5 blend for

private passenger vehicles and up to B30 for use in fleet vehicles.

The French government has a financial scheme, operated at the national level, to

develop investments in Biofuel production. In France, biofuels receive exemption

from excise tax on petroleum products at the rate of EUR 0.35/l for biodiesel which

was introduced in 2000. French fiscal aid for biodiesel was approximately EUR 120

million per year, supporting 385 million litres of oil equivalent. Production in 2004 is

estimated at 450 million litres. The excise tax exemption allows biofuels to compete

cost effectively with fossil fuels (European Renewable Energy Council 2004).

4.4 Italy

Recent Italian legislation cut the amount of biodiesel production eligible for tax relief

from 343 million litres to 229 million litres per year, beginning 2005. The reduction isdue to budget constraints and the desire to favor alternative energy sources coming

from domestically produced agricultural raw materials. The same legislation allocated

219 million Euros to fund the tax relief for the production of one million ectoliters per

year of bioethanol. While biodiesel is obtained mainly from imported oils (rapeseed

and soybean oil), bioethanol will be obtained mainly from surplus distilled wines, as

well as sugar beets and corn produced in Italy (Perini 2005).

Given the extremely high consumption tax on gasoline and any petroleum products in

Italy, the only way to make biodiesel competitive with fossil products is for the


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establishment of a tax relief policy, supported by environmental considerations. As a

result of the subsidy, production (and consumption) of biodiesel in Italy has grown as

follows:

Table 1: Biodiesel product ion in Italy

1999/00 2000/01 2001/02 2002/03 2003/04

Million Litres 80 137 199 309 355

Source: USDA Attaché Report 2004

The link between the two actions (reduction of the tax relief for biodiesel and parallel

establishment of a tax relief fund for bioethanol production) seems to be obvious,

with the Italian government attempting to benefit Italian agriculture rather than import

feedstock from other EU countries. However, the overall level of funds allocated for

these projects is surprisingly meager, especially when compared to other European

countries. Italy produces a very small amount of agricultural surpluses, at least in the

grain and sugar beet sectors, and there are no large stocks weighing on the market

and looking for new outlets, as in other countries. However, smog and air quality

concerns have grown dramatically in recent years and the use of alternative energy

sources seems to have been under valued by Italian authorities (Perini 2005).

4.5 Austria

Austria was the first country to have commercial production of biodiesel, beginning in

1988 and since then, through the Austrian Biofuels Institute, Austria has played a

leading role in establishing the European market for biodiesel (Hamilton 2004).

There are currently nine large-scale and three pilot biodiesel plants in operation in

Austria. The total capacity amounts to more than 115 million litres per year. In

addition, the biodiesel plant in Linz/Aschbach has a capacity of

11 million litres per year but is not currently in operation. The Austrian government

predicts it will need to produce 253 million litres of biodiesel in 2005 to meet its two

per cent biofuels commitment to the EU25.

4.6 United Kingdom

The United Kingdom (UK) has been slow in its adoption of biofuels, but has recently

taken a number of steps to promote the uptake of biofuels. To date, the main support

has been through fuel duty incentives, although the UK Government is currently

consulting on other measures to support the longer-term growth of the UK biofuels

industry. A twenty pence per litre duty incentive on biodiesel has been in place since


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July 2002, and a similar duty incentive for bioethanol will be introduced from 1

January 2005. This policy has seen sales of biodiesel increase rapidly since the

introduction of the incentive, and sales have increased from 150,000 litres a month in

August 2002 to around 2 million litres a month in 2004.

To a large extent, production is from waste vegetable oil (WVO), since this is

currently the cheapest feedstock. Biodiesel is currently available at over 100 petrol

stations in the UK, including a number of major supermarket sites. The UK has

recently begun construction of a large biodiesel production plant (286 million litres

per year capacity) in the Northeast of England close to one of the most suitable areas

for rapeseed growing.

The UK fuel industry is being encouraged to take a collaborative approach to

biodiesel production. Industry is focusing on inefficiencies in terms of manufacturing,

storage and distribution, and reducing the cost disadvantage of biofuel due to double

handling in the blending process. At least one major oil company has been

experimenting with using bio oils and the waxy materials produced from biomass,

directly in the conventional refinery; in effect supplementing the crude oil. This is

advantageous from a fuel quality perspective but is challenging for the current fiscal

regime, which focuses on the final product. The industry's suggestion is that the duty

concession is linked to the bio input, through a 'bio credit' concept i.e. a tax credit

allowed on approved bio input material, which is redeemed against the full duty which

applies to the total final fuel production. One of the advantages of the input focus is

that it is easier to handle a range of different input materials, tailoring the level of

credit and incentive to the degree of environmental gain (EBB 2004).

4.7 Netherlands

The Netherlands has begun to import Malaysian palm oil for electricity generation,

with reports of a 200,000 tonne shipment arriving recently. The Dutch are also

researching the use of palm oil in biodiesel. Anticipating the limited availability of

domestically produced oils, the Dutch Government is expected to lift the excise tax

on biodiesel made from all vegetable oils and animal fats in September 2005. This is

in contrast to policies imposed in Germany and France, which in practice restrict

excise tax cuts to only rapeseed oil. The proposed Dutch policy will open the way to

use any vegetable or animal fat for the production of biodiesel. Palm oil however,

does not meet the EN14214 standard and the German requirement of an iodine

number between 100 and 120 mg/100g. Palm oil can be blended to a lower meltingpoint and mixed with fossil diesel to overcome these problems.


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The Dutch company Unimills, a subsidiary of the Malaysian company Golden Hope

Plantations, plans to build a refinery plant for producing palm oil fractions as a

component for biodiesel. For this project, Unimills cooperates with the Dutch

company BIOX. At the moment, both companies are conducting a feasibility study

for the biodiesel project, which is expected to be ready in August 2005. The

feasibility study reportedly examines the production of palm oil fractions with low

melting points. A part of this research has reportedly already been conducted in

Malaysia. These fractions could be mixed with fossil diesel at an inclusion rate of

three to four per cent in petro-chemical refineries located in the Rotterdam port. The

feasibility study possibly includes an analysis of the export potential of this product

depending on the biodiesel policies in the neighboring countries.

4.8 United States

Dedicated production capacity of US plants is estimated to be 415 million litres per

annum. In addition to dedicated production capacity, there is available production

capacity for biodiesel within the oleo chemical industry. This capacity is mostly

modular, and can be doubled or tripled in a short time frame (less than 12 months). It

is estimated that an additional 415 million litres per annum excess capacity exists

within the oleo chemical industry and increasing amounts of biodiesel are being

produced through this excess capacity (www.biodiesel.org).

There are currently 30 companies involved in the production and marketing of

biodiesel in the US. A further 25 companies (approximately) have reported their plans

to construct dedicated biodiesel plants in the near future. These intentions are

dependent upon regional and national demand prospects. Proposed plants are those

companies that are in permitting, equity drive or construction phase of the project, but

are not yet actively producing biodiesel. Their combined capacity, if realized, could

result in another 900 million litres per annum of biodiesel production. Capacity is

expected to increase by at least 380 million litres per annum between May 2005 and

May 2006 (www.biodiesel.org).

There are many lobby groups involved in the American biodiesel industry and these

have helped it to overcome legislative hurdles. All biodiesel, and biodiesel blends are

subject to a credit scheme. On top of this, many state governments also provide

incentives for production and consumption of biodiesel. All the key drivers for the

development of a biodiesel industry can be seen in the American market, and each is

supported by a plethora of lobby groups. The environment, jobs in rural areas,


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reduced use of imported crude oil, children’s health to name a few, and each have

there own theme on a common agenda; produce more biodiesel.

The US Government Energy Bills require a renewable fuels standard (RFS) of 18

billion litres by 2012. Private industry experts believe that the industry would expand

more rapidly if a proposed energy bill was passed. This would be helpful to American

soybean farmers, because soybean oil is the principal oil being utilized for biodiesel

in the US. A senate version of the energy bill would offer a tax credit of 50 cents per

gallon of biodiesel to be blended with other fuel. One source in the US, estimates the

cost of production of biodiesel at $1.50 per gallon. Added to this, is the cost of

distribution and taxes which then pushes the retail price too high and is not

competitive with mineral diesel.

However, the proposed tax credit would offset the cost differential for certain ranges

of crude oil and vegetable oil prices. Environmental regulations have brought about

the impending removal of most of the sulphur from U.S. mineral diesel, which will

reduce the lubricity of diesel fuel. This will require good lubricating characteristics and

biodiesel is an excellent source. Concentrations as low as 0.5 per cent will improve

lubricity of mineral fuels and open another market for biodiesel (www.fsa.usda.gov).

The US senate has proposed an income tax credit scheme of US$1.00 per gallon

(3.78 litres) and US$0.50 per gallon (nominal dollars) for producers of biodiesel from

virgin oil and recycled oil respectively. Added to this, all government fleets using

medium to heavy vehicles are now subject to the State & Alternative Fuel Provider

Program, which decrees that such fleets must use a minimum 50 per cent alternative

fuels each year, providing a mandated market for biodiesel.

President Bush recently signed a US$14 billion bill which extends the tax

concessions for biodiesel. Most of the money is destined for the ethanol industry.

Recent reports are that in order to fulfil the 50 per cent alternative fuels goal, the

Department of Energy has begun building biodiesel fuel stations for the exclusive use

of government vehicles.

4.9 Australia

Australia’s contribution to biofuel production has been relatively small. By mid 2002,

there were three commercial producers with a combined output of around 23 million

litres per annum. ABARE (2004) predict the production of bioethanol and biodiesel

for transport fuel use in Australia is currently around 60 million litres and is projectedto increase to 115 million litres per annum by 2010. However, CIBC World Markets


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(2005) claims production of bioethanol alone has reached 135 million litres; 55 million

litres of which is used in transport. Production of biodiesel by comparison is believed

to be around 10 million litres.

In September 2003, locally manufactured biodiesel for use in diesel engines became

subject to excise duty at the same rate as low sulphur diesel. This rate is currently

38.143 cents per litre. Biodiesel imported for use in diesel engines will also attract

customs duty at the same rate. Under the Cleaner Fuels Grant Scheme from

September 2003 to 30 June 2011, grants will be provided for the production and

importation of eligible biodiesel. These grants will offset the excise and customs duty

payable on biodiesel, providing a net effective excise rate of zero. The grant will be

progressively phased out from 1 July 2011 to 30 June 2015. Whilst offering a tax

incentive to the industry, this legislation does nothing to protect a biodiesel oilseedmarket; rather it encourages the importation of cheaper feedstocks.

Whilst export markets are a possibility for Western Australian produced biodiesel due

to our small population, another incentive to export could be carbon trading. However

at this stage, there is limited opportunity in this market as Australia is a not a

signatory to the Kyoto agreement and carbon trading is almost impossible due to the

legal framework involved.

Prime Minister Howard has reconfirmed his governments commitment to earlier

statements of achieving 350 million litres of biofuels by 2010, however this is not

legislation and as such no policy has been put into place to achieve this out come.

4.10 Asia

Asia is the sleeping giant in the biodiesel export world. Malaysia (45 per cent) and

Indonesia (39 per cent) are the biggest producers of palm oil, which is the cheapest

vegetable oil available on the world market. Asian palm oil could supply up to 20 per

cent of the European Union’s biodiesel needs by 2010 according to Sellen (2005).The EU currently imports about 3.5 million tonnes of refined and crude palm oil every

year, predominantly from those two countries. A 20 per cent share of biodiesel would

mean between some 300,000 and 350,000 tonnes of additional palm oil imports.

Reports have emerged of the first biodiesel plant to be built in Asia. By world

standards it is relatively small at 68 million litres per year. The plant will be built in

Quezon City in the Philippines with a second plant being planned for construction in

the next 2-3 years. The Philippines plant is said to be using coco feedstock, taken to

mean coconut. Asian authorities have moved to dispel anti biodiesel propaganda that


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the biofuel is bad for vehicles, referring to studies by Shell Australia and BP New

Zealand that the fuel is safe.

The Malaysian Palm Oil Board (MPOB) along with PETRONIS (the regions largest oil

company, wholly owned by the Malaysian government) has developed a process to

produce low pour point palm biodiesel (-21°C to 0°C) which is suitable for temperate

countries (www.mpob.gov.my). It is interesting to note that the site claims that a 10%

reduction in palm oil stocks would stabilise the global palm oil price.

In March 2003, an American biodiesel company exported 18,000 litres of biodiesel to

an unnamed Asian country. Considering the distance the shipment would have

travelled, facilities such as the proposed 100,000 litre per year plant in Darwin should

be able to take up this opportunity.

4.11 Brazil

As the world’s leader in alcohol/ethanol (from sugar) production and consumption,

Brazil has now set its sites on biodiesel. 0n October 30, 2002, Brazil launched the

pro-biodiesel program. The program aims to develop technology for the production,

industrialisation, and use of biodiesel, and its use in mixtures with diesel using pure

and residual vegetable oils. Earlier this year Brazils government legislated that all

diesel sold in that country must contain 5 percent biodiesel.

Brazil aims to reduce its dependence on diesel imports, as it has successfully done

with petroleum through bioethanol. Whilst consumption of petroleum has increased,

imports have declined due to domestic production of petroleum and the use of

bioethanol. Brazil’s soil and climate diversity presents various crop possibilities for

biodiesel, such as soybean, palm, coconut, castor seed, cottonseed, sunflower, etc.

As soybeans account for the vast majority of Brazilian oilseed production, it presents

the most obvious option for large scale production, processing and research due to

the large capital and intellectual investment in this commodity. Variability ofagricultural commodity prices has been more dramatic than that of oil, thereby

reducing its attractiveness as an economic alternative. However, many believe that it

is only a matter of time before biodiesel becomes permanently profitable, as natural

diesel sources dry up. The President Lula administration views biodiesel as a

program for social inclusion and job creation, generating up to 200,000 jobs. North-

eastern Brazil is encouraging the production of castor seed by small scale producers

for biodiesel production. Other commodities are being explored in different regions,

such as soybean, sunflower and used cooking oils. Brazil’s Pro-biodiesel program is

still in its infancy, but offers great potential.


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5. Conclusion

In short, as an alternative fuel, biodiesel has many selling points:

• increased lubricity with quantities as little as 0.5% blend;

• a reduction in greenhouse gas emissions that far out strip those of bioethanol

across a range of tests; and

• no modification to vehicle or infrastructure are required with the inclusion of

biodiesel in fuels.

Opportunities for Western Australian oilseed farmers appear to lie with the

development of mustard as a higher yielding oilseed and the mustard meal as a

biofumigant. More research is needed into the development of a feedstock that has

by-product salability.

Countries which have strong biodiesel industries have two things in common; a

government which wants to support it and lobby groups which have their attention.

The current Australian governments approach to biofuels will not support a

developing oilseed/biodiesel industry, and the industry has as yet had nothing with

which to leverage support.


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6. Glossary

B100 - 100% biodiesel fuel, where B stands for biodiesel and 100 the % of biodieselin the fuel. Biodiesel and biodiesel blends are sold in many countries with the prefix

B100 or B20, to make customers aware of the blend. Bioethanol is sold in a similarmanner, i.e. E10 currently sold in Australia.

Biodiesel - fuel comprised of mono-alkyl esters of long chain fatty acids derived fromvegetable oils or animal fats, designated B100, and meeting the requirements ofrelevant government authorities.

Biofuel - A fuel, liquid or gaseous, produced from dry organic matter or combustibleoils of plants or animals, intended for the operation of vehicle combustion engines.Biofuel is any fuel that derives from biomass - recently living organisms or theirmetabolic by products, such as manure from cows. It is a renewable energy, unlikenatural resources such as petroleum, coal and nuclear fuels.

Biomass - biodegradable fractions of products, waste or residues from agricultureand forestry (including vegetative and animal substances) and related industries, aswell as the biodegradable fraction of industrial waste.

Bioethanol - an ethanol produced from biomass and/or biodegradable fractions ofwaste.

Fatty acid methyl ester - (FAME) biodiesel, a methyl ester produced fromvegetable or animal oil or fat.

Biogas - a gas produced from biomass and/or biodegradable fractions of waste by

means of pyrolysis or fermentation.

Bio-methanol - a methanol produced from biomass and/or biodegradable fractions ofwaste.

Lubricity - Smoothness; freedom from friction; also, property, which diminishesfriction; as, the lubricity of oil.

Ml/a - Million litres per annum.

Pure vegetable oil - oil produced from oil plants through pressing, extraction orcomparable procedures, crude or refined but chemically unmodified.

Renewable fuels - renewable fuels other than biofuels, which originate fromrenewable, non-fossil energy sources such as wind, solar, geothermal, wave, tidal orhydropower and which are intended for use in vehicle combustion engines.

RME - Rape methyl ester

SME - Soy methyl ester

Synthetic biofuels - are synthetic hydrocarbons or mixtures of synthetichydrocarbons, which have been produced from biomass;

Transesterification - A chemical process which reacts an alcohol with the triglyceridescontained in vegetable oils and animal fats to produce biodiesel and glycerine.


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7. References

Al-Turki A.I. and Dick W. A. (2003), “Myrosinase Activity in Soil”, Soil Science Societyof America Journal 67:pp139-145.

Bassanese, D. (2005), “Mixed signals from rising oil’, The Australian FinancialRevue, 27 June 2005, pp 1 and 23.

Beer, T., Grant, T., Brown, R. , Edwards, J., Nelson, P., Watson, H. and Williams, D.(2000) "Life-cycle Emissions Analysis of Alternative Fuels for Heavy Vehicles",CSIRO Atmospheric Research, Aspendale, Vic.

Bockey D. and Schenk W. (2004), “Status Report Biodiesel Biodiesel Production andMarketing in Germany 2005”, Union For the production of Oil and Protein Plants,Germany.

Hamilton, C (2004), “Biofuels made easy”, presentation to Australian Institute ofEnergy.

Kirkegaard J.A., Wong P.T.W., Desmarchelier J.M. and Sarwar M. (2000),“Suppression of soil-borne cereal pathogens and inhibition of wheat germination bymustard seed meal “, CSIRO, Canberra.

Mielke,T. Editor (2005), ‘Oilseeds’ - Oil World Monthly, Vol 48, No 26.

Perini, S., (2005) “Biodiesel Fuel/Bioethanol Production Prospects in Italy – Update”GAIN Report Number 5010

Sheehan, J., Dunahay, T., Benemann, J.R., and Roessler, P. 1998. A Look Back atthe U.S. Department of Energy's Aquatic Species Program - Biodiesel from Algae,National Renewable Energy Laboratory, Colorado.

Sellen., T. (2005).”Dutch palm oil imports to surge”, Dow Jones News Wires, June2005,

Short, C. and Dickson, A. (2004), ‘Revised assessment of biofuels industry viability’. ABARE report for the Department of Industry, Tourism and Resources.

Thiyam, U. (2003), ‘Upcoming challenges of Indian mustard and rapeseedmeal - current global perspectives’. Indian Food Industry, Vol 22, No 2.

Tyson K.S., Brown J. and Moora, M., (2000), “Industrial mustard crops for biodieseland bio-pesticides”, National Renewable Energy Laboratory, Colorado, USA.

Zijlstra R.T., Hickling D.R., and Patience J.F. (2005), “Comparison of voluntary feedintake and growth performance between grower pigs fed diets containing eithermustard meal or canola meal” Prairie Swine Centre Inc., Saskatoon, Canada.

Websites used in this documentWebsite of the Energy Information Administration, Department of the Environment,US Government. http://www.eia.doe.gov/emeu/steo/pub/contents.html

Website of the National Biodiesel Board, US www.biodiesel.org


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Website of the Union for the Promotion of Oil and Protein Plants, Germanywww.ufop.de

Website of the European Renewable Energy Council 2004 www.erec-renewables.org CIBC World Markets (2005)

Website of the Malaysian Palm Oil Board www.mpob.gov.my.

Website of the WTRG Economics organisation http://www.wtrg.com/prices.htm

Website of BP Australia www.bp.com.au

biodiesel overview on global production and policy

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