Experts warn that Malaysia’s palm oil surplus is insufficient for large-scale B100 biodiesel, risking price hikes and supply disruptions for food and exports.
PETALING JAYA: Although Malaysia is a major producer of palm oil, it lacks sufficient surplus to sustain large-scale implementation of B100 biodiesel without disrupting existing demand or driving up prices, experts say, highlighting challenges for the government’s renewable energy push.
B100, a 100% palm oil-based biodiesel, has been touted by the Federal Land Development Authority (Felda) as a potential alternative energy source capable of reducing diesel reliance, stabilising domestic fuel prices as well as strengthening national energy security.
However, supply constraints and sustainability considerations could limit its role to a complementary energy source rather than a full-scale replacement for conventional diesel.
Universiti Putra Malaysia agricultural economist Prof Datuk Dr Mad Nasir Shamsudin said while Malaysia has substantial production, it lacks sufficient surplus to sustain large-scale B100 implementation without disrupting existing demand or increasing prices.
“In the short term, supply constraints remain a key concern since most of the palm oil output is committed to exports, food consumption and downstream industries,” he said.
Diverting crude palm oil (CPO) to fuel production could also have broader economic consequences, he added.
“As more CPO is diverted to biodiesel production, the supply available for food and industrial uses declines, leading to tighter market conditions.
“This would exert upward pressure on CPO prices, which could translate into higher food costs, particularly in net food-importing countries such as Malaysia.”
At an estimated factory price of RM4.50 per litre, B100 may be competitive with market-priced diesel but not with subsidised fuel.
“Prices are determined by global market fundamentals and fluctuate with energy and commodity trends.
“When CPO prices rise, biodiesel production costs also increase, necessitating fiscal incentives or policy support to sustain B100 adoption,” he explained.
He added that promoting B100 would require a coordinated policy framework, including subsidy reforms, mandatory usage mandates, as well as investment in blending and distribution infrastructure.
“Targeted fiscal incentives, such as tax exemptions, financing support and sustained research and development investment, are essential to encourage industry participation and ensure long-term viability.”
Mad Nasir described B100 primarily as a strategic buffer during energy crises, rather than a long-term substitute for conventional fuels.
Sustainability concerns add another layer of complexity.
Universiti Teknologi Mara Sarawak agrotechnology expert Assoc Prof Dr Abdul Rahman Saili said palm oil-based B100 could offer significant carbon savings, but only under strict production conditions.
“Biofuels may reduce emissions by between 50% and 90% if produced without deforestation.
“However, indirect land-use change could result in emissions up to three times that of fossil diesel.”
Scaling B100 production may increase land-use pressures, but Malaysia’s domestic constraints may moderate the impact, he said.
“Growth would depend on replanting and yield intensification rather than new land clearing, limiting direct deforestation.
“Indirect effects may occur as increased biofuel demand influences global edible oil markets and shifts land away from other crops, such as rubber or food staples.”
He emphasised the importance of aligning biofuel expansion with Malaysia’s broader environmental and social commitments.
“Effective governance, high-yield practices and robust sustainability certification are important to help maintain food security, environmental protection and international environmental, social and governance credibility,” he said.
Safeguards such as land-use limits, avoiding peatland conversion and sustainability certification are essential, he added.
Abdul Rahman also said international markets may remain cautious.
“European Union markets are likely to be cautious due to sustainability and indirect land-use concerns.
“Export opportunities will depend on verified certification, transparent supply chains and demonstrable low environmental impact, while competition from alternative biofuel feedstocks may influence market dynamics.”
On Tuesday, Felda chairman Datuk Seri Ahmad Shabery Cheek said B100 could possibly emerge as a more competitive and sustainable alternative energy source, particularly given the uncertainties arising from the Middle East conflict.
He added that the rollout, still in the policy stage, would start within the Felda ecosystem, stressing that a government policy is needed first as current CPO supplies may not be sufficient for immediate implementation.