Institutional and Legal Framework of Biofuels: [Essay Example], 680 words GradesFixer
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Institutional and Legal Framework of Biofuels

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The limited source and use of fossil fuels has encourage countries to develop new method and technique to produce a much clean and renewable energy in order to fulfil the need of energy. Due to this condition it is best to reduce the consumption of fossil fuels and Malaysia has taken an important step to develop biofuels mainly from the palm oil by considering the availability and the renewability of this type of fuels. The development of the oil palm sector starts when the oil palm tree introduced in Malaysia in 1875. The palm sector has developed further until what has been witness in current days as a large economic contributor. As the world’s second largest palm oil producer, Malaysia is now looked upon as the pioneer palm biofuel producer.

Malaysia’s National Biofuel Policy

The policy is constructed based on research by the Malaysian Palm Oil Board and after consultations with the stakeholder. The policy is under the development and implementation by The Ministry of Plantation Industries and Commodities (MPIC). The policy has been introduced on 10 August 2005. The biofuel policy is underpinned under 5 strategic thrusts with the implementation planning of short, medium and long-term periods.

The policy implementation strategy is being categorized into short, medium and long terms. The short-term strategies are mainly focusing for the domestic use while the medium-term implementation strategies focus on the establishment of Malaysian Standard specifications by SIRIM Bhd for palm oil biofuel, basically involve methyl ester biofuel for domestic and export. The quality standard is important to regulate the quality of biodiesel and made engine manufacturer to provide assurance and extend their warranty. In the long-term implementation, the proportion of processed palm oil in the diesel blend will be gradually increased and also the uptake of biofuel technologies by Malaysia and abroad companies.

The policy focuses on the blending of processed palm oil with petroleum diesel and the conversion of palm oil into biodiesel for export. The policy has yet to meet its medium and long-term goals, mainly due to the increase in CPO price and the drop in oil prices. The National Biofuel Policy envisions the use of environmentally friendly, sustainable and viable sources of energy to reduce the dependency on depleting fossil fuels. Besides, it is also expected to enhance the prosperity and well-being of all stakeholders in the agriculture and commodity-based industries through stable and remunerative prices (Abdullah et al.,2009).

The successful implementation of the policy is expected to bring the following main benefits such as stabilise the CPO price, saving in foreign exchange, mitigate climate change by reducing greenhouse gas emissions, create new demand for palm oil, mutually beneficial effects on petroleum and palm oil industries, achieving socio economic safety net and lastly, efficient utilisation of raw materials.

The Malaysian Biofuel Industry act

The Malaysian Biofuel Industry Act 2007 is introduced to further regulate and facilitate the development of biofuel sector. The act is implemented on 1 November 2008 and provides for mandatory blending of biofuel with petroleum diesel and licencing of downstream activities, such as production, blending, storage, transportation and export. The task of issuing biofuel manufacturing licences was taken over by the MPIC from the Ministry of International Trade and Industry. Prior to this, anyone who wished to manufacture biofuels had to apply for two licences, a manufacturing licence from the Malaysian Industrial Development Authority and a licence to use palm oil raw materials at the manufacturing plant from the MPOB.

Since the Malaysian Biofuel Industry Act came into force, biodiesel companies only need to apply for one licence, thereby streamlining the management and administration of licence holders. The act empowers the Minister of Plantation Industries and Commodities to prescribe the type of biofuel and its percentage by volume to be blended in any fuel or the activity for which the use of biofuel is to be made mandatory. A Biofuel Licensing Task Force has been formed under the Secretary General of the MPIC to process the licence applications. The Biofuel Working Committee evaluates and makes recommendations on the applications, which are then submitted to the Biofuel Licensing Committee for consideration and approval.

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