Biodiesel Overview on

Global production and policy

November 2005

Nathan Hancock - Grain Development Officer

Trade and Development, Department of Agriculture Western Australia

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

Executive 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 other
regions 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.

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 Australias 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).

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, biodiesels lack of sulphur allows the use of
N2O control technologies in new vehicle engines that cannot be used with
conventional 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 value
for 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;

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
(ITCs) when glucosinolates are hydrolysed. This means that when water is washed

through the meal, it releases ITCs 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
ITCs, 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 value
horticultural 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 Brassicas 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.

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 EUs 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.

EU 2004 Production by Country

1200
000 tonnes

1000
800
600
400
200
0
Country
Germany

France

Italy

Austria

Spain

Denmark

United Kingdom

Sweden

Czech Republic

Slovakia

Lithuania

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

EU 2004 Production Capacity

1200

000 tonnes

1000
800
600
400
200
0
Country
Germany

France

Italy

Austria

Spain

Denmark

United Kingdom

Sweden

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

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 nonfood 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

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; an
estimated 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 available
at 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

10

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 a
relatively 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 is
due 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

11

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 production in Italy

1999/00

2000/01

80

137

Million Litres

2001/02

2002/03

199

309

2003/04
355

Source: USDA Attach 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

12

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 melting
point and mixed with fossil diesel to overcome these problems.

13

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,

14

reduced use of imported crude oil, childrens 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
Australias 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 projected
to increase to 115 million litres per annum by 2010. However, CIBC World Markets

15

(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 oilseed
market; 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 Unions 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

16

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 (-21C to 0C) 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 worlds 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. Brazils 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 of
agricultural 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. Northeastern 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. Brazils 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 biodiesel
in 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 similar
manner, i.e. E10 currently sold in Australia.
Biodiesel - fuel comprised of mono-alkyl esters of long chain fatty acids derived from
vegetable oils or animal fats, designated B100, and meeting the requirements of
relevant government authorities.
Biofuel - A fuel, liquid or gaseous, produced from dry organic matter or combustible
oils of plants or animals, intended for the operation of vehicle combustion engines.
Biofuel is any fuel that derives from biomass - recently living organisms or their
metabolic by products, such as manure from cows. It is a renewable energy, unlike
natural resources such as petroleum, coal and nuclear fuels.
Biomass - biodegradable fractions of products, waste or residues from agriculture
and forestry (including vegetative and animal substances) and related industries, as
well as the biodegradable fraction of industrial waste.
Bioethanol - an ethanol produced from biomass and/or biodegradable fractions of
waste.
Fatty acid methyl ester - (FAME) biodiesel, a methyl ester produced from
vegetable 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 of
waste.
Lubricity - Smoothness; freedom from friction; also, property, which diminishes
friction; as, the lubricity of oil.
Ml/a - Million litres per annum.
Pure vegetable oil - oil produced from oil plants through pressing, extraction or
comparable procedures, crude or refined but chemically unmodified.
Renewable fuels - renewable fuels other than biofuels, which originate from
renewable, non-fossil energy sources such as wind, solar, geothermal, wave, tidal or
hydropower 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 synthetic
hydrocarbons, which have been produced from biomass;
Transesterification - A chemical process which reacts an alcohol with the triglycerides
contained 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 Society
of America Journal 67:pp139-145.
Bassanese, D. (2005), Mixed signals from rising oil, The Australian Financial
Revue, 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 and
Marketing in Germany 2005, Union For the production of Oil and Protein Plants,
Germany.
Hamilton, C (2004), Biofuels made easy, presentation to Australian Institute of
Energy.
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 by
mustard 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 at
the 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, June
2005,
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 rapeseed
meal - current global perspectives. Indian Food Industry, Vol 22, No 2.
Tyson K.S., Brown J. and Moora, M., (2000), Industrial mustard crops for biodiesel
and bio-pesticides, National Renewable Energy Laboratory, Colorado, USA.
Zijlstra R.T., Hickling D.R., and Patience J.F. (2005), Comparison of voluntary feed
intake and growth performance between grower pigs fed diets containing either
mustard meal or canola meal Prairie Swine Centre Inc., Saskatoon, Canada.
Websites used in this document
Website 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, Germany
www.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

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