Global biodiesel demand to double in 5 years

By Susanne Retka Schill | January 19, 2010
Biodiesel demand will continue to grow globally, with the Asia-Pacific and Latin American regions increasing their participation in global production and markets, according to Tammy Klein, executive director of global biofuels services for Hart Energy Consulting. "The driver for biofuels usage is not limited to the United States and Europe," she said in a presentation on the opening day of the Canadian Renewable Fuels Summit held Dec. 1 and 2 in Vancouver, British Columbia.

Thirty countries are implementing biofuels targets in 2010 alone, she said. Many of them are in the developing world and are encouraging biofuels as a means to build energy security and improve rural economies, she said.

Biodiesel demand is expected to double between 2009 and 2015, while supply is expected to grow threefold. "Currently, there is massive overcapacity on a global basis in the biodiesel industry, and utilization rates are generally below 50 percent," Klein added. Current global biodiesel capacity is already large enough to supply the demand of the 10 billion gallons per year projected for 2015.

At present, 30 countries worldwide are blending biodiesel, with the typical B5 beginning to inch upward. Several countries in Europe are moving towards B7, with Brazil moving to higher blends and Indonesia considering B10. In 2009, developing nations represented 17 percent of biodiesel demand and almost 50 percent of global supply. That is expected to grow to 42.6 percent of biodiesel demand and 59.2 percent of global supply by 2015. Much of that demand among developing countries will be for domestic use, Klein added. African nations are banking on biofuels for job creation, economic development and domestic energy supply, and are not likely to become international players. In the Asia-Pacific region, the big four-Indonesia, Malaysia, China and the Philippines-represent 74 percent of regional biodiesel demand.

Brazil is likely to produce biodiesel to satisfy its internal markets and continue to raise blending limits to absorb capacity. Argentina is expected to expand biodiesel exports, looking to supply Europe.

Europe is likely to maintain its standing as the largest consumer of biodiesel with a 44 percent share of the global market by 2015. Asia-Pacific will be close behind with a projected 39 percent share.

Europe is expected to see the greatest penetration of biodiesel into the domestic diesel market by 2015, although the pending implementation of sustainability standards for its Renewable Energy Directives is raising questions. "We don't know how Europe will meet its RED requirements," Klein said. With U.S. imports restricted by countervailing duties and the Brazilians using their biodiesel internally, it may leave Argentina and the Asia-Pacific producers to supply Europe, driving an expansion of the Asia-Pacific industry, in particular. Europe will remain the largest consumer of biodiesel at about 44 percent of world consumption, but Asia-Pacific will come close with a 39 percent share by 2015, Klein projected.

She urged the group of Canadian Renewable Fuels Association members to be proactive about involvement in policy development, and in the creation and development of sustainability standards, not only through dialogue with nongovernmental organizations but also by engaging with governments and organizations such as the Roundtable for Sustainable Biofuels. "The complaint from the RSB is they don't have enough industry participation, and not enough producer involvement," she said.

She also predicted that the anticipated EU sustainability standards for biofuels will be challenged in the World Trade Organization as a protectionist trade barrier. At a recent international meeting, Klein reported, "the change in tenor was astonishing" from the European Commission representative who openly admitted they would have to consider WTO implications in the development of the RED. "Brazil is watching the EC closely," she said. "And Brazil has a history of winning WTO cases." Klein added that if a WTO suit successfully challenges Europe's sustainable biofuels policy, it could also impact U.S. policy.
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