Almost zero production after RM22b spent

By Anil Netto,

They invested RM22 billion in the hope of hitting a ‘gold mine’. And now they have almost zero production.
That’s the fate of the Malaysian biodiesel industry players, which have an installed capacity of 2.6 million tonnes. Read The Star report here.
And now, guess what, they are asking the government for subsidies. How do you like that? Didn’t they factor in the various risks? I still remember a business weekly gushing about the prospects of the biofuel industry and the big moves planned by the various players.
And what about the environmental impact of biofuels? Environmental groups argue that deforestation produces far more emissions than biofuels remove. See Wikipedia here.
This is what Global Subsidies Initiative says:

The Malaysian Federal Government consequently developed ambitious biofuel policies in 2005 to expand the market for palm oil, improve energy security, create a new export industry and replace petroleum imports with a cheap indigenous fuel to satisfy domestic needs.
Yet, in just a few years, Malaysia has seen its vision of sustainable development through biofuel production fade. The very efforts of governments worldwide to encourage the production and use of biofuels have undermined the economic viability of the industry as a whole. In 2007, millions of tonnes of vegetable oils, tallow, grains and sugar cane were converted worldwide to produce approximately 70 million litres of biofuels. A sizeable portion of this production occurred in OECD countries, heavily supported by government incentives that are estimated to have totalled over US$ 15 billion that year alone. The result, over the past two years, has been an unprecedented surge in demand for agricultural commodities causing dramatic rises in prices, including that of palm oil. Today, high feedstock prices put biofuels largely beyond the reach of any but the wealthiest nations that can afford to maintain subsidies.

The GSI concludes:

In light of the limited economic, social and environmental benefits of promoting biodiesel in Malaysia, the GSI report recommends that the government refrain from intervening in the market for biofuels, through such measures as offering direct price support or imposing mandatory blending. Rather, the biofuel industry should be allowed to function in response to market signals—consistent with environmental and social standards—so that the industry establishes itself on a sustainable rather than a government-dependent basis. The government has correctly surmised that biodiesel can only, at most, complement other energy sources. It cannot significantly augment the nation’s energy supplies.