Palm-biofuels fail to meet US green standards: EPA

KUALA LUMPUR (Jan 28, 2012): Palm oil biofuel has failed to meet greenhouse gas saving standards to qualify for the US renewable fuels programme, the Environmental Protection Agency (EPA) said, dealing another blow for southeast Asian producers in search of new markets.

The EPA said in a regulatory filing on late Friday that palm oil converted into biofuels in Indonesia and Malaysia cut up to 17% of climate warming emissions, falling short of a 20% requirement to enter the world's largest energy market.

For 2012, the EPA raised annual renewable fuel mandates by 9.4% to 15.2 billion gallons.

If the EPA findings are finalised later this year, palm oil producers would now miss out on supplying biomass-based diesel to U.S. oil refiners and importers who currently use canola and soyoil fuels.

The agency set a deadline of Feb 27 for public comment on its findings. Malaysian and Indonesian palm oil industry groups have said they will respond to the EPA's carbon emission calculations on the process of diverting palm oil into fuel tanks.

"The Malaysian Palm Oil Board is formulating a response to this development with its own calculations on carbon emissions," said M.R. Chandran, a leading industry analyst and a consultant to several palm oil firms in Malaysia.

"The Americans appear to be moving forwards with land use change calculations while the European Union says there are many scientific uncertainties," he added.

CARBON ACCOUNTING

Palm oil and EU rapeseed use in biofuels came under threat in 2011 after a series of leaked EU reports showed fuel from crops can do more harm due in part to forests getting destroyed to make up for the food shortfall.

EU's top climate and energy officials came up with a political compromise in the same year to delay indirect land use change rules (ILUC) by up to seven years in order to protect the economic bloc's US$13 billion biodiesel sector.

ILUC means that if you take a field of grain and switch the crop to biofuel, somebody, somewhere, will go hungry unless those missing tonnes of grain are grown elsewhere.

If the crops making up the shortfall are grown on farmland created by cutting down forests or draining peat land, this can pump out enough climate-warming emissions to cancel out any benefits from biofuels.

The EPA said it based carbon accounting for palm oil based biofuel partly on the "incremental expansion" of oil palm estates in Indonesia and Malaysia that arise from producing a projected 400 million gallons of biofuels for the U.S. by 2022.

Indonesia and Malaysia will produce close to 2 million tonnes of CO2 annually over 30 years as a result of clearing peat swamps and forests to expand estates and cater for U.S biofuel demand, the EPA said.

That represents a minute fraction of the U.S. annual carbon emissions of 5.6 billion tonnes in 2010, according to data from the U.S. Energy Information Administration. – Reuters