In 2020, the transportation sector accounted for 34.8% of ASEAN’s total final energy consumption (TFEC), trailing only the industrial sector. Dominated by fossil fuels, oil consumption alone constituted 43.8% of the region’s TFEC. The ASEAN Energy Outlook 7 (AEO7) also indicates a worrying trend: the region’s net oil imports, as a percentage of primary oil supply, soared from 48% in 2005 to 79% in 2020. This growing dependency underscores the urgent need for alternative energy sources to decarbonise transportation and lessen reliance on oil imports. With the ambitious regional target of increasing renewable energy (RE) to 23% of the total primary energy supply (TPES), ASEAN must leverage biofuel as a critical player. The shift to biofuel is not only crucial for increasing regional RE share in transportation but also aligns with the national ambition of ASEAN Member States to maintain energy security. 

Indonesia and Malaysia, the leading palm oil producers in ASEAN, play a pivotal role in biofuel production. Indonesia’s biofuel mandate program has evolved from B2.5 in 2008 to B35 in 2023, with plans to increase this rate further. Similarly, Malaysia has implemented a B10 biodiesel mandate and aims for B30 by 2025, with specific regions like Sarawak, Labuan and Langkawi islands already at B20. By 2023, these two countries contributed over 83% of the world’s palm oil production and effectively utilised Crude Palm Oil (CPO) for biodiesel, producing 13.6 billion and 1.1 billion liters, respectively. This ambitious biofuel mandate and increase in production is pivotal to meet the demand for biofuel in ASEAN, which is projected to grow the fastest over the 2021-2050 period, with an average annual rate of 4.7%.  

They also actively trade palm oil and biodiesel in international markets, with Indonesia exporting primarily to China, the Netherlands, and Peru, and Malaysia to the EU, China, and the USA. However, this global trade contrasts sharply with the biofuel landscape within ASEAN, where other member countries face stark challenges. Vietnam’s underutilisation of E5 petrol due to limited feedstock, Myanmar’s struggles to utilise their most potential crops (jatropha) for biofuel production, and Lao PDR and Cambodia’s dilemma to balance feedstock use for fuel and food security exemplify these struggles.  

More than that, the Philippines and Thailand also face challenges in escalating biofuel blending rate mandates despite being two of the biggest biofuel producers in ASEAN.  

The Philippines has seen limited or stagnant progress in increasing biofuel blending rates. High bioethanol and biodiesel prices led to a three-year suspension of biofuel mandates from 2022 due to the economic impacts of the COVID-19 pandemic and rising feedstock costs, effectively postponing the plan to increase the blending target and making their biofuel blending rates stagnant at B2 and E10. The suspension of biofuel mandates threatens not only the livelihood of local farmers and biofuel industry investments but also the nation’s environmental goals. With a refinery capacity of 677.9 million litres per year, actual 2023 biofuel production was just 220 million litres, constrained by feedstock availability and restrictions on feedstock import due to the Biofuel Act. Thailand, facing similar challenges, planned to reduce its biodiesel blending rate from B10 to B7 and switch bioethanol from E85 to E20, leading to a 7.8% drop in biodiesel consumption in 2022. The decision to lower the biofuel blending rate contradicts the national strategy to enhance energy security by reducing dependency on fossil-fuel imports. However, like the Philippines, Thailand also restricts biofuel imports to protect its farmers, which, in a sense, also contradicts the bigger national objective of maintaining energy security.  

Nevertheless, as ASEAN countries grapple with the challenges of biofuel feedstock, the development of regional collaboration in trade agreements is needed. These agreements could centre around stabilising feedstock prices or prioritising local feedstocks before imports, thus facilitating trade and utilisation of imported feedstocks within ASEAN without adversely impacting local agriculture. The regional agreement could also be extended to biofuel trade to address immediate fuel shortage. This approach gains relevance against the backdrop of the EU’s decision to phase out unsustainable palm oil imports by 2030, prompting Malaysia and Indonesia to seek new markets. The EU’s stance could reshape the ASEAN biofuel feedstock landscape and present an opportunity for the region to reallocate Indonesia and Malaysia‘s available feedstock export capacity, thereby enhancing regional biofuel development and economic collaboration within ASEAN.

Although EU’s movement could influence broader regional bloc perspective towards biofuel, ASEAN should learn from EU in always a step ahead in establishing separate custom codes for biofuels and its feedstocks’ trade that benefit the regional priority and goals. EU also has various forms of regional cooperation in renewable energy, such as joint renewable energy projects, support schemes, or statistical transfers, aiming to achieve more efficient and cost-effective energy generation.   

In addition to fostering regional cooperation for enhancing feedstock and biofuel trade among ASEAN countries, it is crucial that ASEAN’s strategy extends beyond merely increasing feedstock production, as relying solely on this method is not sustainable. ASEAN countries require more innovative approaches in biofuel technology and robust Research & Development (R&D) efforts. Several countries have initiated R&D projects to search for more sustainable fuel options. For instance, the Philippines is delving into third-generation biofuel feedstocks like lignocellulosic materials and microalgae, while Indonesia is experimenting with a blend of Fatty Acid Methyl Esters (FAME) and hydrogenation derived renewable diesel (HDRD).  

Furthermore, the ASEAN region can leverage Singapore’s established role as a central hub for biofuel processing and trade, thereby enhancing R&D for next-generation and sustainable biofuels. Singapore is the home of several of the largest biodiesel plants in the world, including Neste Oil’s largest biodiesel plant. The engagement with the private sector can also be instrumental in fostering regional joint R&D initiatives and reduce the costs associated with R&D projects. Singapore, as a global aviation hub, also lead the adoption of Sustainable Aviation Fuel (SAF) in Southeast Asia, which is exemplified by Singapore’s regulatory mandate requiring departing flights to utilize SAF with a minimum blend of 1% by 2026. Such initiatives align seamlessly with the global imperative for sustainable aviation, as evidenced by Boeing’s ambitious target of achieving 100% SAF utilization across its fleet by 2030. The implementation of mandatory SAF blends across all fleets within ASEAN could serve as a strategic imperativeplan, offering economic benefits while propelling a more sustainable trajectory of the aviation industry within the region. 

In conclusion, with ASEAN’s ambitious renewable energy targets hinging on biofuel, addressing the region’s varied feedstock and trade challenges is essential. ASEAN region will need to create an integrated framework for biofuel regional cooperation that meticulously explores the interconnections between policy, trade, and technology. It is also essential to conduct in-depth research to thoroughly understand the complexities of feedstock utilisation and uncover regional cooperation opportunities. Such approaches are vital to harness the collective strength of ASEAN countries, fostering a concerted effort to devise innovative strategies and robust collaborations and ultimately leading to a sustainable biofuel future in the region.