In 2015, about 35 billion litres of biofuel (biodiesel and renewable diesel) was produced from fats and vegetable oils, consumed primarily in the EU, U.S., Brazil and Indonesia. This created an estimated 8.2 million tonnes of demand for palm oil as biofuel feedstock (mostly for use in Indonesia and the EU), and a further indirect demand of at least 2.5 million tonnes of palm oil to replace other biodiesel feedstocks in existing uses (considering only indirect demand from the EU and U.S. mandates, not from biodiesel mandates elsewhere in Asia and Latin America). In total, those 10.7 million tonnes represent nearly a fifth of global palm oil production, which the FAO reported as 57 million tonnes in 2014 and was expected to reach 65 million tonnes in 2017. Globally, average palm oil yields have been more or less stagnant for the last 20 years, so the required increase in palm oil production to meet this growing demand has come from expanding the cultivated palm area, with profound impacts on biodiversity and carbon storage. Increasing demand for palm oil is a problem because palm oil expansion in Indonesia and Malaysia is currently endemically associated with deforestation and peat destruction. Without fundamental changes in governance, we can expect at least a third of new palm oil area to require peat drainage, and a half to result in deforestation. Approaching 2020, the future of biofuel policy is at a potential inflection point. Targets have been set by several countries, and by the aviation industry, that could lead to a significant increase in palm oil demand in the decade from 2020 to 2030. Given current biofuel consumption targets, by 2030 Indonesia alone could consume 19 million tonnes of palm oil as biodiesel feedstock. That is double total current global production of palm oil biofuels.
In parallel, the aviation industry has ambitious alternative fuel consumption goals but currently no limits on the feedstocks that are eligible. Palm oil
is the world’s cheapest plant oil and well suited to hydrotreating for renewable jet fuel production, and therefore if nothing changes is likely to play a major role. If 25% of aviation biofuels required to deliver on stated 2030 aspirations came from palm oil, this would add a further 12 million tonnes of demand.
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