BIODIESEL, a big deal for the Green Deal?

BIODIESEL, a big deal for the Green Deal?

Bi-Monthly bulletin on Oils & Fats by Aveno
December 22th, 2020.

Vegetables oils in mechanization and warfare.

Rudolf Diesel’s motor prototype presented at the 1900 Paris Exposition, ran on groundnut oil, but as mineral diesel got cheaper and more available, that is what was going to be used. 

World War I was the first war fueled by petroleum. Through mechanization an energy transformation took place, and petroleum became the lifeblood of armies. Later civilians benefitted from the technological breakthroughs. 

In the early 20th century, there was still interest in vegetable oils as fuel, for electricity generators and transport, in tropical regions (colonies) and during the 1930’s, next to military considerations, a concern for security of energy supply rose. So, scientists looked at splitting the fatty acids from the glycerin backbone in vegetable oil, to create an alternative to mineral diesel. In 1937 the French-Belgian chemist Georges Chavanne patented the “Procedure for the Transformation of vegetable oils for their use as fuels”. A year later, for the first time in history, during two months, a bus line between Brussels and Leuven tested biodiesel (palm oil ethyl ester). 

Data source: IEA (Int. Energy Agency)

During World War II, to fuel and lubricate the war machine, when petroleum supplies were interrupted, vegetable oils were used. Canadian rapeseed oil lubricated marine engines in naval and merchant ships, and vegetable oil was used as fuel in countries like Brazil, Argentina, China, India, and Japan, until petroleum fuels were again cheap, abundant and easily accessible.

In the 1970s, the petroleum crisis made many countries rediscover that straight vegetable oil could be used to run diesel engines, and tractors ran on “farm-made fuel” and many motorists bought sunflower oil in supermarkets to put in their tank. But quality and viscosity problems caused damage to the modern diesel engines. The first biodiesel plant was built in Austria in 1985.

In the U.S. the Pentagon has always supported biodiesel which the military consider a part of their strategy to secure their fuel supply. Still in 2010 the army even ran a biodiesel project with the Utah State University to use safflower that grew wild on government land.

Different drivers for biodiesel production

Since the 1990’s, global biodiesel production increased considerably but the drivers behind differ. In 2006 global production reached 7.5Mmt; presently, worldwide, some 40 Mmt of edible oils (+ some 5 Mmt waste oils) are used to produce fuel, mainly for road transport but also increasingly as marine fuel and sustainable aviation fuel. 

In Europe, the driver of this development was the 1992 Mac-Sharry CAP reform (Common Agricultural Policy), with the Blair House Agreement, resulting in an obligation to take arable land out of production. However, this set-aside land could be used to grow non-food crops and the Commission wrote its ‘Green Paper for a strategy to develop and use renewable energy’. So initially, the EU biodiesel production developed mainly on mandatory set-aside land in EU! This allowed to consequently reduce Europe’s protein deficit and to provide an income to farmers by boosting rapeseed production. 

The America’s saw a constant growing global demand for soybean meal for animal feed, but the demand for edible soybean oil did not grow at the same rate and to absorb the excess oil, the U.S., Brazil and Argentina, introduced biodiesel quota systems. 

In South East Asia “green diesel” is part of Indonesia’s strategy to soak up excess supplies of palm oil and to minimize expensive fuel imports and so improve the external trade balance. Palm oil is very important for the Malaysian and Indonesian economies and a job creator, so the driver is more, market policy supporting producers and reducing the dependence on imported fossil fuel.

Globally, a growing ecology and climate awareness led to the rediscovery of oils & fats as alternatives to petroleum-based fuels. Today, this awareness is also increasingly driving this industry and there are over 60 countries with biofuel (ethanol and/or biodiesel) mandates. 

The challenge: decarbonizing European transport. 

In EU-28 we count some 190 biodiesel and HVO (hydro treated oils) plants, mostly not running at full capacity, with a total production capacity of about 21.4 million liters or 18 Mmt. In 2019, on a total diesel usage of 223 Mmt, on-road diesel use was roughly 178.5 Mmt (210 mln liters). 

The industry uses different technologies and an increasingly diverse mix of feedstocks. We also noted that some petroleum refineries are being converted to produce biodiesel. This is cheaper than dismantling and helps them meet their greenhouse gas emission reduction targets. Some even co-process vegetable oils with petroleum. 

All this in an effort to produce a renewable, clean-burning fuel that can be used in existing diesel engines without modification. It can be used pure or mixed with mineral diesel in any proportion. In EU on average 8.5% is blended in. Indonesia has B30 while France also markets B100 for trucks. Biodiesel can also be used as heating oil. 

On 4th March, the European Commission published “the founding legislative proposal of the EU Green Deal: the EU Climate Law. The proposed regulation sets a legally binding EU-wide common target of net-zero greenhouse gas (GHG) emissions by 2050 as well as a reduction on GHG emissions of 55 percent by 2030.” And the European institutions have laid out a roadmap through an energy directive that proposes a minimum of 14% renewable energy in transportation (≠ biodiesel for the road) by the year 2030. 

Today EU road transport accounts for about 18% of GHG emissions. Some studies predict that in 2030, 80% of European cars will still be vehicles with an internal combustion engine. It is probably safe to say that it is unlikely that 80% of the fleet will be electrified by 2030. According to the feedstock used and its origin, biodiesel saves 50 to 90% GHG emissions compared to mineral diesel and so we see a place in the sun for biodiesel producers. 

Politics, policy and the future 

Policy makers can make or ruin our future but they can’t predict the future. No matter how good their intentions are, how well or not they listen to lobby groups and consultants, it always turns out differently. They can set out guidelines, express wishes and goals but the path is made, by others, who do the walking. Imagination of others, market forces, the complexity of real life and its opportunities are always underestimated. 

In 1992, Mc Sharry could never have predicted that years later EU would be importing soy methyl esters from Argentina or palm methyl esters from South East Asia to fuel our cars. That we would use more biodiesel than we produce. Or that more than half the 3 Mmt used cooking oil used for biodiesel would come from China and Malaysia and Indonesia, the world’s biggest producers of palm oil, biodiesel producers themselves. That was not the intention… but these are normal market dynamics. This is all reaction to policies. 

On the bright side: market dynamics keep people alert and always on the lookout for where to next put their foot on the ground. There is debate over food for fuel, deforestation, old or new technology etc. but looking at the enormous number of initiatives around the globe to find affordable, more sustainable energy, from carbon-capture-to-fuel to oil out of algae, can only make us confident. Will the next wide scale feedstock for biodiesel be algae oil from the sea? We don’t know. But keep watching!

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Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bring the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as an advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.

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Aveno NV - The one stop shop for all your Oils and Fats: BIODIESEL, a big deal for the Green Deal?
BIODIESEL, a big deal for the Green Deal?
Bi-monthly bulletin on Oils & Fats by Aveno. BIODIESEL, a big deal for the Green Deal?
Aveno NV - The one stop shop for all your Oils and Fats
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