The government has announced the introduction of a National Biofuel Policy on August 10 2005. The policy is primarily aimed at reducing the country’s fuel import bill, promoting further the demand for palm oil which will be the primary commodity for biofuel production (alongside regular diesel), as well as to shore up the price of palm oil especially during periods of low export demand.

Brief on new policy Malaysia’s National Biofuel Policy (interchangeably known as the National Biodiesel Policy) introduced by the government basically entails a four-prong strategy, which encompass:

1. Producing a bio-diesel fuel blend of 5% processed palm oil with 95% petroleum diesel.

2. Encouraging the use of biofuel among the public, which will involve giving out incentives for oil retail companies to provide biodiesel pumps at stations.

3. Establishing an industry standard for biodiesel quality, which will be the responsibility of SIRIM.

4. Setting up of a palm oil biodiesel plant, which is targeted to be built in Labu, Negri Sembilan.

In addition, the government will set up a demonstration mill for the production of biofuel for cold climates, which is a strategy for the marketing of Malaysia’s biofuel in the export markets. The government will also award a contract to a plantation company to ensure a consistent supply of palm oil for the production of palm oil biofuel. It will also provide some sort of incentive to automotive companies to produce biofuel-ready engines. To encourage the use of biofuel on a trial basis, oil companies will be asked to cooperate with the Malaysian Palm Oil Board (MPOB) to create pioneer kiosks.

In the longer term, the National Biodiesel Policy will include establishing a national Biofuel Industry Act as well as providing several more incentives.