A Timely Push For Malaysia’s Biogas Industry
30/04/2025 (Business Today) - The recent call by Plantation and Commodities Minister, Datuk Seri Johari Abdul Ghani, urging all palm oil millers to accelerate the development of the biogas industry, is both timely and commendable. With over 170 palm oil mills having installed biogas facilities, Malaysia is indeed progressing on this front. However, if the nation is to fully unlock the climate and energy potential of its palm oil sector, we must not rest on our laurels.
The development of biogas facilities represents not just an environmental obligation but an economic opportunity to transform agricultural waste into clean energy, reducing greenhouse gas emissions and creating new revenue streams for millers.
Furthermore, this transformation could significantly improve the global perception of Malaysia’s palm oil industry. For years, the industry has faced scrutiny—particularly from Western markets—over its environmental footprint. Advancing biogas deployment, especially for clean energy generation, sends a strong signal that Malaysia is not just reactive but proactive in aligning palm oil with global sustainability benchmarks.
Reforming Carbon Credit Mechanisms
To catalyse greater adoption, the government should consider implementing a series of bold and forward-looking measures. One key area is the revision of incentives associated with carbon credits. Presently, carbon credit mechanisms primarily reward biogas or methane capture. However, converting biogas into electricity delivers even greater environmental benefits by displacing fossil fuel-based power generation.
It is only logical to consider a double-counting mechanism for such initiatives, where credits are awarded not only for capturing methane but also for generating clean energy and feeding it into the national grid. This dual recognition would better reflect the full climate benefit of the process and incentivise millers to move beyond flaring.
Moreover, with the establishment of Bursa Carbon Exchange platform, there is now a unique opportunity to shift focus toward domestic carbon trading. Instead of relying on international markets, Malaysia can harness its own platform to promote the trading of credits, especially as the nation prepares to implement a carbon tax. A robust domestic carbon market would offer industries a meaningful choice: either pay the tax or invest in carbon credits by supporting renewable projects such as biogas-to-electricity. The timing couldn’t be more ideal to make this shift.
Enabling Investment Certainty
In tandem with carbon credit reforms, the Sustainable Energy Development Authority (SEDA) should review the current Feed-in Tariff (FiT) mechanism. At present, biogas project developers must go through a competitive bidding process for FiT rates. While competitive bidding promotes market efficiency, it may inadvertently discourage investments in biogas, particularly in a sector that already faces high capital costs and technical complexity.
If the true aim is decarbonisation and supporting Malaysia’s net-zero target by 2050, then a fixed FiT rate for biogas-to-electricity projects would provide much-needed certainty and enhance project bankability. Understandably, renewable energy tariffs are higher than fossil-based power, but this is the cost of a cleaner future. The government can bridge this gap using tax revenues or cess funds collected from the palm oil industry—in essence, reinvesting industry gains for the industry’s long-term sustainability.
Bio-CNG as a Game Changer
We must also consider oil mills located far from the national grid, where connecting to electricity infrastructure can be prohibitively expensive. In such cases, biogas should be upgraded into bio-compressed natural gas, or bio-CNG. This upgraded biogas can be sold directly to gas utility companies that already possess an established gas pipeline network. Doing so not only offers a green gas alternative but also helps gas operators decarbonise their supply. For this to be viable, gas operators must offer commercially attractive prices for bio-CNG and recognise its strategic importance in Malaysia’s net-zero journey. It is imperative they view this not merely as a cost but as a national responsibility and opportunity.
Where pipelines are inaccessible, bio-CNG bottling offers another practical solution. Bottled bio-CNG can potentially be exported to overseas markets, especially where demand for green energy is high and pricing justifies the logistics. This not only expands the market for Malaysia’s bio-CNG but also elevates the nation’s standing as a credible exporter of renewable energy solutions.
The Time is Now
Datuk Seri Johari Abdul Ghani’s strong push for biogas development deserves the full support of both the government and industry stakeholders. But to truly capitalise on this momentum, we must go further.
Malaysia’s palm oil industry has long been a cornerstone of our economy. Now, it can also become a leader in our clean energy transition—reducing emissions, generating value, and showcasing Malaysian innovation to the world. With the right measures in place, biogas can power not only our mills but also our journey toward a more sustainable, low-carbon future.
https://www.businesstoday.com.my/2025/04/30/a-timely-push-for-malaysias-biogas-industry/