B15 biodiesel shift timely, but long-term viability in question
11/06/2026 (New Straits Times), Kuala Lumpur - Malaysia's transition to the B15 biodiesel programme is viewed as a timely measure to address rising global fuel prices and supply uncertainties, although questions remain over its long-term sustainability.
CGS International Securities Malaysia Sdn Bhd said the viability of higher biodiesel blending mandates is largely dependent on global price dynamics, particularly the spread between palm oil and gasoil, which is currently favourable.
However, a reversal in market conditions could exacerbate inflationary pressures and increase the fiscal burden.
"We believe the government's move from B10 to B15 is achievable as the price signal is present, the capacity to refine exists, with palm oil stock aplenty.
"However, progressing to B20 or B50 within two to three years as promised is uncertain," it said.
The firm said the commitment remains unclear, citing the absence of a defined timeline and a comprehensive policy framework to address infrastructure investment requirements and the associated fiscal burden.
It said a key uncertainty is what happens if price signals move against the government's position.
"Once gasoil is no longer vulnerable to global disruptions, its price will fall, leading to higher subsidy burden and price pressures.
"While energy security is paramount during times of crisis, over the long term, we think that economics tends to take precedence.
CGS International said it sees a major long-term challenge for Malaysia's biodiesel industry.
The European Union, which absorbed about 90 per cent of the country's biodiesel exports in 2025, is progressively reducing its imports.
"The European parliament has argued that palm-based biodiesel feedstock drives deforestation, and has implemented policies to cap imports at 2019 levels until 2023 and then subsequently reduced to zero by 2030.
"Additionally, all palm oil products for the biodiesel industry exported to the EU are required to be certified sustainable," it added.
The firm said Malaysia has stepped up its certification efforts by making the Malaysian Sustainable Palm Oil scheme mandatory since 2020, although challenges remain in achieving full compliance.
CGS International said a revised strategy is needed where the three key pillars of biodiesel policy, which includes energy security, sustainability commitments and economic considerations, are better aligned to ensure a win-win outcome for all stakeholders.
Among the policy options suggested is channeling carbon tax towards biodiesel, so that with the planned introduction of a carbon tax in the 2026 Budget, Malaysia could use the additional funds to help close the price gap between palm oil and gasoil.
"According to the Organisation for Economic Co-operation and Development, global carbon tax revenues generally range between 0.1 per cent to 0.6 per cent of gross domestic product.
"In Malaysia's context, that could rake in up to RM12 billion annually, which we believe would be adequate to support a portion of the fiscal cost of higher blending mandates," it said.
CGS International said biodiesel's key advantage is its sustainability value rather than its cost competitiveness.
Factors such as greenhouse gas emission reductions, renewable energy targets and environmental, social and governance commitments are increasingly driving biofuel demand.
"We think Malaysia has a huge potential to develop this industry given its large availability of feedstocks.
"As the deadline for climate commitments approaches, policy support and regulatory frameworks are likely to play an even more critical role in sustaining demand.
"In this context, Malaysia's long-term biodiesel viability will depend more on how effectively it is integrated into broader decarbonisation strategies and national energy transition plans," it added.