KUALA LUMPUR: Palm oil bio-fuel has failed to meet greenhouse gas saving standards to qualify for the US renewable fuels programme, the Environmental Protection Agency (EPA) said, dealing another blow for southeast Asian producers in search of new markets.
The EPA said in a regulatory filing on late Friday that palm oil converted into bio-fuels in Indonesia and Malaysia cut up to 17 percent of climate warming emissions, falling short of a 20 percent requirement to enter the world's largest energy market.
For 2012, the EPA raised annual renewable fuel mandates by 9.4 percent to 15.2 billion gallons.
If the EPA findings are finalised later this year, palm oil producers would now miss out on supplying biomass-based diesel to US oil refiners and importers who currently use canola and soyoil fuels.
The agency set a deadline of Feb. 27 for public comment on its findings. Malaysian and Indonesian palm oil industry groups have said they will respond to the EPA's carbon emission calculations on the process of diverting palm oil into fuel tanks.
"The Malaysian Palm Oil Board is formulating a response to this development with its own calculations on carbon emissions," said M.R. Chandran, a leading industry analyst and a consultant to several palm oil firms in Malaysia.
"The Americans appear to be moving forwards with land use change calculations while the European Union says there are many scientific uncertainties," he added.
Palm oil and EU rapeseed use in bio-fuels came under threat in 2011 after a series of leaked EU reports showed fuel from crops can do more harm due in part to forests getting destroyed to make up for the food shortfall.
EU's top climate and energy officials came up with a political compromise in the same year to delay indirect land use change rules (ILUC) by up to seven years in order to protect the economic bloc's $13 billion bio-diesel sector.
ILUC means that if you take a field of grain and switch the crop to bio-fuel, somebody, somewhere, will go hungry unless those missing tonnes of grain are grown elsewhere.
If the crops making up the shortfall are grown on farmland created by cutting down forests or draining peat land, this can pump out enough climate-warming emissions to cancel out any benefits from bio-fuels.
The EPA said it based carbon accounting for palm oil based bio-fuel partly on the "incremental expansion" of oil palm estates in Indonesia and Malaysia that arise from producing a projected 400 million gallons of bio-fuels for the US by 2022.
Indonesia and Malaysia will produce close to 2 million tonnes of CO2 annually over 30 years as a result of clearing peat swamps and forests to expand estates and cater for U.S bio-fuel demand, the EPA said.
That represents a minute fraction of the US annual carbon emissions of 5.6 billion tonnes in 2010, according to data from the US Energy Information Administration.
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