A brief note on biodiesel: cost of production

Global demand on biofuel is predicted higher in coming years. Many countries had developed policy to increase their utilization on biofuel, including biodiesel too. This demand growth has been examined by scientists recently in relating to food price increasing.

Some experts suggested prudent approach when studying the impact world biofuel demand on climate change. Previous claim saying that biofuel has neutral impact on green house gas emission, but when it recalculated including the effect on land use change, the result shows very different.

So, world’s consumers must be careful because there are many biofuel productions coming from various situation. Biodiesel from India could be very different from Indonesia, because a few areas in Indonesia were forest before it coverted to biofuel plantation. Even in Indonesia, there are various types of land, management and previous land use before it planted oil palm. Indonesia also promotes jarak and nyamplung as alternative sources of future fuel.

As we note various biodiesel producers, there is a range in biofuel cost of production (COP). A recent scientific paper reveals that aside from sugar cane based ethanol in Brazil, biofuels are not presently competitive without substantial government support if oil prices are below US$70 per barrel. More than half of the production cost of biodiesel are rely on feedstock price, thus feedstock price reduction will decrease the biofuel production

In term of biodisel production, biodiesel from palm oil costs around $0.70 per liter, whereas biodiesel produced from rapeseed oil may cost up to $1.00 per liter, with soybean diesel in between.  The paper suggests that the cost of biodiesel production in China, mainly from used cooking oil, ranges from $0.21 to $0.42.

The IEA (2006a) anticipates a decline in biodiesel production costs of more than 30% in the US and EU between 2005 and 2030 along with a decline of feedstock costs. However, the prices of biodiesel feedstocks have been moving in the other direction since the IEA’s estimates were produced.

The paper author’s of Biofuels Markets, Targets and Impacts are Govinda R. Timilsina & Ashish Shrestha. Find the paper at World Bank site resource.