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The global biodiesel industry is among the fastest-growing markets the chemical
industry has ever seen. World capacity, production and consumption of biodiesel
grew on average by 32% per year during 2000–2005, and the industry looks
set for even faster growth rates—115% per year for capacity, and 101%
per year for demand—in the years to 2008 and beyond.
This 548-page CEH study is a comprehensive report on the expansion of this
market, and contains country-by-country forecasts to the year 2010 for production
capacity, production and consumption.
The following graph shows recent and forecast growth in biodiesel capacity
and demand:
The following pie charts show world production/consumption of biodiesel in
2005 and 2010 by region.
World Production/Consumption of Biodiesel
Used as a replacement for fossil diesel, the success of biodiesel hinges on
government support through subsidies and tax relief. Without such subsidies,
biodiesel would not be competitive with fossil diesel.
Biodiesel is the methyl ester product of natural fatty acids, produced by
the transesterification of fats and oils. It is miscible with petroleum-based
diesel in all proportions. This makes it compatible with existing fuel infrastructures
without major modifications. It can be used either in its pure form (referred
to as B100) or admixed with conventional diesel as a 2–30% blend (“blended”).
For example, B5 is a 5% biodiesel blend with conventional diesel.
The environmental credentials of biodiesel are impeccable. The use of biodiesel
reduces greenhouse gas emissions compared with the use of fossil fuels. This
has made it attractive to national governments seeking to meet their obligations
under the Kyoto Protocol. Biodiesel also has a favorable energy balance and
can be made sustainably from renewable oilseed resources.
The market potential for biodiesel is defined by the size of the existing
fossil diesel fuel market. There is no major technical limitation on replacing
fossil diesel with biodiesel. There is, however, a limitation on feedstock
availability—vegetable fats and oils and animal fats—and this,
in turn, depends on the availability of farmland to grow the crops.
How rapidly the biodiesel industry will grow will be determined largely by
government legislation and regulation. In general, governments use a variety
of subsidies and tax breaks to stimulate demand growth. In doing so, governments
have three major concerns that influence their biofuel policy:
- Securing energy supply and reducing dependence on fossil fuel imports
- Obtaining environmental benefits, including cutting greenhouse gas emissions,
but also reducing sulfur emissions compared with those of fossil diesel
- Creating jobs in rural regions and boosting the agricultural sector
Hardly a day passes without the announcement of a new biodiesel production
plant, and they are becoming larger and larger. With capacity growing at 115%
per year, the world is expected to run into an overcapacity situation during
2007, even though growth in biodiesel consumption is expected to reach its
peak during 2006–2007. The buildup in capacity will be particularly strong
in North America and Asia, and the total growth in capacity worldwide will
far exceed expected consumption growth rates. This will result in intensified
competition, lower capacity utilization rates, squeezed profit margins, a war
for raw materials, and, probably, the closure of small-scale producers and
those in less strategically important regions.
A shift in global biodiesel production patterns is expected to occur during
2005–2010. While Western Europe accounted for more than three-quarters
of worldwide biodiesel production in 2005, its share is expected to diminish
to below 40% through 2010. This is mainly because production is expected to
grow at much higher rates in all other regions, headed by Asia, which is expected
to become the second-largest biodiesel producing region, right behind Western
Europe, and followed by North America.
Looking at world biodiesel consumption, 61% of the world total in 2005 was
accounted for by Germany, where market conditions were highly favorable. Other
countries with significant biodiesel markets in 2005 included France, the United
States, Italy and Brazil. All other countries combined accounted for only 11%
of world consumption. By 2010, the United States is expected to become the
largest single biodiesel market, accounting for roughly 18% of world biodiesel
consumption. New and large single markets for biodiesel are expected to emerge
in China and India. The share of all other countries will increase to 44% through
the forecast period.
On a global scale, the biodiesel industry was highly fragmented in 2005, with
the top ten producers accounting for roughly a quarter of worldwide installed
production capacity, and with the largest producer having 857 thousand metric
tons of installed production capacity. By 2010, the largest biodiesel producers
will have grown dramatically in size. The six largest producers will have a
combined capacity equivalent to the current total installed and operational
capacity.
The choice of fats and oils for producing biodiesel depends on local availability
and affordability. Governmental decisions can also affect the choice of feedstock.
Rapeseed oil is preferred in Western Europe, while the United States favors
refined soybean oil as a feedstock. Although Brazil is the world’s second-largest
producer of soybeans, its government is fostering a castor oil–based
biodiesel industry. The big palm oil producing countries in Southeast Asia,
Malaysia and Indonesia focus on palm kernel and palm seed oil. Both India and
China have huge jatropha (physic nut) plantations under development. Recycled
cooking oil is another important feedstock for China too. The most important
feedstocks by 2010 are expected to be soybean, rapeseed and palm oils, in descending
order. Jatropha and cottonseed oils will show the highest growth rates.
Glycerin is the by-product of biodiesel production. Traditionally, biodiesel
producers sell this raw glycerin to processors or purify it on site to make
pharmaceutical-grade glycerin. With the biodiesel production boom, the glycerin
market has become flooded with huge amounts of both crude and refined glycerin.
The traditional supply/demand pattern for glycerin has moved into a period
of severe imbalance.
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