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Towards a new era of US-Malaysia relations.

AS US President Barack Obama settles in for a second term in office, it is clear that clean energy will be a top priority of his administration.
In his inaugural address, Obama stressed the importance of utilising newer, cleaner fuel sources as a way to address global climate change. This is good news for the world’s energy economy. It is also potentially very good news for US-Malaysian relations as both nations can be partners in improving living standards and ensuring a healthy planet.

Obama has stressed the need to expand the use of biofuels as a way of diversifying the global fuel mix and reducing greenhouse gas emissions. Meeting the rising demand for fuels derived from biomass will require the United States and other developed nations that are big consumers of energy to source these fuels from around the globe.

Malaysia is one of the world’s leading producers of environment-friendly biofuels derived from palm – both conventional biodiesel and next generation biomass fuels. For example, last year Malaysia produced more than 80 million tons of palm-derived biomass. Supply is already abundant and growing at a healthy pace.

The industry is generating rising revenues and creating thousands of new jobs across the region. The industry is expected to generate more than 40,000 high-skilled jobs and revenues of RM30bil by 2020 through the exploitation of palm biomass.

And tropical palm oil has in recent years enjoyed a welcome reception in the American marketplace. As Scott Miller of the Center for Strategic and International Studies, one of the United States’ leading policy research organisations, recently pointed out: “The United States imported US$361mil (RM1.16bil) worth of tropical oils from Indonesia in 2010 (palm oil accounts for much of this) and US$1.7bil (RM5.3bil) worth of palm oil from Malaysia in 2011.”

Malaysia is well positioned to play an important role in scaling up the needed production to meet world demand and thus help address the planet’s climate challenges.

Stumbling block

While both nations, and the global environment as a whole, stand to benefit from trade and cooperation, a key obstacle must be overcome.

At present, the US Environmental Protection Agency has chosen to limit consumption of Malaysian biofuels in the US market, thereby impeding Obama’s goal of sustainable energy diversification. Under a programme called the Renewable Fuels Standard, the US government is currently poised to favour biofuels from domestic sources – at the expense of affordability and sustainability.

This discrimination is the result of an unrelenting pressure campaign waged against the palm oil sector by environmental groups like the WWF and domestic biofuels producers. The critics claim that production of palm oil is harmful for the global environment. They also claim that it disrupts native wildlife habitat and is unsustainable.

But they are wrong.

High yield

Palm oil is by far the most efficient and energy-dense biofuel on the market. Malaysia is a responsible producer adhering to international standards for agriculture production, and strict Malaysian laws. Palm can produce more usable energy per hectare under cultivation than competitor oils such as canola and rapeseed. We can generate more oil and do so on less land. This is one reason why more consumers around the globe are demanding for palm oil.

According to a study by the Asia Pacific Economic Conference (Apec), palm biodiesel costs US$2.75 per gallon (RM2.27 per litre) to produce, compared to US$3.30 per gallon (RM2.70 per litre) for American soy-based diesel. And according to Dr Robert Shapiro, who was Undersecretary for Commerce to former US President Bill Clinton, palm biodiesel can reduce greenhouse gas emissions by as much as 64% – far above the 51% greenhouse savings boasted by soy biofuel producers.

Despite the misleading claims against palm oil by green campaigners, there are grounds for optimism.

A key US government official – Gina McCarthy, an assistant administrator at the EPA – visited Malaysia last year and toured our nation’s biofuel facilities. She was able to see up close Malaysia’s world-class production techniques – including methane capture facilities – and is aware of the positive role palm oil can play in addressing global climate concerns.

In his recent State of the Union address, Obama reiterated his support for the Trans-Pacific Partnership (TPP), a global initiative to open markets and lower barriers to trade. And, broadly speaking, there is strong support across Pacific-facing nations for such an initiative.

So this gives both our nations much to build on. After all, it would be difficult for countries like Malaysia to support the TPP if the United States elects to discriminate against one of its most significant industries (accounting for 8% of GDP) and one of its most important export products.

The logic of the TPP is that trade is mutually beneficial, wealth enhancing, and, in the long run, good for the global environment. That’s certainly been the experience across Asia and North America – continents that have experienced strong economic growth, generating the wealth needed for governments to protect their environments. As such, any US discrimination against Malaysian biofuel should be considered completely counterproductive.

The Malaysian palm oil industry shares Obama’s desire to move to a cleaner and more sustainable energy future for the good of the planet. And the United States has long led the world in promoting free and open trade. With that solid foundation shared by both sides, we are confident that a fruitful partnership based on mutual understanding will ultimately carry the day.

Tan Sri Dr Yusof Basiron is CEO of the Malaysian Palm Oil Council. For more information or comments, e-mail yusof@mpoc.org.my.

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