The Link between Renewable Fuel Mandate and Natural Rubber Market in Malaysia: A Search for A Conceptual Framework

There are many countries that used biodiesel as an alternative for fossil fuels. The countries are European Union (EU), United State of America (USA) and Indonesia. It’s been used primarily in transportation fuel. Beside, government policy such as mandate has increased the biodiesel demand in worldwide. 

Germany is one of the leading in biofuel in EU’s country (Thone and Rauch, 2012). The main source of biodiesel in Germany comes from rapeseed oil. Starting year 2004, the uses of B5 has been introduced in Germany while for B7, the consumption been encourage since year 2007. The mandate B5 means 5 percent of biodiesel need to be blend with diesel. 

In USA, the Renewable Fuel Standard (RFS) had mentioned the minimum volume of biofuel that should be blend with biofuel. In Renewable Fuel Standard (RFS2), the goal is to achieve 36 billion gallons of biofuel uses by year 2022 (Schnepf and Yacobucci, 2013).

 In the ASEAN countries, Indonesia target is to use 10 percent of biofuel on transportation in year 2010. However, as the largest producer for palm oil industry, in Indonesia National Energy Policy, it had increased the blending mandate to 20 percent by the year 2025 (Dillon, Laan and Dillon, 2008).

 In Malaysia, only in year 2011 the uses of biodiesel in transportation had been commercialized. It had been` used at stage which involved 1,150 petrol stations started at Putrajaya on 1st June 2011 until at Selangor on November 2011. In year 2013, B5 had been mandate by Malaysia government.

Figure 1 show the production, import and export of natural rubber and CPO since year 2006. Production and export natural rubber decreased from year 2006 until 2009. While there is a fluctuated in production, export and import CPO. 

After the launched of biodiesel mandate in year 2011, production of natural rubber decreased year by year. In year 2012, the natural rubber production was less than 1,000,000 tonnes (Malaysian Rubber Board, 2012). While import increased until year 2013. This trend will worsen when in year 2012 until 2014, the import of natural rubber exceed export. In year 2013, the contribution of natural rubber to export was only 0.98 percent (Malaysian Rubber Board, 2013).

 Compare to CPO, the production decreased slightly in year 2012 and achieved 19,000,000 tonnes production in year 2013 and 2014. There is a fluctuated in total export CPO from year 2012 until 2014. It can be said that the B5 mandate decreased the natural rubber production and export but increased the import. Value -0.9957 show the strong negative coefficient between production natural rubber and biodiesel mandate. .While, mandate will increased the production CPO and decreased the import CPO. However, the correlation showed that there is only a slightly decrease in import compare to slightly increased in export CPO.  Therefore, it is important for Malaysia to sustain the local raw materials in develop the upstream and downstream activity in Malaysia. The local raw material is important in producing gloves, tires and other latex based product. This can reduced the volume of latex import from other countries. Therefore, it is important to build a conceptual analysis especially after the implementation of biodiesel mandate on natural rubber market in Malaysia based on the previous literature review. The link between renewable fuel mandate and natural rubber will be achieved in this article.