Asian economies re shaping low carbon fuel landscape
Asia’s biofuel sector is undergoing a period of rapid change, driven by decarbonisation commitments, energy security concerns and the desire to build new industrial capabilities.
While Asia is often discussed as a single market, the reality is far more nuanced. Indonesia and Malaysia continue to anchor their strategies in palm oil; Singapore has become the region’s renewable diesel and SAF powerhouse; Korea is building a policy framework from the ground up; and Japan is pushing technological innovation and ambitious aviation targets.
Together, these countries are creating a complex, but increasingly interconnected biofuel ecosystem.
Indonesian drive
Indonesia stands out as the most assertive adopter of biodiesel in Asia. Its B35 mandate, introduced in 2023, is one of the highest blending requirements in the world and reflects the government’s determination to reduce fossil fuel imports while supporting domestic palm oil producers.
Trials for a B40 blend are already underway, signalling further tightening ahead. The country’s biodiesel programme is underpinned by export levies on palm oil, which subsidise domestic production and ensure stable supply.
This model has been effective in scaling biodiesel use, but it has also attracted international scrutiny over sustainability and land‑use impacts.
Renewable diesel and HVO development is progressing more slowly, though Pertamina has begun co‑processing trials at its Cilacap refinery, producing limited volumes of green diesel and SAF.
These early steps suggest Indonesia is preparing for a future in which aviation decarbonisation becomes a major driver of demand, even if biodiesel remains dominant for now.
Cautious approach
Malaysia’s trajectory is similar in some respects, though more cautious. The country’s B20 biodiesel mandate is being rolled out gradually, with full nationwide implementation delayed by infrastructure constraints and cost concerns.
The industrial sector continues to operate under a B7 requirement. Like Indonesia, Malaysia’s biofuel strategy is closely tied to palm oil, but the government has placed greater emphasis on sustainability certification through the Malaysian Sustainable Palm Oil (MSPO) scheme. This is partly a response to international pressure and partly an effort to secure market access in regions with strict sustainability criteria.
Renewable diesel and HVO development is still at an exploratory stage, with several feasibility studies underway but no major commercial plants yet operational. Malaysia’s aviation sector is beginning to examine SAF pathways, and the country’s feedstock base — particularly used cooking oil and palm oil derivatives — positions it well for future SAF production once policy frameworks mature.
Making progress
Singapore, by contrast, has already established itself as Asia’s most advanced centre for renewable diesel and SAF production.
Neste’s refinery, now the world’s largest facility of its kind, has transformed Singapore into a global hub for waste‑ and residue‑based fuels.
The plant’s expansion to more than 1.3 million tonnes per year of renewable diesel and SAF capacity underscores the city‑state’s strategic commitment to low‑carbon fuels.
Singapore’s policies do not include biodiesel mandates, but its broader regulatory environment — particularly carbon pricing and sustainability frameworks — creates strong incentives for low‑carbon fuel adoption.
The Sustainable Aviation Fuel Incentive Scheme (SAF IS) and the decision to introduce a SAF requirement for flights departing Changi Airport from 2026, starting at 1%, mark significant steps in regional aviation decarbonisation. Singapore’s role as a trading hub also allows it to aggregate feedstocks from across Asia, reinforcing its position as the region’s distribution and certification centre for SAF.
Policy framework
South Korea is moving quickly to build a coherent biofuel policy framework. Historically reliant on fossil fuels, Korea has begun tightening its climate commitments and exploring new pathways for transport decarbonisation.
The country currently enforces a B3 biodiesel mandate, but policymakers are considering increases to support net‑zero goals.
Domestic biodiesel production relies heavily on imported feedstocks such as used cooking oil and tallow, reflecting Korea’s limited agricultural base. Renewable diesel and HVO development is gaining momentum, with refiners conducting feasibility studies for co‑processing and dedicated production units. Aviation is emerging as a major driver of policy change: the government has proposed a SAF blending mandate, potentially starting at 1%, and is developing a certification framework to support domestic production. Korean Air and other carriers have already conducted SAF trials, though most fuel is imported. Feedstock constraints remain a challenge, making regional cooperation essential for Korea’s long‑term biofuel strategy.
New innovation
Japan has taken a technology‑driven approach to biofuels, focusing on innovation, co‑processing and ambitious aviation targets. The country does not have a nationwide biodiesel mandate, and biodiesel use remains limited due to strict fuel quality standards and vehicle compatibility concerns.
However, Japan’s refiners — including ENEOS and Idemitsu — are investing heavily in co‑processing technologies to produce renewable diesel and SAF. Government subsidies and research funding support these efforts, reflecting Japan’s broader industrial strategy.
The country’s SAF target is one of the most ambitious in Asia: airlines must use 10% SAF by 2030. This commitment is driven by both domestic climate goals and international obligations under ICAO’s CORSIA framework.
Japan is also exploring diverse feedstocks, including municipal waste, algae and woody biomass, and has established several pilot plants. International collaboration is central to Japan’s strategy, with partnerships forming across the US, Europe and Southeast Asia to secure supply and harmonise certification standards.
Across these five countries, several regional trends are becoming increasingly clear.
SAF is emerging as the fastest‑growing segment of the biofuel market, driven by aviation decarbonisation commitments and international pressure. Singapore and Japan are leading the charge, while Korea is building the policy foundations needed to follow. Indonesia and Malaysia are exploring SAF but remain focused on biodiesel for now.
Feedstock availability is shaping national strategies: palm oil dominates in Indonesia and Malaysia, while Singapore, Korea and Japan rely heavily on waste and residue feedstocks.
This creates opportunities for regional trade and supply chain integration, particularly as demand for UCO and tallow increases. Co‑processing is gaining traction across the region, offering refiners a scalable pathway to produce renewable diesel and SAF without constructing entirely new facilities. Sustainability certification is becoming essential, with countries adopting or strengthening schemes to meet international market requirements and address environmental concerns. Policy mandates are tightening, from Indonesia’s B35 to Japan’s 10% SAF target, signalling a shift towards more assertive government intervention.
New opportunities
The road ahead offers both opportunities and challenges. Regional feedstock trade could strengthen supply chains and support the growth of waste‑based fuels. SAF demand will surge as aviation mandates tighten, creating new markets and investment opportunities.
Refinery conversions and co‑processing technologies offer scalable pathways for renewable diesel and SAF production. International partnerships can accelerate technology transfer and harmonise certification standards. However, feedstock sustainability remains contentious, particularly for palm oil. High SAF costs continue to hinder widespread adoption, even in markets with strong policy support.
Infrastructure gaps slow biodiesel rollout in Malaysia and Korea, and policy uncertainty affects investment decisions across several markets.
Despite these challenges, Asia’s biofuel transition is gathering momentum. Indonesia and Malaysia continue to anchor the region’s biodiesel production; Singapore has established itself as the renewable diesel and SAF hub; Korea is building a new policy framework; and Japan is pushing technological innovation and ambitious aviation targets.
Together, these countries are reshaping Asia’s biofuel landscape and playing an increasingly important role in global decarbonisation efforts. As mandates tighten and production capacity expands, the region’s biofuel market is set to accelerate, offering both opportunities and complexities for industry stakeholders.
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