Asia Scrambles to Produce Biodiesel

China, Malaysia and Indonesia are ramping up biodiesel production, but skyrocketing demand is a boon to some producers while wreaking havoc with others.

China has a goal of processing 12.4. million tons of biodiesel this year. Demand across Asia has more than doubled the price of palm oil as a feedstock, which has forced several producers to shut down because they can't sell the fuel for more than its production cost.

For companies that are producing biodiesel from lower cost jatropha plant, however, the high demand is prompting rapid expansion. China Agro-Technology will invest $200 million during the next four years in a new plant in Beihai, China. The company expects a healthy profit of $350 per ton of biodiesel.

Other Chinese companies participating in the jatropha gold rush include China Clean Energy, Sinopec and China Biodiesel International Holding. Jatropha has the advantages of not competing with food crops and a higher yield per acre than popular alternatives rapeseed and soybeans.

Biodiesel demand is also troubling financial markets and crops elsewhere. The head of U.K.-based biofuels company D1 Oils recently quit, blaming investors on undervaluing his company because it was being assessed alongside companies that used less sustainable feedstock from rapeseed and soy.

In Africa, planters are growing jatropha in such large quantities that non-government organizations fear it will diminish food crops, and several have called for a moratorium on biofuels investment there.