Asian countries agree to establish sustainable fuel supply chain with a focus on biofuels

Japan, Australia, and nine Southeast Asian countries have agreed to establish an extensive Asian supply chain geared towards the production and distribution of sustainable fuels, with a particular focus on biofuels and other renewable fuels.

The commitment was formalized during the second Asia Zero Emission Community (AZEC) Ministerial Meeting held in Jakarta, signaling a significant collaborative effort to meet aggressive net-zero emission targets, according to a statement published on Aug. 21.

The member countries agreed to develop a roadmap for establishing supply chains for sustainable fuels, including biofuels, in anticipation of growing demand for sustainable aviation fuel (SAF) in the region. The ministers also committed to sharing best practices for the production, distribution, and retail sale of cleaner fuels.

Another stated goal was to leverage substantial renewable resources, such as hydrogen and ammonia, to power their net zero transition.

The focus on renewable fuels was further highlighted by the signing of a memorandum of understanding (MoU) between local biofuel developers, including Indonesia's ABE Indonesia Berjaya, Indonesia's National Research and Innovation Agency, and Japan's Green Power Development Corporation, to produce sustainable aviation fuel (SAF) from low-grade coconut oil.

This initiative aims to tap into regional resources and expertise to create a robust SAF supply chain, to match presence of European and US producers.

The governments across the region plan to introduce emission standards, incentives, and technological advancements to drive energy efficiency. This initiative aims to harmonize climate goals with economic growth and enhance energy resilience throughout Asia.

The AZEC ministers also agreed to craft a roadmap for developing sustainable fuel supply chains, particularly focusing on biomass as more than 400 projects were announced, with significant involvement from member countries.

These efforts included the establishment of the Asia Zero Emission Center at the Economic Research Institute for ASEAN and East Asia (ERIA) in Jakarta, funded by the Japanese government. The center will facilitate information sharing, policy development, and project studies to guide decarbonization efforts.

Japanese Minister of Economy, Trade and Industry Saito Ken announced 70 new MoUs, backed by $1 billion in financial support through a global South support scheme.

Launch of the Asia Zero Emission Center

The establishment of the Asia Zero Emission Center at ERIA signifies an important step in regional collaboration. The center is tasked with sharing information, conducting studies on policies and projects, and helping AZEC members develop visions, roadmaps, and policies towards decarbonization through carbon credit markets, hydrogen, and other means.

Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto outlined a roadmap with focus on three key initiatives: creating an integrated clean energy system, transitioning to clean energy-powered transportation, and improving energy efficiency.

Hartarto highlighted the importance of developing a strong, integrated clean energy system supported by regional electricity connectivity. "Enhancing regional power connectivity is vital for a resilient and adaptable clean energy system," Hartarto said. Indonesia intends to utilize its significant renewable resources, such as hydrogen and ammonia production, to drive this transition.

The Indonesian minister also highlighted a MoU signed with Toyota Tsusho and Indonesia's state energy firm Pertamina. This collaboration is set to develop biofuels and green hydrogen, underscoring Indonesia's commitment to advancing renewable fuel technologies.

AZEC was first proposed by Japanese Prime Minister Fumio Kishida in 2022. AZEC leaders' summit is scheduled for October in Laos. The next ministerial-level meeting will be held in Malaysia in 2025.

SAF is expected to account for 0.61% of global aviation fuel consumption in 2024, up from 0.31% in 2023, according to S&P Global Commodity Insights. This is projected to rise to 3.24% by 2040 and 24.06% by 2050.

Platts, part of S&P Global Commodity Insights, assessed SAF production costs (palm fatty acid distillate) in Southeast Asia at $1,611.49/metric ton Aug. 21, down $15.38/mt from the previous assessment. The bio-bunkers Singapore LSFO was assessed up $4.80/mt on the day at $704.15/mt on Aug. 21.