The prospects of coconut oil in the biodiesel economy

Department of Agriculture

The adoption by the International Maritime Organization of the “2023 IMO Strategy on Reduction of GHG (greenhouse gasses) Emissions from Ships” opens up a new and highly promising business opportunity for the shipping industry, particularly those involved in the logistics and fuel side. Specifically, shipping companies can partner with agriculture companies who can venture into the production of biodiesel from coconut oil to cut dependence on fossil fuel, while obtaining carbon credits in the process.

Scientists, including experts in the Philippine Coconut Authority (PCA), have long known that coconut oil can be converted into high-grade biodiesel. In the book “Biofuels from Philippine Plants” that was published by the Asia-Pacific Biofuels Corp., it was reported that “copra has 63 to 68 percent oil, no more than 6 percent water, and a free fatty acid content of less than 1 percent.”

Moreover, the book says: “Coconut oil, cracked at high temperatures, can yield nearly 50 percent motor fuel and diesel oil …” Coconut oil could thus be a very good candidate from this viewpoint, and could become a major player in biodiesel supply in developing tropical countries like the Philippines.

On Oct. 4, 2023, the Marcos administration declared its goal of planting 100 million coconut trees by 2028. A budget of P2.4 billion is being asked to improve national coconut production, including the massive replanting to produce 8.4 million seedlings. The new trees are to be planted mostly in the Visayas and Mindanao regions.

Assuming 100 million coconut trees are planted, here are some present-day industry numbers, according to industry experts:

Assuming 100 nuts per tree per year, 100 million coconut trees would yield 10 billion nuts per year;
Eight thousand coconuts would yield one metric ton of crude coconut oil (CNO), according to the World Bank;
One MT of CNO yields 1,090 liters of coconut methyl ester (CME);
Ten billion nuts per year would yield 1.25 million MT of CNO which, in turn, would yield 1.3625 billion liters of CME per year
At the current price of P57 per liter, 1.3625 billion liters of CME would fetch P77.66 billion, or approximately $1.36 billion a year (assuming an exchange rate of P57 = $1).

When the coconut products that result from this massive replanting program are processed, a large portion of the output can be set aside for nonfood use, such as producing biodiesel to fuel the Philippine transport industry from buses to container ships.

While imported fossil diesel is seen to continue dominating the domestic fuel market for transport, the emerging bio processing technologies and climate change incentives could lead to a gradual replacement program in favor of biodiesel.

With the replanting program, it is estimated that the Philippines can easily double its production of 1.6 million tons of coconut oil per year. This doubling of output could result in the Philippines producing more hydrotreated vegetable oil, portions of which could be shared with the transport industry as 100 percent “green” fuel. On the shipping side alone, there will be opportunities to shift to the use of biodiesel. Building biodiesel storage tanks in foreign ports could be the next step.

There have also been interesting numbers on the ability of 100 million coconut trees to sequester carbon emissions, which means obtaining more carbon credits. According to the PCA, 100 million coconut trees will require 700,000 hectares planted at 143/trees per hectare. Each hectare of mature coconut trees sequesters 12.81 tons tCO2e (carbon dioxide equivalent) per hectare per year. Using this assumption, 700,000 ha can sequester close to 9 million tons tCO2e per year. Assuming one ton of tCO2e is worth $33 based on the Singapore carbon market, close to $300 million worth of tCO2e could be sequestered per year.

Huge corporations like Bayer, GSK, SAP, Standard Chartered, Unilever, among others, are in a position to advance carbon credit financing, according to carbon traders. They could perhaps be joined by large Philippine agribusiness and infrastructure companies to serve as a platform for a sustainable biodiesel industry in the country.

Miguel Z. Patolot is an author, environmentalist, and cofounder of the Philippine Futuristics Society. He was formerly the executive editor of Business Day.