Malaysia government has announced plans to promote the development of sustainable aviation fuel (SAF) from palm oil waste.
Prime Minister Anwar Ibrahim unveiled the initiative in his presentation of the 2025 budget. The state-owned Petronas will collaborate with palm oil producers, including FGV and SD Guthrie, to develop palm oil waste-based SAF.
To encourage domestic production of SAF and biodiesel, the government will introduce additional higher tax brackets for crude palm oil (CPO) exports and increase the windfall profit levy threshold for the palm sector. These changes are expected to increase costs for the palm plantation sector in Malaysia but could make the downstream palm refining industry more competitive compared to Indonesia.
The government will also allocate 100m ringgit to incentivise smallholders to replant unproductive, ageing oil palm trees in Malaysia. However, this amount may not be sufficient to support adequate replanting, as the low replanting rate has been partly due to high palm oil prices in recent years.
