It is important to differentiate between palm oil and PFAD (Palm Fatty Acid Distillate). PFAD is a processing residue from the refining of edible palm oil.
When oil palm fruit are handled, normal bruising occurs causing the fat in the fruit to start degrading. The longer it takes for the fruit to be transported, processed, and refined into palm oil, the larger part of the fats degrade. When palm oil is being refined into food grade oil, these degraded fats, free fatty acids, are removed by distilling to improve taste, odor, and color of the oil, as well as increase its shelf life.
PFAD consists of these degraded fats that are undesired for food production and need to be removed during the palm oil refining process before the oil meets the food industry’s quality standards.
The annual production of PFAD totals approx. 2.5 Mt as refining of palm oil generally yields approx. 4–5% of PFAD as a processing residue (source and all rights: Informa Economics, 2016).
In addition to biofuels, PFAD is used, for example, to produce candles, soaps, other oleochemical products, as well as animal feed.
PFAD use does not increase pressure to expand oil palm farming
Palm oil producers can get a higher price from crude palm oil than from selling PFAD. PFAD is, however, generated despite producers’ continuous efforts to improve their processes to minimize PFAD volumes and maximize the output of more valuable fractions from the refinery. Because PFAD is a non-desired output of the palm oil refining process, its use does not drive palm oil production or expansion of its cultivation, nor does it accelerate deforestation (Informa Economics, 2016).
Norwegian environmental organizations Zero and Rainforest Foundation Norway pointed out in February 2016 that “it is not likely that producers make new investments as a result of price increases of a waste product accounting for about 4% of the value of the main product. It is not likely that an increase in the price of PFAD in itself leads to an increased production of palm oil. "
Some argue that PFAD should not be considered a residue because it has market value and many uses. In circular economy, however, all residues and wastes should have an avenue to be utilized, and thus have value. The European Union and many of its members states have categorized PFAD as a processing residue, i.e. “a substance that is not the end product(s) that a production process directly seeks to produce. It is not a primary aim of the production process and the process has not been deliberately modified to produce it”.
PFAD as renewable raw material offers clear climate benefits
Using PFAD to produce renewable fuels is good for the climate and an efficient way to utilize natural resources. Neste’s renewable diesel based on PFAD and other waste and residues helps replace crude oil based diesel in transportation, and enables all diesel-powered vehicles to reduce greenhouse gas emissions by approx. 80–90 compared to conventional diesel.
PFAD provides the biofuel industry with an alternative to those raw materials that can also be used in the food industry. In turn, the biofuels industry offers vegetable oil refiners a sustainable avenue for their residue streams such as PFAD.
The majority of PFAD is exported to countries where palm oil is not a viable replacement. This applies particularly to PFAD usage in animal feed, and implies that the elastic commodity that would replace PFAD is not palm oil, but soybean oil or corn (Informa Economics, 2016).
Sustainability of PFAD
Neste buys PFAD only from those suppliers that are committed to sustainable working practices and meeting strict sustainability criteria embedded in the regulation on biofuels. These criteria include proactive approach to preventing deforestation and mitigating its risk. Neste has full traceability of the PFAD it uses to its place of origin, as the law requires.
Neste is the world’s largest producer of renewable diesel from waste and residues which currently account for nearly 80% of Neste’s usage of renewable raw materials. Besides using various vegetable oil processing wastes and residues such as PFAD, and animal fat from food industry waste, Neste currently explores the potential of other vegetable oil or animal fat processing waste and residues to be used as raw material, the use of which is challenging for other industries.
Neste invests over 70% of its annual R&D budget of over 40 MEUR to researching renewables, such as renewable raw materials like low-quality waste and residues, as well as algae and forest harvesting waste and residues. One-fifth of Neste’s employees work in R&D and the related functions.