Op-Ed: "Alternative" GHG Proposals Would Derail IMO's Climate Progress

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Published Aug 23, 2026 10:49 PM by Lukas Leppert

The shipping sector makes up 2-3% of global greenhouse gas emissions - about the same as the world’s fifth biggest emitting country, Japan. With accelerated climate warming already driving devastating impacts around the world, such as record heatwaves, flooding, wildfires and droughts, there is no doubt that the industry must rapidly lower its greenhouse gas emissions. For the shipping sector, the question is no longer whether it needs to decarbonize, but how best to meet the goals of the International Maritime Organization’s (IMO) GHG (greenhouse gas) Strategy and to reach net zero by 2050.  

Four proposals of concrete measures to lower shipping’s climate impact have been circulated among IMO member states for potential adoption at MEPC 85 in December. Among them is the IMO’s long-negotiated compromise agreement, the Net-Zero Framework (NZF).

While not perfect, the NZF has received broad political support from IMO member states, and remains the best tool available to meet the IMO’s GHG Strategy goals on climate, decarbonization and a just and equitable energy transition for the shipping industry The result of multiple rounds of negotiations, the NZF is already by any measure an acceptable compromise. Any further weakening would lead to a less effective, slower, and costlier transition.

The NZF includes a “global fuel standard” (GFS), which requires ship operators to gradually decrease the amount of greenhouse gas emitted by shipping fuels - or pay penalties. The framework also introduces a mechanism that puts a price on the greenhouse gases ships emit, giving the industry a clear financial incentive to reduce emissions in line with the global fuel standard.

Back in May, my colleague John Maggs wrote that the “IMO’s Net-Zero Framework is back on track”, but that supporters must remain “vigilant and strong in order to parry inevitable future attacks and attempts to further delay the process of adoption, which is scheduled for early December”.

With the next round of negotiations, the IMO’s Intersessional Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 22), coming up next week, those threats have materialized in the form of “alternative” proposals from a number of IMO member states. Having analyzed the available proposals, the Clean Shipping Coalition has found two of them unfit for decarbonization: those submitted by Liberia and Japan.

Liberia

Instead of setting reduction targets on a path to net zero, the submission from Liberia - the world’s largest flag state - would allow ships to stick to conventional fuels if they think cleaner alternatives are too costly or unavailable.

Additionally, Liberia’s proposal puts greater emphasis on trading of surplus units, while removing the idea of mandatory payments into a Net-Zero Fund. Without reduction targets or financial incentives, this would not cause a shift in the shipping sector beyond business-as-usual, while the lack of available funds would make it impossible to address disproportionately negative impacts on states.

Liberia’s proposal constitutes a fundamental redesign which will fail to deliver on the goals set out in the 2023 IMO Greenhouse Gas Strategy.

Japan

Japan's proposal would not deliver on the goals set out in the GHG Strategy 2023. Japan has put forward a questionable alternative to compliance payments flowing into a centralized fund, which would allow shipowners to direct payments to projects of their own choice.

Without safeguards and oversight from a governing board, such a system risks creating a scheme where money is invested into projects that look good, but achieve little. This system would divert necessary investments from zero or near-zero (ZNZ) technologies and fuels, which require support and incentives early in the transition, and instead support incremental dead-end ‘solutions’ involving fossil fuels like LNG, or biofuels, causing a technological lock-in and sunk costs.

Furthermore, a central fund administered by the IMO or another independent body and sufficient contributions to it are key to enable a just and equitable transition. In order to leave no one behind, states facing disproportionately negative impacts - like small island developing states and least developed countries - need financial support, which they made abundantly clear at previous negotiations. Japan's proposal would lose the support of one group of states in an attempt to appease another.

Japan’s proposal also carries serious procedural risks. As it wasn't circulated six months ahead of the meeting (as is the normal requirement), it cannot be adopted under normal rules at MEPC 85. 

The IMO already delayed its planned timetable of establishing a climate framework for global shipping in 2025 by adjourning MEPC ES.2 for a year. By diverting attention from circulated proposals, the submission from Japan risks throwing the IMO further off-course.

Getting to the Net-Zero Framework is the result of multiple years of negotiations. The result is based on a Comprehensive Impact Assessment, and has the ability to deliver on the goals of the IMO GHG Strategy 2023. Now is the moment for the IMO and all its member states to have the courage to protect and adopt the Net-Zero Framework “as is”.

Lukas Leppert is President of the Clean Shipping Coalition.

Solar overtakes hydropower in the EU electricity mix for the first time

Fossil fuels fell to 28.6% of EU generation in 2025 and renewables reached 48.1%. The milestone inside those numbers is that solar has passed hydro, Europe's oldest power source. / bne IntelliNewsFacebook

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By Ben Aris in Berlin August 19, 2026

Solar panels generated more electricity in the European Union than dams did in 2025, the first time that has happened, according to the latest data from Eurostat.

The margin was almost nothing - 346,819 GWh of solar against 346,244 GWh of hydro, a gap of 575 GWh, or about four hours of French demand. Both came to 13.0% of EU generation.

The difference in output is still small, but the pace of the change is not: EU solar output has more than tripled since 2017, when it was 104,317 GWh, while hydro fluctuates with rainfall and has no trend at all.

Share of net electricity generation by fuel, 2025. Source: Eurostat nrg_cb_pem.

Fossil fuels supplied 28.6% of the EU's 2,667 TWh, nuclear 23.3%, wind 17.7%, then solar and hydro tied at 13.0% and biofuels 4.0%. Taken together renewables reached 48.1%, and wind and solar alone made 30.7% - more than fossil fuels.

Coal is the source doing the disappearing. EU coal-fired generation fell from 574,375 GWh in 2017 to 245,053 GWh in 2025, a drop of 57% in eight years. Gas has not filled the gap so much as held station, at 449,213 GWh against 360,046 GWh in 2017.

Nuclear is the quieter story. At 620,874 GWh it is down 17% on 2015, but it has recovered from the 2022 trough of 577,593 GWh, when France's corrosion-related outages coincided with Germany's final shutdowns. It remains the single largest low-carbon source in the bloc, ahead of wind.

What the chart shows better than the aggregate is that there is no European electricity system, only 27 national ones that happen to be wired together.

The spread runs from Malta at 83% fossil-fired to Sweden at 1%. Between them sit two different kinds of country. Poland, at 67% fossil, is the largest economy still built on coal. Cyprus and Malta are small island systems with no interconnection to speak of and nowhere to put a dam. Greece at 54% and Italy at 51% still lean on gas.

At the other end the low-fossil countries got there by three different routes, and none of them is the one Brussels talks about most. France is at 67% nuclear. Slovakia is at 66%. Austria is at 51% hydro, Latvia 51%, Sweden 41%. Only Denmark, at 60% wind, is a case of a country building its way to a clean grid rather than inheriting one.

Sixteen of the 27 are below the EU average for fossil fuels, which means the average is being dragged up by a handful of large, carbon-heavy systems rather than reflecting a typical member state.

Germany is the interesting middle case: 42% fossil, but also 30% wind and 20% solar, and zero nuclear since the last three reactors closed in April 2023. It generates more wind power than any other member state by a wide margin and still burns more fossil fuel than any of them too, because it is simply very large - 447 TWh, second only to France's 553 TWh.

Fifteen of the 27 member states now generate no nuclear power at all. That list includes Germany, Italy, Poland, Denmark, Austria, Ireland and Portugal, and it is the reason the nuclear share of the EU mix keeps slipping even as French output recovers.

Hungary, at 28% solar, has the highest solar share in the bloc - a fact that surprises people who assume the answer is Spain, which is at 19%. Estonia gets 21% of its electricity from biofuels, mostly wood, the highest in the EU and a reminder that the country's oil shale industry is being replaced by something that is renewable on paper but still involves burning things.

 

Coconut-blend fuel vs. jet fuel: Engines can’t distinguish, the environment can

Original coconut-blend fuel performed similarly to jet fuel with reduced hydrocarbon emissions

Osaka Metropolitan University

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Coconut oil is processed into SAF, which is chemically similar to the commonly used jet fuel JET A-1.

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Credit: Osaka Metropolitan University

With airlines and consumers increasingly concerned about carbon, nitrogen, and hydrocarbon emissions, biofuels have emerged as a green alternative. Among these, those made from coconut oils are particularly attractive as they have fatty acid chain lengths similar to the hydrocarbon chain lengths required for jet fuel, suggesting that they could make effective fuels with minimal processing.

Now, using a unique co-solvent method, a team from Osaka Metropolitan University has created a coconut oil-based fuel that could be added to jet fuel without lowering performance.

The co-solvent method combines coconut oil extracts with acetone and alcohol. This process allows fuel to be produced under ambient temperature and pressure, reducing energy consumption and ensuring purity during manufacturing. They created two biofuels that could potentially be added to conventional jet fuel: FAME using methanol; and FAEE using ethanol.

To investigate the ideal blend, they varied the ratio of FAME and FAEE with Jet A-1, a conventional jet fuel. The researchers wanted to find the ideal ratio that balanced fuel consumption, thermal efficiency, and exhaust gas emissions using a small turbojet engine.

They found that despite increases in fuel consumption as the biofuel blending ratio increased, which was likely due to differences in the heating values of the two fuels, thermal efficiency remained comparable to that of Jet A-1.

Their trials also showed a decrease in hydrocarbon emissions as well as no significant changes in CO₂ or NO emissions, two pollutants that are largely responsible for the carbon and nitrogen footprints of airlines.

“The experiments showed that our fuel blend can operate in existing gas turbine engines without major loss of efficiency or engine performance, and without increasing emissions,” Dr. Huynh Phuong Uyen Nguyen of the Graduate School of Sustainable System Sciences summarized.

The findings could be especially important for Asian countries. In Southeast Asia, approximately 30% of harvested coconuts are discarded because they do not meet commercial standards, creating a potential source for biofuel production, especially as the region is at risk of fuel shock.

“In the future, we want to improve fuel consumption performance and establish technologies for operating engines on 100% biofuel,” Dr. Ogawa said. “Looking ahead, we also want to advance the practical application of this fuel by improving its long-term storage stability, material compatibility, and environmental impacts through life cycle assessment.”

The study was published in Fuel.

###

About OMU

Established in Osaka as one of the largest public universities in Japan, Osaka Metropolitan University is committed to shaping the future of society through the “Convergence of Knowledge” and the promotion of world-class research. For more research news, visit https://www.omu.ac.jp/en/ and follow us on social media: X, Instagram, LinkedIn.

---

Journal

Fuel

DOI

10.1016/j.fuel.2026.140208 

Method of Research

Experimental study

Subject of Research

Not applicable

Article Title

Combustion and emission characteristics of aviation biofuel derived from coconut oil using the co-solvent method: toward eco-friendly micro jet engines

Mexico races to clear record seaweed surge from Caribbean beaches

By Paola Chiomante
Fri, August 14, 2026
REUTERS


FILE PHOTO: Members of the Mexican Navy collect sargassum seaweed from a beach in the hotel zone in Tulum, Mexico, July 22, 2026. REUTERS/Paola Chiomante/File Photo

PLAYA DEL CARMEN, Aug 14 (Reuters) - Mexico is scrambling to contain a record surge of foul-smelling sargassum along its Caribbean coast, as the brown seaweed swamps ‌beaches in the heart of the country's tourism belt.

Officials in Quintana Roo, home to resort ‌destinations including Cancun, Playa del Carmen and Tulum, have cleared more than 105,000 metric tons of sargassum so far this year, ​according to data released this week, a figure that already exceeds last year's record 92,783 tons.

The haul also puts the state on track to blow past earlier projections for 2026 and deepen what officials have described as one of the worst sargassum seasons on record. Authorities had previously estimated that about 119,000 ‌tons could wash ashore this year.

Scientists ⁠say the outsized blooms are being fueled by a mix of nutrient-rich runoff — including fertilizer-linked nitrogen and phosphorus, particularly from agricultural powerhouses such as Brazil — and ⁠shifting ocean conditions. The seaweed's buildup on beaches can drive tourists away as it releases hydrogen sulfide gas as it rots that irritates nasal airways.

The season could last until early or mid-October, though forecasts remain uncertain, said ​Oscar ​Rebora, Quintana Roo's environment minister.

"It will depend on winds, ​currents and tides," Rebora said, adding that ‌the latest tally was current as of Tuesday. Playa del Carmen has recorded the largest volume collected so far, he said.

For workers charged with clearing the beaches, the seaweed has become an almost constant presence. In Puerto Morelos, cleanup worker Vitinia Villamontes said sargassum had been arriving without letup.

"This year it didn't stop. From July to July, sargassum kept arriving," she said. "It's basically impossible to keep it ‌under control this year."

Sargassum has increasingly inundated parts of the ​Caribbean over the past decade, fouling once-clear beaches and threatening ​the tourism industry that underpins much of ​Quintana Roo's economy.

Some companies say creating a market for the algae could help ‌offset the high cost of collection.

"We believe ​one of the strategies to ​mitigate the sargassum problem is creating value from it," said Sebastian Aguilar de Alba, technology and innovation director at Carbonwave, which processes sargassum into liquid biostimulants and fertilizers.

Mexico's environment ministry ​has previously identified dozens of projects ‌that could turn sargassum into products including fertilizers, biofuels and bioplastics. Backing for commercializing ​sargassum remains limited, however, with most public funds still aimed at cleanup.

(Reporting by Paola Chiomante, ​Writing by Daina Beth Solomon and Andrea Ricci)

Mexico Is Betting on Biofuel to Tackle Its Seaweed Crisis

By Felicity Bradstock - Aug 15, 2026

• Mexico is experiencing a record sargassum season, with peak landings on Quintana Roo beaches reaching roughly 9,000 tonnes per day in 2026.
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• The government is investing heavily in offshore collection vessels, containment barriers and greater collection capacity in an effort to intercept more seaweed before it reaches tourist beaches.
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• Researchers and businesses are developing uses for harvested sargassum ranging from fertilizers and biofuels to bioplastics and construction materials.
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Over the past 15 years, Mexico has faced a severe seaweed problem, with vast quantities of a brown seaweed known as sargassum washing up on beaches along the Caribbean coast and hitting the tourism industry hard. Researchers are yet to find an effective way to prevent the seaweed from washing ashore or to effectively predict its movement. As the Mexican government attempts to manage the huge quantities of seaweed each year, researchers are exploring potential uses for the algae, such as biofuel or fertiliser.

As much as 9,000 tons of seaweed is washing up on Mexico’s beaches every day along the Caribbean coast, a popular spot for tourists who contribute heavily to the region’s revenue. Governments across major destinations such as Cancun, Tulum, and Playa del Carmen are fighting to keep beaches clean by using industrial equipment, such as diggers, to clear the seaweed so visitors can continue to use the beaches and swim in the sea. However, this is a daily battle and annual expenditure on sargassum management stands at around $2 billion, roughly equivalent to 11 per cent of the local GDP.

Sargassum smells like rotten eggs and releases methane as it decomposes. While it is not thought to significantly threaten public health, it can affect the health of vulnerable populations and workers who are regularly exposed to the seaweed. Meanwhile, tourists often avoid beaches where the seaweed washes up because of the smell, the inability to swim, and the weed’s visual impact. This has driven many visitors to explore alternative destinations that have not yet experienced sargassum problems, such as Mexico’s Pacific coast.

In July, Mexico’s President Claudia Sheinbaum announced a $115 million plan to combat surging sargassum in the Caribbean. The government plans to deploy two large ships to capture the seaweed before it reaches the coast. Mexico’s navy is also expected to install 30 miles of containment barriers to trap the sargassum at sea in the most critical areas, including Playa del Carmen, Cancún, Tulum, Puerto Morelos and Mahahual.

Meanwhile, workers will continue to shovel up the seaweed that does make it to shore. “The effort so far has been titanic, but we have to do more to prevent sargassum from reaching the beaches,” Sheinbaum said.

Mexican authorities and the private sector currently have the capacity to collect almost 2,200 metric tonnes of sargassum each day at sea and on beaches. The government intends to increase this capacity to around 4,000 tonnes by 2027. In addition, the government is partnering with Japan to tackle the problem. Japan will provide ocean-monitoring technology, specialised equipment including robotics and sensors, and financial cooperation as part of clean-up efforts.

Sargassum has become a major problem in several regions, with parts of the Caribbean and South Florida also reporting large quantities of the seaweed on their shores. As part of the project between Mexico and Japan, researchers will explore the potential to convert the sargassum into commercially viable products, such as fertiliser, biofuels, building materials, and soap, which could help these regions regain access to their beaches.

Mexico’s Environment Minister Alicia Barcena said that out of almost 200 sargassum-related projects, at least 11 had the potential for scaling up industrially and 39 were already making products, including fuel, fertilisers, laminates, and bioplastics to produce sandals.

In July 2025, the Quintana Roo state government announced plans to develop a new facility to monitor and manage Mexico’s sargassum and eventually convert it to biofuel. A Dutch consortium will finance, construct, and operate the Sargassum Centre with the aim of developing new technologies for the biodigestion of sargassum and organic waste to produce biomethane. If successful, it could provide the blueprint for other regions dealing with sargassum to follow.

The chemical composition of the sargassum found along Mexico’s Caribbean coast could also make it suitable for use as an agricultural input. A 2026 assessment by the Inter?American Development Bank (IDB) and the Mexican Institute for Sustainable Fisheries and Aquaculture Research studied the seaweed closely to better understand its potential as an economic opportunity rather than a burden.

Researchers from the Technological Institute of Santo Domingo and the IDB have developed methods to produce energy from sargassum while separating the arsenic contained in the algae. Mexican government departments and university research centres are also exploring the potential to use sargassum as an organic construction material to produce blocks, bricks, paving stones, and asphalt mixtures.

Mexico has invested heavily in cleaning up the huge influx of sargassum over the last decade. Now, the government and private sector hope to effectively analyse the brown seaweed to better understand its potential as a biofuel, fertiliser, or other product, and to develop economic opportunities from something that has so far been seen as a plague that disrupts regional tourist activity and revenue.

By Felicity Bradstock for Oilprice.com

Electric Aviation Won't Kill Jet Fuel - But It Could Take the Best Routes First

By Leon Stille - Aug 15, 2026

• Electric aviation is moving from prototypes toward real operations much faster than its tiny share of today's fleet suggests, with eVTOLs, certified electric trainers and larger regional demonstrators progressing in parallel.
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• Jet fuel will remain essential for long-haul aviation for years because batteries still carry a severe energy-density penalty. But on short routes, electric propulsion offers an efficiency, noise and operating-cost proposition that liquid fuels may struggle to match.
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• Oil displacement will start slowly because aviation fleets turn over slowly and certification is demanding. Yet at today's airline fuel consumption, every 10% of fuel demand eventually displaced by electricity would equal roughly 0.7 million barrels per day.
• 
  

Aviation is often treated as one of oil's safest remaining markets. In 2026 that still looks like a reasonable assumption. Airlines are expected to consume around 104 billion gallons of fuel this year, sustainable aviation fuel remains below 1% of total use, and virtually every commercial passenger aircraft in service still depends on liquid hydrocarbons.

But that view risks making the same mistake the oil industry made with cars: looking at the installed fleet rather than at the technology competing for the next route.

On July 30, Archer's all-electric Midnight aircraft flew from Salinas to Monterey and back, taking roughly nine minutes each way. It was a piloted, coordinated flight, not the start of an autonomous urban air-taxi network. Archer itself is still working through certification, while its partners are participating in the FAA's eVTOL Integration Pilot Program.

That distinction matters. But so does the speed of progress. Electric flight is no longer a laboratory curiosity. The more interesting question for oil markets is what happens when batteries begin winning the parts of aviation they are actually suited to serve.

The Electric Aircraft Is No Longer the Science Project

The first fully electric aircraft was type-certified by EASA back in 2020. The Pipistrel Velis Electro is only a two-seat trainer, but it proved that an electric aircraft and propulsion system could pass a commercial certification process.

The technology is now moving up the scale. In 2025, EASA certified Safran's ENGINeUS 100, an electric motor platform intended to extend into applications of up to 19 seats. Heart Aerospace is developing its 30-seat ES-30, with a claimed 200-kilometre all-electric range and type certification targeted for 2031. Archer, meanwhile, is pushing the completely different eVTOL model into supervised real-world operating environments.

These aircraft will not replace a Boeing 787. They do not need to.

Road transport electrification did not begin by replacing every vehicle category at once. Buses, passenger cars and increasingly trucks electrified as battery economics and charging became suitable for each use case. Aviation is likely to be similarly uneven. Training, short cargo missions, island routes, air taxis and regional passenger services are the obvious early markets because their energy requirement is bounded and their aircraft return frequently to known infrastructure.

Where Batteries Work, the Economics Are Difficult to Ignore

The attraction is not simply that an electric aircraft has no tailpipe emissions. It is that electricity is a remarkably efficient way to produce motion. NASA is developing aviation electric machines with efficiency above 98%. Electric propulsion also offers fewer mechanically complex combustion components, lower noise and the possibility of using locally generated electricity instead of a globally traded refined oil product.

That last point looks more valuable in 2026 than it did a year ago. Middle East disruption has pushed IATA's expected average jet-fuel price for this year to $152 per barrel, around 70% above 2025, adding roughly $100 billion to the industry's fuel bill. Electricity is not immune to energy shocks, but an aircraft charged from a diversified domestic power system is not directly exposed to crude prices, refinery margins, tanker routes or a closure in the Middle East

This is where the comparison with electric cars becomes relevant. Hydrogen and synthetic fuels can technically power road vehicles. Biofuels can technically replace gasoline and diesel. But battery-electric cars increasingly won the efficiency argument because converting electricity into a fuel and then converting that fuel back into motion throws away energy and adds infrastructure.

I suspect the same will happen in aviation - but only within the range envelope where batteries work.

Jet Fuel Still Has One Enormous Advantage

The strongest objection to battery aviation is also the correct one: weight.

Jet fuel contains vastly more energy per kilogram than today's batteries, and an aircraft becomes less efficient every time extra mass must be carried into the sky. A NASA study of a notional 19-passenger electric aircraft found that roughly 600 Wh/kg at cell level would be needed to achieve a 250-nautical-mile mission with reserves - more than twice the capability assumed for then-current lithium-ion cells.

That is why sustainable aviation fuel will not follow hydrogen cars into irrelevance. Long-haul aviation needs dense liquid energy, and SAF has the huge advantage of working with aircraft and infrastructure that already exist. In 2026, however, global SAF supply is expected to reach only 2.4 million tonnes, or 0.8% of aviation fuel use. It also remains expensive.

So the likely outcome is not batteries versus SAF across all aviation. It is batteries taking the routes where electricity is technically sufficient, while SAF and eventually e-fuels fight for the much larger aircraft and longer routes where batteries remain impractical.

On those short routes, liquid fuels may eventually find themselves in the same uncomfortable position as hydrogen in passenger cars: technically possible, but economically hard to justify.

Oil Displacement Will Be Slow - Until It Isn't

The near-term oil impact should not be exaggerated. The global aircraft fleet is old enough to need renewal, but replacement is painfully slow. IATA says the aircraft order backlog has passed 18,000 units and the average fleet age has reached a record 15.2 years. Most of those aircraft on order still burn jet fuel. Certification, charging infrastructure, battery supply and airport operating procedures will slow electric adoption further.

Archer illustrates the point perfectly. The aircraft can fly. Scaling dozens or hundreds of them through constrained urban airspace, charging them quickly, turning passengers around and operating economically is a different challenge. The FAA is already building dedicated research infrastructure to study issues including vertiport operations, wake separation and downwash.

But slow adoption should not be confused with small long-term consequences.

IATA's 104 billion gallons of expected 2026 airline fuel consumption equates to roughly 6.8 million barrels per day. Electrifying just 1% of that fuel demand would displace about 68,000 barrels per day. At 10%, the arithmetic becomes roughly 0.7 million barrels per day. That is not a forecast, and today's eVTOL market will displace only a fraction of it. It simply shows why oil markets should watch regional electric aviation long before electric aircraft appear at major international gates.

Electric aviation does not have to conquer the sky to matter for oil. It only has to become the obvious choice on the routes batteries can reach. If the economics develop anything as they did on the road, that may happen faster than the existing fleet suggests.

By Leon Stille for Oilprice.com

 

India's edible oil self-sufficiency drive faces headwinds

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By IntelliNews August 6, 2026

India relies heavily on edible oil imports. More than half of the country’s edible oil consumption is met through imports. The ongoing conflict in the Middle East, along with deficient rainfall, has raised concerns in India’s edible oil market, according to a recent report published in OpenMarkets, a global market insight platform of the CME Group.

According to the Indian Meteorological Department, this year’s monsoon season is expected to witness below-normal seasonal rainfall over most parts of the country. India has seen rising prices of palm, soybean and sunflower seeds needed to make cooking oil. Another fallout of the Middle East conflict has been a sharp rise in crude oil prices, another commodity that India imports in significant quantities. Higher crude prices have prompted economists to trim this year’s GDP growth numbers to 6.6% from 7.7%.

The current economic situation risks derailing plans by the world's most populous nation to double domestic edible oil production to roughly 25.5mn metric tons by 2031, the report said. Under its National Mission on Edible Oils programme, New Delhi is aiming to reduce its dependence on imports from Indonesia, Malaysia, Brazil, Russia and Ukraine and establish self-sufficiency to a large extent.

The plan is to increase acreage under oilseeds to 33mn hectares up from 29mn hectares, and the use of more innovative harvesting methods. India’s heavy reliance on edible imports (56% vs. 15% in 1995) means New Delhi does not have much room to negotiate prices given the supply chain bottlenecks that have emerged due to the Middle East conflict, the OpenMarkets report stated, citing a study by Indian think tank Observer Research Foundation (ORF).

The ORF said that India's edible oil demand has been increasing at an average annual rate of 4.3%, outpacing domestic oilseed production, which has grown by only 2.2% a year. The widening gap between consumption and output has increased the country's dependence on imports. ORF added that recurring rainfall shortfalls have further heightened India's vulnerability to swings in global edible oil prices and supply chain disruptions.

As petroleum prices rise, farmers are suffering from higher raw input costs, such as fertilisers, that may not be entirely compensated by domestic Minimum Support Price (MSP) government subsidies. If this continues, farmers may be discouraged from long-term oilseed cultivation, potentially undermining the national expansion plan, according to the ORF.

Palm, soybean and sunflower oil, meanwhile, have surged 23%, 11% and 8% since the conflict began in late February, hurting importers who were already suffering under India’s weakening rupee, the report added. 

In an effort to stabilise domestic prices, India could roll out so-called price-triggered tariffs that rise when foreign prices drop below a benchmark and decrease when global prices increase, according to the ORF. Currently, import duties stand at a flat rate regardless of market dynamics. 

An industry analyst, quoted in the OpenMarkets report, said Indian oilseed farmers remain exposed to volatile international edible oil prices because imported oils are often cheaper than domestic production. The analyst noted that the small scale of most farmers' operations limits their ability to lower costs and compete effectively with overseas suppliers.

The analyst suggested that the government adopt a flexible import tariff mechanism under which duties would increase when global edible oil prices are low to improve the competitiveness of domestic produce for bulk buyers and reduce when international prices increase.

The analyst further proposed setting up Special Oil Zones (SOZs) as dedicated trade and logistics hubs at India's ports to improve the efficiency of the edible oil supply chain. The analyst also suggested that India strengthen its edible oil security by partnering with other countries to develop offshore oilseed cultivation, creating a more integrated and resilient global supply chain.

The report stated that for now, the situation looks increasingly difficult, especially as Indian farmers are already paying much more for key fertilisers, such as urea and ammonium phosphate, than they did in February.

The Indian government is already working to rescue the sector by pledging to hike the MSP, especially for sunflower seed, where production lags.

Recent developments in major palm oil-producing countries, Indonesia and Malaysia, could also potentially squeeze Indian importers, the report said. The two Southeast Asian countries plan to increase biofuel output to benefit from higher margins.

Indonesia has mandated that 50% of palm-based biodiesel be blended with regular diesel, up from 40%. Malaysia, meanwhile, is also transitioning to B12 (12% palm / 88% petroleum) from B10 and plans to gradually boost it to B15.

The Reserve Bank of India (RBI) has also expressed concerns about the development in Southeast Asia. The RBI in its July Bulletin has attributed the rise in edible oil prices to widespread diversion of edible oil in the biofuels sector. A footnote in the Bulletin cited Indonesia’s increase in its palm oil biodiesel blending mandate from B40 to B50, according to a report by The Deccan Chronicle.

Rising edible oil prices have a significant impact on India's retail inflation, as edible oils carry a 2.18% weight in the country's Consumer Price Index (CPI) basket. Any sustained increase in edible oil prices can therefore contribute to higher overall consumer inflation.