The implications of production efficiency improvement and subsidy removal strategies during the transition to higher blends of biodiesel in Thailand’s transport sector

With the rising potential of palm oil-based biodiesel and vehicle compatibility with higher blends, Thailand’s transition to higher biodiesel blends has become critical. As subsidies are phased out under the new State Oil Fund Act and inefficiencies in oil palm production raise costs, key challenges arise. This study uses a static computable general equilibrium model to assess the socioeconomic and environmental impacts of two strategies: subsidy removal and production efficiency improvement. Policy scenarios are simulated during the transition from B10 to B20 blends and under no transition. Results show that a 10 percent shift to B20 increases GDP by 0.17 percent, boosts employment by 0.26 percent, and cuts CO2 emissions by 1.61 percent. A 5 percent production efficiency improvement slightly raises GDP by 0.01 percent but marginally increases emissions by 0.02 percent. Subsidy removal alone reduces emissions by up to 0.32 percent but negatively impacts GDP. The findings demonstrate that the transition toward higher biodiesel blends is the most significant strategy for achieving balanced socioeconomic and environmental outcomes.