Govt Preparing Incentives for Biodiesel Commercialization

October 26, 2024

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(Antara) The government and relevant parties are currently developing financial and incentive policies to support the commercialization of biodiesel, particularly through partnerships between smallholder farmers, independent farmers, and biodiesel producers.

Director of bioenergy at the Ministry of Energy and Mineral Resources, Edi Wibowo, here (Jakarta) on Thursday (October 24, 2024) emphasized the importance of sustainable biodiesel development, especially the future implementation of B100.

He said that biodiesel development will not only involve his ministry but also the Ministry of Agriculture, the Coordinating Ministry for Economic Affairs, and other stakeholders, including palm oil companies and farmers.

"Biodiesel production heavily relies on palm oil as the primary raw material. Therefore, the role of palm oil farmers, both smallholder and independent, is crucial," Wibowo explained.

Wibowo further said that the partnership between farmers and companies must be strengthened to ensure that the biodiesel program not only succeeds in the industrial sector but also directly benefits palm oil farmers.

According to the institutional coordinator at the Directorate of Oil Palm and Various Palms of the Ministry of Agriculture, Mula Putra, the government will increase the capacity of human resources through apprenticeships and training programs for cultivators.

Data collection through the Cultivation Registration Certificate will be strengthened to improve the trade of oil palm fresh fruit bunches (FFB) and increase farmers' income through the integration of intercropping, animal husbandry, and palm oil waste utilization.

Putra expressed optimism that these measures would boost the productivity of oil palm plantation smallholders to 30–40 tons of FFB per hectare with a yield of 23–25 percent.

"The increase is expected to support the palm oil-based biodiesel program and improve the welfare of Indonesian palm oil farmers," he said. READ MORE

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Excerpt from Antara (Biodiesel Mix...): The program to increase the biodiesel mix to 50 percent, or B50 biodiesel, must be followed by a rise in domestic crude palm oil (CPO) production to maintain a balanced supply for the energy and food sectors.

A senior economist from the Institute for Development of Economics and Finance (Indef), Fadhil Hasan, delivered the remarks during a discussion here (Jakarta) on Wednesday (October 23, 2024).

"The key is increasing the CPO production in the country, be it through the use of degraded lands or other means," he said.

Hasan explained that increasing the biodiesel mix without increasing CPO production would cause a decline in exports. This is because most of the CPO would then be used to meet domestic needs.

According to him, such a fall in exports could trigger an increase in CPO prices in the international market, which could eventually push up the prices of cooking oil in the country.

He further said that the decision to increase the biodiesel mix to 50 percent needs to be considered carefully through a comprehensive study.

The B40 biodiesel policy is considered to be still applicable, while further increases could potentially cause disruptions in the global vegetable oil industry and have an impact on the domestic market.

The government has expressed Indonesia's readiness to increase the biodiesel mix from 35 percent (B35) to 40 percent (B40) by 2025, as well as making preparations for the implementation of B50.

Earlier here on Tuesday, Agriculture Minister Andi Amran Sulaiman said that Indonesia has sufficient stocks of CPO to produce B50 biodiesel.

Of the around 46 million tons of the CPO produced in the country, only 5.3 million tons are needed to produce B50.

"Our CPO production is 46 million tons. Currently, we use 20 million tons of CPO domestically and export 26 million tons. If we take 5.3 million tons (for B50), it will not be a problem," he explained.

According to the Ministry of Agriculture, the total national palm oil production reached 51.98 million tons in 2023. READ MORE

Excerpt from Antara (Need 20 mln): The Ministry of Agriculture has said that Indonesia needs to secure 20 million kiloliters of crude palm oil (CPO) production per year to implement the 50 percent biodiesel mix or B50 program.

Chair of the international marketing working team of the ministry's Directorate General of Plantations, Muhammad Fauzan Ridha, said that to achieve the B50 target, the installed capacity of the biodiesel industry needs to reach around 25 million kiloliters.

"Meanwhile, the installed capacity of our biodiesel industry is currently still in the range of 17–18 million kiloliters," he informed during a discussion here (Jakarta) on Wednesday (October 23, 2024).

The biodiesel mix still applicable in Indonesia is B35. The government has said that Indonesia is ready to increase the biodiesel mix from 35 percent (B35) to 40 percent (B40) in 2025 and is making preparations for the implementation of B50.

Ridha informed that the CPO output needed for B35 is 13.4 million kiloliters, while for B40, it is 16.08 million kiloliters.

He noted that the government is currently considering shifting export allocations for the European market to meet domestic CPO needs.

This could come in handy when the European Union implements the European Union Deforestation Regulation (EUDR), which will pose a challenge to Indonesia's palm oil product exports.

However, long-term contracts with buyers in the region could become a hindrance.

To this end, he noted that the step must be studied thoroughly so that it does not have a negative impact on the country's foreign exchange and disrupt cooperation established with trade partners in Europe and other countries.

On the same occasion, a senior economist from the Institute for Development of Economics and Finance (Indef), Fadhil Hasan, said that the program to increase the biodiesel mix to 50 percent must be followed by a rise in domestic CPO production. READ MORE

Excerpt from Dialogue Earth:

Indonesia’s coordinating minister for economic affairs, Airlangga Hartarto, told media in September that the government saved IDR 404.32 trillion between 2018 and 2022 because the mandatory use of biodiesel decreased the amount of diesel imports required.

But as the mandatory biodiesel blend rises, so too will domestic demand for crude palm oil (CPO), experts and campaigners say. This will be further fueled by newly inaugurated President Prabowo Subianto’s ambitious push to eventually implement B100, or 100% crude palm oil, in a move intended to shift the country away from reliance on imported diesel and bring Indonesia towards energy self-sufficiency.

Indonesia produced 50 million tonnes of CPO in 2023, an increase of 7% from the previous year, according to the Indonesian Palm Oil Entrepreneurs Association (GAPKI). The country is the world’s top CPO producer, with Airlangga announcing that it accounted for 54% of global exports that same year.

According to data from MapBiomas, during the past two decades, the country has seen a 145% increase in land used for palm oil plantations, from 7.2 million hectares in 2000 to 17.7 million hectares in 2022.

...

Catra de Thouars, vice chair on promotion and communication for the Indonesian Biofuel Producers Association (Aprobi), said the country’s infrastructure is prepared for implementing the higher mixes of biodiesel, and that it “will support the government whether it decides to go [with] B40 or B50,” he said. “But if the mixture reaches B50, additional production capacity is needed.”

Aprobi’s vice chair of research and technology, Jummy BM Sinaga, also said at an energy forum in August that Indonesia’s 20 million kilolitre annual biodiesel capacity was still sufficient for increasing the biodiesel mixture to B40, the trial for which is being rolled out in stages.

...

In the country’s enhanced NDC, biodiesel becomes one strategy to reduce emissions, especially from the energy sector. However, adopting a biodiesel policy to accomplish such goals could backfire. A 2017 study concluded that biodiesel policies do not provide any net climate benefits, mainly because of high emissions associated with increased pressures on palm oil expansion. READ MORE