TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Indonesia biodiesel policy revisited
As the world’s largest producer of crude palm oil (CPO) and also one of the biggest consumers, Indonesia has a strategic position in influencing the global vegetable oil price and shaping the market.
Change Size
Villagers passing through a palm oil plantation in Meulaboh, Aceh on March 27, 2019. Indonesia is now the leading supplier for the global market that demands more of the palm tree's oil for cooking, cosmetics and biofuel. (AFP/Chaideer Mahyuddin)
C
ontroversy surrounding palm oil never ceases. It is love and hate to the extreme. Loved for its productivity, cost-effectiveness and product versatility but hated as a result of incessant campaigning on allegations of deforestation and unfair competitiveness against other vegetable oils produced in developed countries.
Despite all nuisances, palm oil production continues to grow steadily to meet the market needs for both food and feedstocks for numerous consumer goods, even in the most hostile importing countries in Europe.
However, palm oil growth in the last few years has slowed down due to a more stringent regulatory environment and robust industry standards on new plantation development. This growth trend will eventually reach its peak in a decade when there will exist a huge gap between the supply and the market demand.
The Oil World reported that in 2020, palm oil accounted for 32 percent and soya for 25 percent of global vegetable oil production. The increasing world population will further boost demands, while vegetable oil production, especially palm oil, the cheapest, may become stagnant due to the strict regulatory and sustainability standards. Under current circumstances, the outlook of the world palm oil price will remain bullish and may reach an unprecedented level.
As the world’s largest producer of crude palm oil (CPO) and also one of the biggest consumers, Indonesia has a strategic position in influencing the global vegetable oil price and shaping the market. In 2014 to 2015 when the price of CPO was considerably lower and vulnerable because of sluggish market uptake, the government and industry players sought an innovative way to improve the market demand and subsequently shore up the price of CPO.
In June 2015, the government established the CPO Support Fund (CSF), collecting dues from the exports of palm oil, and the Palm Oil Fund Management Agency (BPDPKS) to manage the CSF with the task of fostering sustainable palm oil. The initiatives were the precursor to the formulation of mandatory biodiesel policy.
Under the biodiesel policy framework, CSF was to use the fund to finance special incentives for biodiesel production, known as mandatory B20 and B30 programs. The B20, a blend of 20 percent biodiesel and 80 percent diesel oil, was introduced in January 2016 and was welcome as it had a positive impact on the CPO price. This program was further enhanced to B30 in December 2019.
