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View all search resultsUncertainty over mandate, subsidies clouds biofuel future
Without mandatory government blending program and subsidy mechanisms, the biodiesel market would not be commercially viable, experts say.
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A worker carries oil palm fruit bunches on April 27, 2022, which will be transported to crude palm oil (CPO) factories in Pekanbaru, Riau. (Reuters/Willy Kurniawan)
A
s policymakers remain in discussion over the planned implementation of a mandatory requirement for 50 percent palm-oil-derived fuel in biodiesel (B50) next year, questions are mounting about the local industry’s readiness to meet the rising demand.
Experts suggest that, without a clear mandate and significant government subsidies from the state budget, the expansion of biodiesel is unlikely because of its higher cost compared to alternatives.
Ahmad Rahma Wardhana, a researcher at Gadjah Mada University’s (UGM) Center for Energy Studies (PSE UGM), said investor confidence in building more biofuel processing facilities does not rest solely on whether B50 is implemented next year, but more on broader regulatory coherence.
He pointed to the delayed enactment of key regulations, such as the new and renewable energy law, the revision of the Government Regulation on the National Energy Policy (KEN) and the Presidential Regulation on the National Energy General Plan (RUEN).
A 2021 report from the Institute for Essential Services Reform (IESR) revealed that the success of the country’s mandatory biodiesel program heavily relies on government subsidies across the supply chain, from the pricing of Fatty Acid Methyl Ester (FAME) to tax incentives for producers and fertilizer support for palm oil farmers.
“Without the government’s hand through mandatory blending and subsidy mechanisms, the biodiesel market would not be commercially viable,” Ahmad told The Jakarta Post on Monday.
The Energy and Mineral Resources Ministry previously stated that five large-capacity biodiesel plants are needed to support the B50 rollout, but only three are currently under construction. The ministry also acknowledged that infrastructure is unevenly distributed, with a particular need for new facilities in eastern Indonesia.
