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Indonesia’s needs holistic approach to sustainable bioenergy
The government needs to take an integrated, multi-sectoral approach to sustainable biofuel production in its efforts to fulfill its NDC commitments.
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ollowing the Paris Agreement in 2015, Indonesia has committed to reducing greenhouse gas (GHG) emissions by 29 percent under a business-as-usual scenario by 2030 in its Nationally Determined Contribution (NDC). It has also committed to achieving 23 percent of renewable energy (RE) in its primary energy supply by 2025.
A critical part of both efforts is biofuel, with the government targeting production of a 30 percent biodiesel blend (B30) by 2020 through to 2050, and a 20 percent bioethanol blend by 2025, to be increased to 50 percent by 2050. By 2020, however, Indonesia had achieved just 11.5 percent of its RE share, of which 35 percent came from biodiesel.
Meeting the emission and renewables targets is not just about mitigating climate change, but also about ensuring energy security. Although Indonesia is known for its rich oil resources with proven reserves of 2.44 billion barrels as of 2021, it has been a net importer since 2008.
Along with the gradual decline in crude oil production, demand has been steadily increasing, particularly in the transportation sector. As of 2018, the transportation sector’s energy demand has been dominated by oil (96 percent), of which 35 percent is imported.
Indonesia has been pushing to develop biofuel production as an answer to environmental concerns and energy security issues, especially palm oil production. Indonesia is the largest palm oil producer in the world with a production output of 40.57 million tons as of 2018. The figure accounted for more than 50 percent of the world’s palm oil output and is projected to grow 25 percent by 2029.
Further, Indonesia views palm oil as a promising export commodity. The Indonesian Oil Palm Association (GAPKI) predicts exports could reach 67 percent of total production this year. In short, Indonesia is highly confident in the sustainability of its palm oil as a sustainable feedstock oil.
However, palm oil plantation expansion is the primary driver of deforestation and land-use change (CIFOR) and contributes significantly to Indonesia’s GHG emissions. Indonesia is the fifth-largest global emitter, with emissions reaching 1,866,552 Gg of carbon dioxide equivalent (CO2e) in 2019 according to the Environment and Forestry Ministry. Of this figure, 50 percent comes from forestry and peat fires. In 2000-2018, Indonesia lost more than 9 million hectares of primary forest and almost 25 million ha of tree cover, according to environmental news site Mongabay (see graph). Nevertheless, Indonesia has continued to issue licenses that provided an additional 891,902 ha of peatland and 3.9 million ha of forests for oil palm plantation companies.
To overcome this dilemma, sustainable bioenergy production is crucial. Indonesia has issued a mandate to promote sustainable biofuel production, but only some regulations are related to sustainable production. To name a few primary rules on biofuel production, Presidential Instruction No. 1/2006 on Biofuel Supply and Utilization lays the legal foundation for biofuel development in Indonesia. Energy and Mineral Resources Ministerial Regulation No. 32/2008 features the first biofuel mandate, while the latest version is stipulated in Regulation No. 12/2015.
In relation to sustainable practices, palm oil plantations must comply with the Indonesian Sustainable Palm Oil (ISPO) certification scheme under Agriculture Ministerial Regulation No. 11/2015. But the regulation is mandatory for large-scale plantations only and not for smallholder plantations, which account for 40 percent of all palm oil plantations in Indonesia. This bias is only worsened by exempting palm oil plantations that supply the commodity for biofuel production from ISPO compliance, according to non-profit CDP.
One solution is to expand plantations on Indonesia’s 27.2 million hectares of degraded land. The high availability of degraded land in several provinces has increased the diversity of tree species that can be utilized as feedstock, while suitable climatic conditions and low labor costs highlight Indonesia’s significant potential as a bioenergy producer from degraded and marginal land (CIFOR). The government has encouraged the use of degraded forestland for biofuel crop development through Presidential Instruction No. 1/2006.
Additionally, the government should regulate plantations supplying palm oil for biofuel production and smallholder palm oil estates to comply with the ISPO. In 2020, the rules were changed to allow most palm oil plantations (including those that supply biofuel manufacturers) to comply with the certification scheme. The government should also incentivize palm oil companies supplying biofuel producers to utilize degraded land instead of open forests, a mechanism that is being considered in the New and Renewable Energy bill. Not to forget, spatial planning is also crucial to ensure the suitability of biofuel tree plantations.
Sustainable biofuel production should also be aligned with other efforts, such as the United Nations’ Reducing Emission from Deforestation and Forest Degradation Plus (REDD+). However, REDD+ projects have traditionally found challenges in practical implementation due to their vulnerability to political change and over-focus on technical matters, rather than directly addressing the driving factors of deforestation. Hence, to maximize existing REDD+ projects, result-based payments and carbon trade systems are crucial complementing strategies.
A successful case happened in May 2020, when Indonesia received results-based payment from the Norwegian government amounting to $56 million, equivalent to emissions reduction of 17 million tons CO2e. The “compensated” reduction comes from less deforestation and forest degradation in 2016-2017 compared to the previous year.
Bioenergy is an intersectoral issue that requires an integrated approach. Indonesia should carefully consider land use issues in its pursuit of clean energy to avoid a zero-sum game. Sustainable bioenergy production should thereby become the norm, particularly if Indonesia pursues its net-zero scenario.
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Shahnaz Nur Firdausi is an intern at the ASEAN Centre for Energy (ACE); Monika Merdekawati is an officer and Zulfikar Yurnaidi is a senior officer of sustainable energy, renewable energy and energy efficiency at ACE. The views expressed are personal.
