Indonesia’s Journey to Become the Largest Biodiesel Producer in The World
During the Orde Baru era, Indonesia was known as a major producer and exporter of crude oil in the world until it became a member of OPEC. However, the current condition is 180 degrees different from the past. Indonesia must import fossil fuel to meet domestic demand which continues to increase every year. In fact, since 2004, Indonesia becomes a net importer of fossil fuels.
The high dependence on imported fossil fuels has led to a higher deficit of oil and gas balance. The fluctuating global fuel prices, even increasing by almost 100 percent in 2005, also add to the economic burden that caused a domino effect on the socio-economic conditions of the Indonesian people. Therefore, the Government of Indonesia is developing biofuels based on local resources to reduce the use of fossil fuels. The issuance of Government Regulation No. 5 of 2006 is the first step in implementing the National Energy Policy.
One of the biofuels developed in Indonesia is biodiesel. The use of local resources as feedstock biodiesel in Indonesia has been developed since the 1990s by researchers. The media and the public in Indonesia were shocked by the news of the development of Jatropha biodiesel in 2007, but its development was stopped due to problems with the supply chain. Then the government redeveloped palm oil-based biodiesel, considering that Indonesia is the largest producer of palm oil in the world, so its availability is abundant at competitive prices.
To optimize the palm oil biodiesel program, the Indonesian Government also implemented a mandatory biodiesel policy in 2009 starting with B-1 in the PSO (Public Service Obligation) sector. The blending rate was increased to B-2.5 (2010-2012), B-10 (2013-2014), and B-15 (August-December 2015). Although the blending rate continues to increase and is mandatory, the realization is still far from the expected target.
Through the Minister of Energy and Mineral Resources No. 12/2015, the Government of Indonesia has become more concerned about developing the biodiesel program by setting a mandatory biodiesel target for the next few years. The government’s seriousness in developing palm biodiesel resulted in significant progress when the mandatory biodiesel B-20 was implemented in 2016, then continued for the PSO sector in 2018 and expanded to the Non-PSO sector in 2019. The strong commitment of the Indonesian government seen when implementing the mandatory biodiesel B-30 in the PSO and Non-PSO sectors in 2020.
Based on data from the Ministry of Energy and Mineral Resources, Indonesia’s biodiesel production increased from 243 thousand kiloliters in 2010 to 8.6 million kiloliters in 2020. This means that biodiesel production has increased by about 400 percent in the last 10 years. This achievement has succeeded in bringing Indonesia to become the largest biodiesel producer in the world with a production capacity of 137 thousand barrels of oil per day. Indonesia’s biodiesel production even beats the United States, Brazil, and Germany, which these countries first developed their biodiesel. Not only that, Indonesia also made another achievement to become the first country to produce and use biodiesel with a blending rate of 20% (B20) and 30% (B30) in the world.
The successful implementation of the biodiesel program in Indonesia is also inseparable from the support of the CPO Supporting Fund (CSF). The funds come from export levies which are charged for every ton of export of palm oil and its derivative products which are managed by the Palm Oil Plantation Fund Management Agency (BPDPKS) to be used, one of them for Pertamina subsidies to buy domestic biodiesel following the Purchase Index Price which has been set by the government.
However, the use of palm oil funds for biodiesel programs raises pros cons. Mansuetus Darto, Secretary-General of Serikat Petani Kelapa Sawit (SPKS), one of the parties who is quite vocal in expressing his opinion regarding the export levy policy as a source of palm oil funds used to support the funding for the biodiesel program is mostly enjoyed by the biodiesel industry, while smallholder considered not to enjoy the benefits of the palm oil funds.
A different opinion from Gulat Manurung, Chairman of APKASINDO, who stated that the export levy on palm oil provides benefits for smallholders. This is because the existence of this policy has an impact on increasing the absorption of palm oil by domestic downstream industries, one of which is the biodiesel industry. This condition is the key to stable FFB prices at the farmer level as indicated by the high Farmer Exchange Rate (Nilai Tukar Petani/NTP) for palm oil.
From a macro point of view, PASPI considers that the biodiesel program is not only able to reduce dependence on imported fossil diesel so it can improve the trade balance but this program can be considered as the anchor of the Indonesian economy because it can produce a greater multi-benefit such as increasing employment opportunities and income, as well as contributing to the reduction of carbon emissions.
However, behind Indonesia’s achievements in the global biodiesel industry, the Government of Indonesia and stakeholders should not be complacent but must remain focused on developing the Indonesian biodiesel and biofuel industry while creating benefits that can be enjoyed by all parties. Constructive criticism from opposing parties needs to be used as input for future development by involving smallholders in the supply chain of the biodiesel industry or other palm oil-based biofuel industries.
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