Detail

Indonesia

Biofuels

Palm oil-based biodiesel

01/12/2020

Renewable energy

Bioenergy policies

Pointed out that the amendment of the country’s palm oil export levy scheme (see above) was aimed at raising additional funds in support of the country’s biodiesel policy. Proceeds from the levy’s collection would be used primarily to subsidize biodiesel producers whenever production costs of palm oil-based diesel rise above the price of regular diesel. Reportedly, during 2020, outlays for biodiesel subsidies exceeded annual levy proceeds, as the price gap between the two fuels rose significantly.

INDONESIA – biofuel policy: The revision in the structure of Indonesia’s levy on palm oil exports (see above) was introduced to increase fund raising in support of the country’s ambitious biodiesel policy, which included plans for lifting the country’s mandatory blending rate from 30 percent to 40 percent in 2021 (see also MPPU Sep.’20). Proceeds from the levy collection are used to subsidize biodiesel producers when the cost of palm oil-based diesel exceeds that of regular diesel. In 2020, as the price gap between the two fuels increased markedly, Indonesia spent more on biodiesel subsidies than it collected through the export levy (IRP 25.7 trillion versus IRP 17–18 trillion, respectively USD 1.83 billion and USD 1.21–1.28 billion), according to official estimates. Owing to the revision in the levy’s structure, the Government expects to raise IRP 36 to 45 trillion (USD 2.56–3.2 billion) in 2021 to fund both the its biodiesel programme and an oil palm replanting scheme for smallholder farmers. Regarding the allocation of biodiesel to the country’s 20 biofuel companies, the Government distributed about 8.5 million tonnes in 2020, compared with the 9.6 million tonnes planned originally. In 2021, the Government expects to allocate 9.2 million tonnes, which points to a postponement of the planned rise in the mandatory blending rate – from 30 percent to 40 percent – to after 2021. Reportedly, the Government’s more cautious approach results from an uncertain fuel consumption outlook due to the COVID-19 pandemic.