JAKARTA — Indonesia must develop a new feedstock alternative to palm oil as the government intensifies an ambitious biofuel program meant to move away from diesel, observers say.
From February this year, diesel sold at the pump must be a blend of 65% fossil diesel and 35% plant-based biodiesel, or B35. The currently available blend of diesel is B30, which means it contains 30% biofuel, derived from palm oil.
This intensification, set to increase to B50 by 2025, and eventually B100 — biofuel with zero fossil diesel — will invariably mean more oil palm plantations will have to be established. And with new plantations comes the associated risk of an increase in deforestation, experts warn.
“From the studies that we collected … there’s a resounding theme,” Anggalia Putri, from the environmental NGO Madani, said at a recent discussion in Jakarta. “It looks like additional lands will be needed [to meet the biofuel demand].”
She cited a 2021 study by the Institute for Essential Services Reform (IESR), an Indonesian policy think tank, that estimated 4 million to 6 million hectares (10 million to 15 million acres) of land will have to be converted into oil palm plantations to fulfill domestic and export demand for palm biofuel by 2024.
That’s in addition to the existing oil palm estate in Indonesia of more than 16 million hectares (40 million acres) — an area the size of Florida.
Indonesia is by far the world’s biggest producer of palm oil, but even so faces a challenge ensuring supplies for its ambitious biofuel program. The mandatory increase to the B35 blend next month alone will push up annual demand for palm biofuel to 13.1 billion liters (3.5 billion gallons) from 10.6 billion liters (2.8 billion gallons) in 2021.
And even if new plantations are established, there might not be enough suitable land to meet the increase.
A 2021 study, by researchers in the U.K. and the Philippines, indicates there’s less than 4 million hectares suitable for new sustainable oil palm plantations in Indonesia, but these are scattered fragments across the country, making them unsuitable for large-scale production.
Calls to diversify feedstock
Besides the threat of deforestation, relying on palm oil as the sole feedstock for biodiesel poses national energy and security risks to Indonesia, according to Rafika Farah Maulia, a researcher at the University of Indonesia’s Institute for Economic and Social Research.
“Don’t put all your eggs in one basket,” she said at the discussion in Jakarta. “When all people use palm oil-based biodiesel, there will be risks that come, both in the present and in the future. That’s why it’s important to diversify [the feedstock] to transfer the risk.”
One viable alternative that experts say should be considered is used cooking oil, which itself is made from palm oil. An analysis by Traction Energy Asia, an organization that advocates for a clean energy transition, shows that biodiesel from waste fat and used cooking oil could meet 35% of the country’s existing demand, as they’re widely available and yet mostly go to waste.
“Maybe now the supply [of palm oil] is abundant, but we don’t know the future,” Rafika said. “So we need to look for feedstock of biofuel that comes from more sustainable sources, that doesn’t compete with food, that has more stable prices and doesn’t need new lands to be opened up.”
The government says it’s considering the use of other feedstocks, as the plan is to keep increasing the use of biofuel.
“If the spirit is to increase the blending percentage, then we will need more supply of feedstock,” Herbert Hasudungan, an official in charge of the biofuel program at the energy ministry, said at the Jakarta discussion. “So indeed, we have to be open [to the use of alternative feedstock].”
Boosting productivity, restricting exports
Another solution is to boost the productivity of existing oil palm plantations to avoid having to clear land for new plantations, Anggalia said.
At present, Indonesia produces 2.8 metric tons of palm oil per hectare of plantation, or about 1.25 short tons per acre.
“In Malaysia, there’s already a cap of 6.5 million hectares [16 million acres of oil palm plantations],” Anggalia said. “With a cap, [Indonesia] will be encouraged to boost our productivity because there’s no other option.”
That avoids what she called “the easier and cheapest option,” which is to open up new plantations by clearing forests. “Maybe that’s one of the reasons why [our palm oil productivity] is stagnant,” Anggalia added.
But a key hurdle to boosting productivity is the shortage of chemical fertilizers, exacerbated by the Russia-Ukraine war; Russia is the world’s biggest fertilizer exporter.
That’s driven fertilizer prices in Indonesia to triple since early 2022, according to the Association of Indonesian Palm Oil Farmers (Apkasindo).
“As a result, 60% of farmers’ plantations use no fertilizer at all, and this has caused a reduction in the productivity of farmers’ plantations,” Apkasindo chair Gulat Manurung said as quoted by local news outlet bisnis.com. “Due to this, the national production of crude palm oil [CPO] will decrease by 5-11%.”
To ensure the availability of palm oil for the domestic market, including for the biofuel program, the government has restricted CPO exports this year.
Normally, exporters are allowed to ship eight times their domestic sales volume, but as of the start of 2023, the ratio is reduced to six times.
The Indonesian Palm Oil Business Association (GAPKI) says there are also concerns over cooking oil supply due to the biofuel program, and expects lower palm oil production in the first quarter of the year.