By Fariz Panghegar. This op-ed was originally posted on The Jakarta Post.
Indonesia’s ambitious biofuel program, which promotes the use of increasingly higher mixes of crude palm oil (CPO) with conventional diesel — currently 30 percent (CPO/diesel) — has become one of the key contributors to Indonesia meeting its carbon–emissions–reduction target, as well as reducing its reliance on expensive oil imports.
During a recent Group of 20 webinar, an official from Indonesia’s Energy and Mineral Resources Ministry (ESDM) stated that “biofuels are vital for the development of a green economy to achieve a just, equitable and people–centered energy transition”.
According to ESDM Indonesia produced 16.3 million kiloliters (kl) of B30–biodiesel in 2021, a significant increase from 13.3 million kl in 2020, giving the government the confidence to scale up the biofuel program and funding. The development of a pilot green–refinery program is underway in Cilacap, Central Java, with the first phase of the project aiming to produce Hydrotreated Vegetable Oil (HVO) or Green Diesel, a second–generation biodiesel product from Refined, Bleached and Deodorized Palm Oil (RBDPO).
While these positive claims and developments paint a rosy picture, Indonesia still needs to overcome several challenges and close some gaps to improve the positive impact of its biofuel program, including the potential for unsustainably produced CPO feedstock to emit more CO2 compared to fossil diesel.
As Indonesia’s biofuel program is still heavily dependent on CPO as the sole feedstock, this has exposed the program to external pressures such as fluctuating prices for CPO and other energy commodities, contributing to ordinary consumers having to pay much higher prices for cooking oil. As a result, in our efforts to reduce the cost of fossil–fuel imports, we risk bearing higher costs caused by surging CPO and oil prices.
Another major concern is that should Indonesia continue its ambitious biofuel program, while still lacking any robust sustainability standards for biofuel, and continue to rely on CPO as a single feedstock, there is a high risk of increased deforestation to source the CPO needed to supply the biodiesel program. The large expansion of palm oil plantations, from 8.6 million hectares in 2006 to 15.4 million hectares in 2019, which coincided with the launch and early development of Indonesia’s biofuel program, highlights the risks of relying on a single feedstock for biodiesel.
The University of Indonesia’s Institute for Economic and Community Research (LPEM UI) 2020 analysis also concluded that the B30 program could face a CPO deficit, which could in turn trigger a further 5.2 million hectares of land clearing to grow the palm oil needed to meet the demand for biodiesel feedstock.
The risk of land conversion and deforestation to source CPO is likely to increase further if plans to increase the biofuel mix to B40 and to supply aviation fuel go ahead, especially if CPO is still the sole feedstock. The increased emissions from land clearing and deforestation to grow more CPO for biofuel directly contradicts the government claim that the biofuel program contributes to Indonesia’s efforts to reduce greenhouse emissions and meet its international climate commitments.
If the primary purpose of the biofuels program was to contribute to Indonesia’s climate commitments and accelerate the transition to clean energy, then it would have been logical to first develop robust biofuel–sustainability indicators. These indicators would provide safeguards against feedstock production for biofuel producing higher–carbon emissions from deforestation and other land clearance — especially high–carbon peatland.
It is crucial to diversify the feedstock supply for biofuel. Indonesia has a ready and stable supply of low carbon–alternative feedstock to CPO, used cooking oil (UCO) — waste oil generated from consuming cooking oil, the majority of which is palm cooking oil. In 2019 Indonesia consumed 16.2 million kl of cooking oil.
Based on research by Traction Energy Asia, a minimum of 1.2 million kl of UCO could potentially be collected annually from Indonesia’s household and micro–business sectors. Based on the average yield of UCO conversion to biodiesel, 1.1 million kl of biodiesel, enough to supply 10–12 percent of biodiesel production quota in 2020, can be sourced from 1.2 million kl of UCO. Even greater volumes of UCO could be collected from the hotel, restaurant and cafe sectors, making UCO even more viable as a biodiesel feedstock.
A recent study by Traction Energy Asia also confirmed that increasing the mix of UCO in biofuel reduced the CO2 emissions considerably. A mix of 30 percent UCO/70 percent diesel could contribute up to 24 percent of the total energy–sector emission–reduction target.
Developing a comprehensive UCO collection system from households, micro–businesses and the food sector would also encourage the public to support the transition to clean energy and fulfilment of Indonesia’s emissions–reduction commitments, in line with the government’s ambition for people–centered biofuel development. Traction Energy Asia’s research also shows that using UCO in biofuel can potentially save up to Rp 4 trillion (US$278.64 million) from the CPO Fund, which is used to close the gap between the price of fossil diesel and biodiesel.
Quick steps are needed from the government to provide the support needed to manage UCO as a strategic energy commodity to improve the sustainability of the biofuel program, and to contribute to Indonesia’s development of a circular economy and low-carbon growth. As the government does not currently regulate UCO, classified as liquid waste, as a biofuel feedstock, policy changes are needed. This requires strong inter-ministerial and agency coordination to provide the policy and regulatory framework to enable UCO to be used as a complementary biofuel feedstock to further reduce emissions from land-use change and transportation, and to accelerate Indonesia’s transition to clean energy and low-carbon growth.
Fariz Panghegar is the Research Manager at Traction Energy Asia.