16 September 2025 (closed)
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Program Biodiesel Indonesia: Penerapan Tahap B50 Akan Ditunda?
It is uncertain whether Indonesia can impose the B50 stage of its biodiesel program in 2026 (which would be the next step after launching the B40 stage in Q1-2025). Currently, the B50 stage is still being studied. In fact, government officials are currently discussing whether it is better to opt for a B45 stage first.
What Is Indonesia's Biodiesel Program?
Indonesia's biodiesel program is a mandatory blending policy that requires diesel fuel (derived from crude oil) to be mixed with a certain percentage of palm oil-based biodiesel. This is not raw palm oil, but a refined biofuel known as Fatty Acid Methyl Ester (FAME). FAME is produced through a chemical process called transesterification, which converts palm oil into a fuel that can be safely blended with conventional diesel.
In the current B40 stage of the program, the blend is specifically 40 percent FAME from palm oil and 60 percent petroleum diesel fuel.
The biodiesel program is one of the cornerstones of Indonesia's energy policy, aimed at achieving several key goals:
- By increasing the use of domestically produced biofuels, Indonesia aims to decrease its heavy reliance on imported diesel, thereby improving its trade balance, current account balance, rupiah exchange rate, and energy security;
- As the world's largest producer of (crude) palm oil, Indonesia uses the program to create strong domestic demand for its primary commodity, which helps to stabilize prices and support the livelihoods of millions of palm oil farmers; and
- The program is a key initiative for reducing greenhouse gas emissions from the transportation sector.
Indonesia's biodiesel program was first launched with a mandatory blend in 2008 under a regulation by the Minister of Energy and Mineral Resources. However, the program gained significant momentum and became a nationwide mandate for subsidized diesel with the B20 program, which was officially enforced in September 2018. The program has since progressively increased its blend level, moving to B30 in 2020, B35 in 2023, and its current stage, the B40 program, which was launched at the start of 2025.
What About the B50 Stage of the Biodiesel Program?
Indonesia's Ministry of Energy and Mineral Resources is currently still studying the B50 stage. Eniya Listiani Dewi, Director General of New Renewable Energy and Energy Conservation at the Ministry of Energy and Mineral Resources, said the government still targets to implement the B50 stage in 2026 but that there are discussions whether it might be better to opt for the B45 stage first as several issues were found during the B50 trials.
One of the issues is whether the B50 biodiesel stage in fact requires 50 percent of FAME, or, might use 10 percent of hydrotreated vegetable oil (HVO) in addition to 40 percent of FAME. She argues that if B50 would consist of 50 percent FAME, then demand for FAME would reach around 20 million tons, or an additional allocation of approximately 2 million tons of crude palm oil (CPO) to the national biodiesel program. This represents a 5 million ton increase from the 15 million tons of FAME needed for B40 production.
She addded that Indonesia needs five new biodiesel plants to implement B50 next year. Currently, three of the five targeted new plants are under construction.
Domestic Palm Oil Demand in 2026
Meanwhile, Executive Director of the Palm Oil Strategic Policy Institute (ASPI) Tungkot Sipayung explained that national crude palm oil (CPO) production in 2025 is predicted to be around 48 million tons, and has the potential to increase to 50 million tons in 2026. Demand for biodiesel under the B50 scheme is projected to absorb around 18.5 million tons of CPO, followed by 6-8 million tons for the food industry and 2-3 million tons for oleochemicals.
This means that in 2026 domestic CPO consumption will be around 27 million to 28 million tons, implying there are still around 22 million tons of CPO available for export (which would mean a decrease in export volume).
Problems on the Horizon?
A decline in exports of CPO could impact negatively as the biodiesel program is primarily funded through a specific CPO export levy. The Indonesian government, through the Palm Oil Plantation Fund Management Agency (BPDPKS), collects a specific tax or duty on every ton of CPO and its derivative products that are exported from the country. The revenue collected is then placed into a special fund that is used to subsidize the price of palm oil-based biodiesel, ensuring it remains competitive with conventional diesel. This funding mechanism makes the biodiesel program economically viable for domestic use without relying on the state budget.
Meanwhile, the Indonesian Biofuel Producers Association (Aprobi) is optimistic that the annual installed biodiesel capacity of its companies will be sufficient to meet feedstock needs if the mandatory 50 percent palm-based biofuel is implemented in 2026. Aprobi Secretary General Ernest Gunawan said that the need for feedstock is estimated to increase to 17-18 million tons if the increase from B40 to B50 is realized next year.
In addition to biofuel allocation, the high price of biodiesel is considered a challenge in implementing B50. According to Putra Adhiguna, Executive Director of the Energy Shift Institute, the main challenge to B50 implementation is the continued skyrocketing price and subsidies (as FAME is more expensive than diesel fuel). It will become increasingly hard for the BPDPKS to cover the rising biodiesel prices. As a consequence, the high price of B50 would also have an impact on industries that use this fuel, such as the mining industry.