Multi Benefits of Expanded Biodiesel Mandatory Program

As of September 1, 2018, the government has taken a strategic step through expansion of mandatory program of biodiesel, that is the mandatory mixing of 20 percent of palm biodiesel on consumption of all types of diesel fuel in Indonesia, for both public service obligation (PSO) and non-PSO. The policy continues to the using of B20 for PSO sector which has been started since 2016. With the expansion of the B20, all types of diesel fuel must contain 20 percent of palm biodiesel.

The B20 expansion policy is considered very strategic and provides various benefits, which are economic, social and environmental benefits. From an economic standpoint, mixing palm oil biodiesel into national diesel fuel consumption has a direct impact on reducing diesel imports. In 2018, total diesel/diesel consumption in Indonesia reaches around 38 million kL, so by mixing 20 percent of our biodiesel, we save diesel fuel by 7.6 million k.l per year. With a world average diesel price of USD 1.4 per liter, the savings in trade balance on diesel fuel can reach USD 10.6 billion per year. Clearly this amount of trade balance can improve the national oil and gas trade balance which is always in deficit.

Mixing imported diesel with domestic palm biodiesel is an energy substitution policy to strengthen national energy security. The use of renewable energy as a substitute for diesel energy that cannot be renewed (non-renewable energy) is the right step to build sustainable national energy security.

The policy of substituting solar imports with palm biodiesel also strengthens the domestic palm oil market base. As the world’s largest palm oil producer, the market base of domestic palm oil needs to be grown sustainably so that Indonesia can become the leader of the world palm oil market and does not depend on only certain markets.

From the social aspect, palm oil biodiesel raw material, which is CPO, is produced on oil palm plantations in 200 remote districts in Indonesia, of which around 42 percent are smallholders’ oil palm. Various studies have shown that oil palm plantations play an important role in regional economic growth, job creation, income generation and poverty reduction. Increasing the use of palm oil as a fuel (biodiesel) will increase the price of oil palm fresh fruit bunches in 200 palm oil center districts so as to increase farmers’ spirit to increase productivity and also to increase the socio-economic role.

Another important benefit is that the expansion of the B20 also results in the benefits of environmental benefits in the form of national carbon emissions. It is known that substituting diesel fuel with palm biodiesel will reduce 60 percent of emissions of diesel engines. The expansion of B20 will reduce national carbon emissions by 11.4 million tons per year.

Many benefits can be enjoyed by Indonesian with the expansion of the B20. Therefore, the expansion of the B20 needs to be supported by all parties to ensure its success.

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