Environmental effect of biodiesel mandatory policy

Abstract

One major biofuel in Indonesia is biodiesel with palm oil constituting the predominant raw material. Over recent years, biodiesel has become the most rapidly developing and influential aspect for economic. Biodiesel mandatory policies aim to reduce import of diesel from fossil fuels, buffer for CPO price, reduce emissions and balancing supply demand of palm oil. The biodiesel policy is supported by the CPO fund mechanism managed by BPDPKS to overcome the price gap of diesel and biodiesel which is affected by volatile price of CPO and fossil fuels. About 8 million ton (5%) CPO production in Indonesia is allocated for biodiesel production to supply domestic and overseas markets. In the long term, palm oil-based biodiesel will become the focus of renewable energy development policy in Indonesia. National energy policy direction ensures an optimum energy mix, with renewables targeted to contribute up 31% of the energy mix by 2050. These are optimistic targets that hope to be achieved over various constraints, such as issues of land for feedstock, gap price between biodiesel prices and diesel fuels, dependence on imported technologies and equipment, and low market demand for biodiesel, particularly in sectors with no government intervention. There is a general assumption that biodiesel or bioenergy already fall in line with sustainability principles as they are sourced from the agriculture sector. The study aims to examine the impact of biodiesel development to economic and environment, also to review several challenges facing by biodiesel development in Indonesia.