Review of Biodiesel Policy in Indonesia

Abstract

Indonesia is known as an energy-rich country, both fossil and renewable. In 2019, the national energy supply still relied on oil, coal and natural gas, with a total proportion in the primary energy mix of 91.5%. Import dependency on petroleum and the high burden of the state budget for fuel subsidies are why the Indonesian Government implements biofuel policies in Indonesia. Biofuel development in Indonesia has been implemented from 2006 with Presidential Regulation No. 5 of 2006 to Regulation of the Minister of Energy and Mineral Resources No. 41 of 2018. Since 2008, the Government has issued a mandatory policy for using biodiesel with a mixture content of 2.5%. The Government gradually encouraged increasing biodiesel content to 7.5% in 2010, 10% in 2011, 15% in 2015, and 20% in 2016. By 2020, biodiesel mandatory is targeted to be 30%. Over the years, the biodiesel industry has shown an increase in quantity and capacity. Using biofuels has many positive impacts, such as reducing diesel import and CO2 emission and increasing CPO and labour’s added value. On the other hand, the mandatory biofuel policy negatively impacts the environment due to the possibility of land expansion. This study aims to review biodiesel policies in Indonesia since 2006 and analyze the problems and outputs in each policy and challenge for future biodiesel development.