The Indonesian government has designed the policy of biodiesel 50 percent (B50) as an energy program to increase the use of biofuel for blending with diesel fuel. Under the scheme, the blending will consist of 50 percent diesel fuel and the other 50 percent Fatty Acid Methyl Ester (FAME) which is processed from Crude Palm Oil (CPO). The implementation of the energy program is aimed to strengthen Indonesia’s national energy resilience and reduce it reliance on imported diesel fuel.
Stagnant Production of CPO
Over the past five years, crude palm oil (CPO) production in Indonesia has been relatively stagnant, hovering between 48 to 51 million tons per year. Meanwhile, domestic CPO consumption has continued to increase, particularly since the implementation of the mandatory biodiesel policy.
By 2023, CPO consumption for biodiesel had exceeded consumption for foods. When the B40 program was implemented, CPO demand for biodiesel was recorded at over 12 million tons per year.
If the B50 program is implemented, CPO demand for biodiesel is estimated to increase to around 16 million tons per year. Such condition is potential to reduce Indonesia’s CPO exports, as a larger volume is allocated for domestic energy needs.
Impact to exports and export levy
Mukti Sardjono, Executive Director of the Indonesian Palm Oil Association (GAPKI), has stated that if CPO production remains stagnant, a decline in exports will be an unavoidable consequence.
The decline in exports also has the potential to affect the state revenue from the export levy. The palm oil fund from the export levy is currently used to finance the subsidy of biodiesel program.
According to Mukti, the main challenge in implementing the B50 program is for the government to strike a balance between energy resilience and export performance.
Oil Palm Moratorium Challenges
One of the main obstacles to increasing palm oil production is the moratorium on new oil palm plantations. This policy limits the expansion of oil palm plantations to preserve the environment and reduce the risk of deforestation.
As a solution, the government has been implementing the program of replanting smallholders’ palm plantations since 2015–2016, targeting approximately 180,000 hectares per year. This program aims to increase the productivity of existing oil palm plantations without the need to clear new land.
GAPKI also proposed that the government consider to develop specially dedicated oil palm plantations managed by state-owned plantation enterprises to fulfill the raw material needs for the B50 program. Such approach is expected to be able to fulfill the demand of CPO for foods, energy and exports.
The role of smallholders’ oil palm plantations
The National Energy Council (DEN) said that increasing the productivity of smallholders’ plantations is the key factor in supporting the biodiesel program. Currently, approximately 40% of the total oil palm plantations in Indonesia are owned by smallholders.
However, the productivity of smallholders’ plantations remains relatively low compared to that of large companies’ plantations. Therefore, improving cultivation technology, replanting, and providing financial support are crucial factors in increasing production.
If the productivity of smallholders’ plantations can be significantly increased, their contribution to the national CPO supply will also increase.
Biofuel industry readiness and energy infrastructure
In addition to the availability of CPO as the raw material, the success of the B50 program also depends on the readiness of the biofuel industry and the automotive sector. Coordination between the Indonesian Biofuel Producers Association (Aprobi) and the Association of Indonesian Automotive Industries (Gaikindo) is necessary to ensure the quality of the biodiesel used is compatible with motor vehicles.
The readiness of energy infrastructure is also a crucial factor. One project expected to support B50 implementation is Pertamina’s Refinery Development Master Plan (RDMP) in East Kalimantan, which will strengthen the blending capacity of diesel fuel with biodiesel.
Environment consideration and land governance
The Deputy Speaker of the People’s Consultative Assembly (MPR), Eddy Soeparno said efforts of increasing palm oil production should be cautiously pursued. Pursuing it through land expansion, it will risk causing conflicts of land use, potential deforestation, and a decline in forest area function.
Indonesia currently has approximately 124 million hectares of forest area, with an estimated 86 million hectares remaining as natural forest. Therefore, an intensification and productivity improvement approach is considered more appropriate than new land expansion.
The B50 program is a strategic step for Indonesia to strengthen energy resilience and reduce dependence on fossil fuels. However, the implementation of this policy faces several challenges, ranging from the availability of CPO as raw material, the productivity of smallholders’ oil palm plantations, the readiness of the biofuel industry, and environmental considerations.
Increasing the productivity of existing oil palm plantations, especially those owned by smallholders, is one of the main solutions to meet domestic energy needs without sacrificing exports or environmental sustainability. (*)
CNBC Indonesia – “RI Akan Berlakukan Biodiesel B50, Produksi Sawit Harus Dinaikkan” (7 Maret 2026). https://www.cnbcindonesia.com/news/20260306145400-4-716723/ri-akan-berlakukan-biodiesel-b50-produksi-sawit-harus-dinaikkan
