JAKARTA – Prabowo Subianto, the most likely winner of the Feb. 14 presidential election, has outlined his renewable energy development plan, which includes increasing the mandatory biofuel content in diesel blends to 50 percent biodiesel (B50) from currently 35 percent (B35) and introducing 10 percent bioethanol (E10) by 2029.
His renewable energy target seems realistic, since Indonesia is the world’s largest palm oil producer with an annual output of over 50 million tons, and it is steadily expanding its oil palm plantations.
Maritime Affairs and Investment Coordinating Minister Luhut Binsar Panjaitan even expressed confidence that Indonesia will be able to sustainably produce 100 million tons of palm oil per year by 2045. The country has implemented a mandatory program since 2008 to use biodiesel containing crude palm oil (CPO) and has marketed B35, a biofuel containing 35 percent palm oil.
Palm oil is currently the country’s largest source of biofuel, but insofar as the commodity is concerned, the outlook is not so encouraging. CPO production has been declining for four straight years, even though Indonesia has over 16.8 million hectares of oil palm estates.
The latest official data show that 1.5 million ha (9 percent) of all plantations comprise young (immature) trees and 14.5 million ha or 91 percent are mature (producing) estates. However, 46 percent of producing trees are very old, and their productivity is now on a downward trend.
CPO production growth in 2005-2010 averaged slightly higher than 10 percent per annum, mainly due to the high pace of plantation expansion, but annual output growth declined to 7.4 percent in 2010-2020, fell further to 3.2 percent in 2015-2020 and then either remained stagnant or became negative in 2020-2023. More worrisome yet is that Indonesian palm oil productivity has been virtually stagnant.
Data from the Indonesian Palm Oil Association (GAPKI) shows CPO production at 53 million tons in 2023, of which 11.6 million tons were used for biodiesel, 10.4 million tons for food (mostly cooking oil), 2.3 million tons for oleochemicals and the rest for exporting.
Since domestic CPO consumption has risen steadily, several analysts have expressed concern that the significant increase in the target for mandatory biodiesel content could affect CPO supplies for food and other industrial uses. As such, the aim to achieve B50 in 2029 seems questionable, especially because CPO production is likely to continue declining without a policy breakthrough from the government.
It has therefore become imperative that the next president and government introduce coherent policies to revitalize oil palm plantation expansion as the mainstay of the country’s economy and to boost CPO production to meet the rising demand for CPO for food, biodiesel and other industrial uses.
Four key coherent policy strategies are necessary to address the steadily rising production target without affecting the country’s commitment to reducing its carbon emissions and accelerating its renewable energy transition.
The first is to revisit all laws and regulations related to palm oil and to amend those detrimental to the palm oil industry. One major regulatory barrier to achieving the development target for biofuels made from CPO is Article 110B of the Job Creation Law.
This article stipulates that oil palm plantation companies operating in forested areas, even companies that hold permits, or in areas in violation of local or national spatial plans are required to pay fines and may continue production for only one more crop cycle, or up to 15 years.
A recent government audit concluded that 2,128 oil palm plantation companies with an area of 2.17 million ha, mostly located in Sumatra and Kalimantan, must abide by Article 110B. If this article is not amended to enable companies that meet the requirements to continue operating, they will have to close down and thereby cause annual production losses of around 6.9 million tons. The incoming government will need to act immediately to amend the article.
Second, the industry should be governed in an integrated manner in view of the increasingly vital economic role of palm oil companies as a major employer, palm oil’s role as the second-largest export commodity and a source of food, biofuel and numerous other consumer products, and the fact that 42 percent of all oil palm estates are owned by over 5 million smallholder farmers. This can be done if all policies related to the palm oil industry are formulated and implemented by a single government agency.
There are now nine national agencies that directly and indirectly govern the palm oil industry, which can sometimes impose competing, overlapping and even contradictory policies. One example is the authority to resolve oil palm estates in areas that overlap with forested land, which belongs solely to the Environment and Forestry Ministry. Since this ministry’s mission and tasks are contrary to palm oil development, its authority to resolve issues concerning the palm oil industry should be minimized.
Third, the policies regulating the use of palm oil for a range of purposes, notably biodiesel and cooking oil for both domestic consumption and exports, must be aligned and synchronized with national production capacity to prevent unnecessary competition. In this context, the production target for biodiesels using CPO should be examined thoroughly to prevent disruption to palm oil supplies for other domestic and export purposes.
Lastly, it is inevitable that palm oil production growth must be sustained, through both concerted efforts to increase tree yield (productivity) and expand estates.
However, expanding oil palm estates or opening new plantations should occur primarily in the least developed provinces in Papua. Therefore, Papua’s status as a High Forest Cover Landscape (HFCL), which makes most of the region strictly prohibitive for plantations, should be reviewed to allow for the designation of new areas for sustainable oil palm development.
This policy will disappoint environmental NGOs and may be considered contrary to the European Union Deforestation Regulation. However, Indonesia has a very vital need to develop sustainable palm oil in Papua, as this is one of the most effective ways of accelerating economic development in that least-developed region so it reaches the level of progress already achieved in other parts of the country. (By Edi Suhardi, Sustainability analyst)
Source: thejakartapost.com