Biodiesel Use Requires Smallholders’ Welfare Improvement

JAKARTA — The government has relied on the crude palm oil (CPO)-based biodiesel in its efforts to transition the energy consumption in the transportation sector from the dominant fossil fuels to renewable energy sources. The welfare of smallholders should be included as a requirement for the suppliers of CPO for the biodiesel production.

The ministry of energy and mineral resources (MEMR) predicted that Indonesia’s energy need will increase from 1.12 million barrels of oil equivalent per day (BOEPD) in 2020 to 1.55 million BOEPD in 2030. The energy need is expected to be partly fulfilled with the palm oil-based biodiesel that will increase from 159,000 BOEPD in 2020 to 238,000 BOEPD in 2030.

The MEMR Renewable Energy and Energy Conservation Director General  Dadan Kusdiana said that currently they are conducting a tracing test of the CPO as the raw material for the biodiesel production. The government will design a set of criteria that must be fulfilled by biodiesel producers. The criteria will include requirement to heed the smallholders’ welfare.

”Producers have to prove the direct impact of CPO absorption as the raw material for biodiesel production to the price of fresh fruit bunches (FFB),” Dadan said in a webinar on ”Dealing With Challenges of Cleaner Biodiesel industry and Electric Cars”, which was organized by Koaksi Indonesia on Wednesday, 07 July 2021.

He said that 18% of the CPO production, which averaged at 55 million tons per year, is used for production of biodiesel. Currently, the biodiesel is the mixture of 30% biodiesel from the CPO and 70% pure diesel fuel, which is popularly known as B-30.

The use of biodiesel is aimed at reducing the imports of oil fuels (BBM), which is potential to save foreign exchange at US$16.8 billion per year during the period of 2021-2040. According to Dadan, the use of B-30 will also reduce the emissions of greenhouse gases.

During 2020, the MEMR reported that the realization of biodiesel consumption reached 8.4 million kilolitres. The realization had resulted in the reduction of emissions at  22.3 million tons of carbon-dioxide (CO2). This year, the target of biodiesel absorption is expected to reach 9.2 million kilolitres.

Meanwhile, energy business analyst of Bandung Institute of Technology (ITB), Agung Wicaksono said that the policy on the use of biodiesel should be integrated. ”It is necessary to consider it thoroughly under an integration of all related factors, which include emissions, land clearing, subsidy, smallholders’ welfare, and foreign exchange,” he said.

Koaksi Indonesia Researcher Siti Koiromah said that the biodiesel use is potential to increase land clearing for new oil palm plantations. ”Considering the factor, we see the importance of a standard of sustainability in the biodiesel industry,” she said during the same occasion.

Electric cars

Besides the biodiesel, the government will also rely on the battery-based electric cars to reduce the consumption of fossil fuels. In 2030, the MEMR has projected that there will be 2.0 million electric cars and 13 million electric motorcycles operating in Indonesia.

Siti noted that, the sustainability principles in the industries of battery and electric should be devised in line with the development of their supply chains. She cited the example of the nickel extraction as the raw material for the battery of electric cars should meet the standard of sustainable mining practices.

Executive Vice President of Engineering and Technology of PT Perusahaan Listrik Negara (PLN Persero), Zainal Arifin added that PLN is ready to supply power for the electric cars in Indonesia. ”Currently, we have a power reserve of 14,000 megawatt due to excess capacity. We predict that the power need of one million electric cars will reach 2,600 megawatt,” he said.

Agung proposed that in downstream sector there should be a scheme of special tariff for land transportation that is based on the electric cars.  He said that the scheme of electricity tariff for buses and taxis can copy the scheme for electric trains which become the customer traction based on the MEMR regulation No.28/2016 on the tariff of electricity provided by PT Perusahaan Listrik Negara (Persero). (*)

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