Indonesia’s biofuel push faces challenges amidst rising palm oil prices
Indonesia is set to increase its palm oil biofuel blend from 35% to 40% in 2024, raising costs amid surging palm oil prices. Subsidies, funded by palm oil export levies, are now insufficient, prompting talks of raising levies. Subsidies for B40 biodiesel will cover public services only, potentially burdening fuel retailers and consumers with higher costs.
Amid a surge in palm oil prices Indonesian consumers, fuel retailers, and palm oil producers are facing higher costs as the government expands its biofuel programme, reported Bloomberg
Starting in the new year, Indonesia plans to increase the amount of palm oil used in its biofuel mix. The government typically provides subsidies for biodiesel sales to support its blending mandate, but the recent rise in palm oil prices has made biofuel significantly more expensive.
To fund these subsidies, levies are imposed on palm oil exports. However, current prices suggest these levies may not be sufficient, according to Dida Gardera, a member of the steering committee for the Oil Palm Plantation Fund Management Agency. The agency oversees funds collected through export levies.
Indonesia is considering raising the export levy, local news reported earlier this month. Gardera confirmed that the agency is “still preparing the revision.” The government plans to increase the proportion of palm oil in the biofuel mix from 35% to 40% to reduce reliance on imported fossil fuels.
Gardera also stated that B40 biodiesel subsidies will only apply to the public service sector, covering about 7.5 million kilolitres, due to the higher costs. As a result, fuel retailers may have to absorb the extra costs or pass them on to consumers.
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Source : Bio Energy Times
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