No Small Feat! Here Are the 7 Key Benefits of Indonesia’s Palm Biodiesel

Indonesia has established itself as the world’s largest producer and consumer of palm oil-based biodiesel. The success of the mandatory biodiesel policy implemented over the past decade (2015–2023) has delivered massive social, economic, and ecological benefits.

According to a report by PASPI (2024), there are at least seven primary benefits from the implementation of Indonesia’s mandatory biodiesel policy:

Palm Biodiesel: A Pillar of Energy Security and National Foreign Exchange

1. Building Sustainable Energy Security

The mandatory biodiesel policy has drastically reduced dependency on fossil diesel imports. The share of fossil diesel imports dropped from 41% of total domestic consumption in 2010 to just 10% in 2021 (PASPI, 2023). Fossil diesel savings thanks to biodiesel increased rapidly, from 915 thousand kiloliters (kL) in 2015 to 12.3 million kL in 2023 (BPDP, 2024).

2. Foreign Exchange Savings and Improving the Oil & Gas Balance

The biodiesel program has a direct impact on improving Indonesia’s oil and gas trade balance, which has historically trended toward a deficit. Foreign exchange savings from reduced fossil diesel imports rose significantly from Rp 3.7 trillion in 2015 to Rp 121.5 trillion in 2023 (BPDP, 2024).

An Engine for Economic Growth and Public Welfare

3. Boosting National and Regional Economic Growth

The downstreaming of palm oil into biodiesel creates economic added value that continues to soar. This value-add increased from Rp 1.5 trillion in 2015 to Rp 15.9 trillion in 2023. This surge triggers growth in real GDP and GRDP (Gross Regional Domestic Product) in both palm-centric and non-palm-producing provinces (Sahara et.al., 2022).

4. Increasing Job Opportunities and Poverty Reduction

The mandatory biodiesel program produces social benefits in the form of massive job creation, both at the plantation level (on-farm) and industrial level (off-farm). The total workforce absorbed increased from approximately 115,000 people in 2015 to over 1.5 million people in 2023 (BPDP, 2024b).

5. Stabilizing FFB Prices and Serving as a Global Market Tool

By absorbing large quantities of palm oil (approximately 11 million tons in 2023), the domestic mandate acts as a vital instrument to reduce the supply of CPO exports to the world market. This has proven effective in raising global CPO prices—from an average of $591/ton in 2018 to $1,347/ton in 2022—which directly increases the Fresh Fruit Bunch (FFB) price for domestic farmers.

6. Increasing Household Income

The rise in CPO and FFB prices due to the biodiesel mandate triggers a multiplier effect that boosts the income of palm oil farming households and non-farming communities in both rural and urban areas. Studies show that the B30 mandate increased income across all household groups at various income levels (Sahara et.al., 2022).

A Tangible Contribution to the Climate

7. Reducing Greenhouse Gas (GHG) Emissions

The palm biodiesel program supports Indonesia’s commitment to the Paris Agreement. Substituting fossil diesel with palm biodiesel can reduce GHG emissions by approximately 40–70 percent (PASPI, 2024). Cumulatively, the 2015–2023 period recorded a significant reduction in GHG emissions, rising from 2.4 million tons of $CO_2$ equivalent (eq) in 2015 to 32.7 million tons of CO2 eq in 2023.