Indonesia's chief economic minister, Airlangga Hartarto, expressed confidence on Thursday in the country's ability to boost palm oil production to meet the expanding demand for biodiesel, as Indonesia plans to increase its mandatory biodiesel blend to 40% palm oil-based fuel (B40) by 2025, up from the current 35%. By 2028, the government aims to push the biodiesel mix further to 50% (B50), with plans to introduce a 1% palm oil blend in jet fuel by 2027.
This biodiesel expansion strategy is part of Indonesia's broader policy to reduce reliance on imported fossil fuels, create a sustainable energy mix, and bolster its palm oil industry, Hartarto said at the Indonesia Palm Oil Conference. As the world's largest palm oil exporter, Indonesia's reduced exports due to rising domestic biofuel demand have already impacted global palm oil prices, which are expected to continue rising with this shift.
According to Indonesia's biofuel producers association, APROBI, palm oil usage for biodiesel could increase from 11 million metric tons needed this year for B35 to 13.9 million tons by 2025 under the B40 mandate.
However, increasing palm oil production presents challenges. Indonesia's palm oil production has stagnated in recent years due to aging trees, which the government seeks to address through improved agricultural practices and accelerated replanting for smallholder farms. Despite an initial target to replant 180,000 hectares annually, only 360,000 hectares have been replanted since 2017. Accelerating this effort is critical, according to Eddy Martono, chairman of the Indonesia Palm Oil Association, to support both the biodiesel mandate and ensure ample supply for food and exports.
If the replanting program meets its targets, Indonesia's crude palm oil output could reach 83 million tons by 2045, up from the current 50 million tons. Without such rejuvenation, output may fall to 44 million tons by that year, data from Indonesia's palm oil fund agency indicates.
