Indonesia: New policy to boost biodiesel consumption

Indonesia: New policy to boost biodiesel consumption

A new ministerial regulation on the supply and use of biodiesel may help
boost consumption of diesel containing 20 percent biofuel next year.

The regulation, issued last week by the Energy and Mineral Resources
Ministry, makes it mandatory for non-subsidized diesel fuel to also contain
a 20 percent mix of biofuel. A penalty of Rp 6,000 (46 US cents) per liter
will be imposed on those who violate the regulation.

The regulation also stipulates that biofuel producers must register with the
government to provide supplies for fuel businesses. A team set up by the
Energy and Mineral Resources Ministry, with members representing the
ministry, the Indonesian Oil Palm Estate Fund (BPDP) and fuel businesses,
will later assess their applications and decide who makes the final cut.

The Biofuels Producers Association (Aprobi) has applauded the regulation and
claims that the new regulation will help promote the consumption of
environmentally friendly fuel and particularly boost the consumption of
diesel fuel containing 20 percent biofuel to almost 6 million kiloliters by
the end of 2017.

"We support this regulation because it will help boost the amount of
biodiesel used in our country," Aprobi chairman Paulus Tjakrawan told
reporters on Thursday.

The mandatory biodiesel mix is part of the government's policy to encourage
the use of non-fossil fuels. Under the program, biofuel - mostly made of
palm oil - is expected to replace diesel fuel as part of the effort to
reduce carbon emissions and the country's dependency on petroleum-based
fuel. The program also aims to jack up the commodity's price, which has been
under pressure amid a global economic slowdown.

The mandatory diesel/biofuel blend increased from 10 percent in 2013 to 15
percent in 2015 and to 20 percent this year.

Although the government has set a target of 3 million kiloliters of diesel
containing biofuel this year, Paulus said he was pessimistic about the
target as he estimated that national production would only reach 2.6 million
kiloliters by year-end.

BPDP director Dadan Kusdiana also acknowledged the slow adoption of the
diesel/biofuel blend policy.

"We are expecting to meet the target. However, as I understand it, the
realization of the mandatory blend of non-subsidized diesel fuel is very low
to date," he said earlier this year.

Even though Aprobi appreciated the new regulation issued as it levelled the
playing field between subsidized and non-subsidized biodiesel, Paulus said
the government still needed to clear up some details in the policy to ensure
business certainty.

Among the unclear stipulations is the detailed mechanism on how the
evaluation team will approve of biofuel producers registered to provide
supplies to fuel businesses.

"There needs to be a detailed account, either through a supporting
regulation issued by the director general or guidance on the implementation
of the ministerial regulation regarding the selection and appointment of
biofuel producers," Paulus said.

The Energy and Mineral Resources Ministry's Directorate General of Renewable
Energy and Energy Conservation, which will supervise the implementation of
the mixture policy, could not be immediately reached for comment regarding
the implementation of the new regulation.

Furthermore, the association called on the government to clarify the subsidy
payment mechanism as most producers remained confused regarding the subject.

While the mandatory biodiesel program in previous years was funded through
the state budget, the government has used the crude palm oil (CPO) fund
sourced from levies on CPO exports since July last year. The BPDP has been
assigned to manage the fund.

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Ref:
http://www.thejakartapost.com/news/2016/10/22/new-policy-boost-ri-biodiesel-
consumption.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com