Indonesia implements the B40 policy in 2025. (Photo: ESDM)
Indonesia’s B40 policy, which mandates a 40% palm oil mix with 60% diesel, was initially set to take effect on January 1, 2025. However, officials have confirmed a delay until February, giving businesses a 1.5-month grace period. Furthermore, the government has announced that by 2026, the biodiesel blend will increase to B50, with plans to completely halt diesel imports.
Biodiesel B40 rolls out in phases
The Ministry of Energy and Mineral Resources (ESDM) of Indonesia, through Vice Minister Yuliot Tanjung, emphasized that the mandatory B40 biodiesel blend policy, which incorporates 40% palm oil, officially began on January 1, 2025. However, the first six weeks will serve as an adaptation period. During this time, businesses will exhaust their remaining stock of B35 biodiesel, while related technologies will be adjusted accordingly.
State-owned oil company Pertamina has already prepared two refineries to produce B40 and, on January 6, announced the initial fuel pricing for five key ports: Jakarta, Benoa, Surabaya, Balikpapan, and Batam. The price per ton ranges from USD 910 to USD 1,103 for the first two weeks of January.
Indonesia sacrifices palm oil exports to push for biodiesel
The ESDM has also decided that Indonesia’s biodiesel output for 2025 will reach 15.6 million kiloliters, a significant increase from the previous year. With rising production and the higher blending ratio, the policy will not only impact palm oil exports but also put additional pressure on the government’s subsidy budget.
Due to palm oil costing approximately USD 400 per ton more than crude oil, the Indonesian Palm Oil Plantation Fund Management Agency (BPDPKS) has estimated that subsidy expenditures will increase by 68%. Currently, this subsidy gap is funded through a palm oil export tax, leading markets to anticipate an eventual increase in export taxes to maintain balance.
As the world’s largest exporter of palm oil, Indonesia is prioritizing the development of biodiesel, even at the cost of reducing exports. With an eye on achieving net-zero emissions by 2050, ESDM Minister Bahlil Lahadalia emphasized that by 2026, the biodiesel blend will rise to 50%, a move expected to cut USD 20 billion in annual energy imports and fulfill the country’s goal of energy self-sufficiency.
Source: Antara、Reuters(1)、(2)、Argus
