Palm trees are an important raw material for biofuels, but they can also have an environmental impact. (Photo: iStock)
Biodiesel, derived from biomass, faces development challenges due to environmental limitations. Indonesia’s biodiesel policy, which promotes the use of palm oil-based biodiesel, has been impacted by rising costs of fatty acid methyl esters (FAME) in palm oil.
Meanwhile, the European shipping industry issued a joint statement urging a reduction in the use of crop-based biodiesel, warning that its expansion could lead to deforestation and undermine global sustainability efforts.
Rising raw material costs challenge Indonesia’s B40 policy
According to Indonesia's state-owned oil company Pertamina, since October last year, palm oil prices have surpassed those of fossil fuels, pushing up the cost of FAME and making biodiesel more expensive than conventional diesel.
Despite this, the Indonesian government is promoting the B40 policy, which blends 40% biodiesel with 60% regular diesel. This has led Pertamina to absorb some of the extra costs.
While retail consumers benefit from government subsidies and do not feel the price difference, heavy energy or electricity users, such as hotels, mining operations, and agriculture, may face a price gap as high as 25%.
Although the B40 program aims to reduce fuel imports and save 1,475 trillion IDR (around 9 billion USD) by 2025, the rising costs of FAME could offset some of the expected savings.
The rise in palm oil prices has increased the cost of biodiesel, yet the Indonesian government continues to promote the B40 policy, forcing state-owned oil companies to absorb some of the extra costs. (Photo: ESDM)
Shipping giants warn of biodiesel’s negative environmental impact
Biodiesel has been seen as a key part of Europe's shipping industry's efforts to decarbonize. However, on Feb. 17, major shipping companies including Louis Dreyfus Armateurs and Hapag-Lloyd, in collaboration with the European Federation for Transport and Environment (T&E), issued a statement expressing concerns about crop-based biofuels.
The European shipping giants argued that these biofuels are as harmful to the environment as traditional fossil fuels, pointing out that most biodiesel is made from food crops, contributing to water shortages, food crises, and widespread deforestation.
According to T&E, producing biodiesel from palm oil and soybeans may have 2 to 3 times the land and forest impact of traditional fuels.
The statement emphasized that crop-based biodiesel should not receive the same incentives as other zero-carbon fuels, noting that “Unless legally-binding safeguards are introduced, there is a risk that a large amount of fossil fuels will be replaced with unsustainable biofuels.”
Source: Bloomberg, Jakarta Globe
