7.1 Biofuels in Indonesia: How and Why
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Biofuels have, therefore, appeared as a broadly beneficial initiative to Indonesia’s
energy situation. In a short period, they have grown significantly from meeting only
1% of the country’s total energy consumption in 2008 to as much as 13% in 2018
(MEMR 2019 p. 27). Unlike elsewhere where the electrification of transportation
is forecast to take hold, the forecast is that electric vehicles will continue to play a
very marginal role by 2050 in Indonesia. By that year, in the best-case scenarios for
renewables, biofuels are expected to fulfill as much as 62% of the country’s transport
energy needs (National Energy Council 2019, p. 25).
7.1.1.2 Agri-Food Context
Indonesia’s agri-food context is marked by competition between agriculture and
other land uses (not only forest conservation, but also urbanization and infrastructure
growth), rapid oil palm expansion, and perennial food security concerns—particularly an unyielding import dependence on rice, Indonesia’s main staple.
About 71% of Indonesia’s territory is formally forestland (Bastos Lima et al.
2013). However, the official estimates are that, in reality, about half of the country’s
land is covered by forests, without necessarily matching the same areas on paper
(Ministry of Forestry 2009; Tsujino et al. 2016). Deforestation has been the single
largest environmental issue for Indonesian agriculture and the country’s most significant source of greenhouse gas emissions (IPCC 2019). Oil palm cultivation, in
particular, has rapidly expanded across the archipelago. It grew in area at a staggering annual rate of up to 10% in the 2000s and early 2010s (Indonesia Statistics
2019), and most often at the expense of forests (Koh and Wilcove 2008; Vijay et al.
2016). Official estimates are that oil palm already occupies more than 16 million
hectares (Mha) in the country; however, illegal plantations are rampant, representing
as much as one-fifth of the total according to one governmental investigation (Listiyorini and Rusmana 2019). Indonesian civil society assesses that 21 Mha is more
likely the actual area (Suwastoyo 2018).
Indonesia’s palm oil production has become the world’s largest by far, having the
country account for 35% of global vegetable oil exports (OECD/FAO 2019). This
substantive role is even though domestic biodiesel manufacturing already captures
22% of the country’s vegetable oil supply—a share forecast to increase to 28% by
2028 (OECD/FAO 2019). Although domestic consumption is increasing, two-thirds
of Indonesia’s production is exported, mostly as crude palm oil (CPO) (Rahmanulloh
2020). Thus, oil palm expansion is largely a response to international market demand,
notably from India, the EU, China, and the United States. While part of that foreign
demand is for biodiesel and oleochemical industries, it is used primarily in processed
foods—leading some to provocatively ask whether the world is “junking its forests
for junk food” (Huay Lee et al. 2016).
That said, the share of exports in Indonesia’s palm oil production is gradually
decreasing as the country turns its attention to a booming domestic market (Rahmanulloh 2020). Domestic CPO consumption is growing fast with the expansion of
Indonesia’s biodiesel sector, along with industry enthusiasm for new bioeconomy
149
Biofuels have, therefore, appeared as a broadly beneficial initiative to Indonesia’s
energy situation. In a short period, they have grown significantly from meeting only
1% of the country’s total energy consumption in 2008 to as much as 13% in 2018
(MEMR 2019 p. 27). Unlike elsewhere where the electrification of transportation
is forecast to take hold, the forecast is that electric vehicles will continue to play a
very marginal role by 2050 in Indonesia. By that year, in the best-case scenarios for
renewables, biofuels are expected to fulfill as much as 62% of the country’s transport
energy needs (National Energy Council 2019, p. 25).
7.1.1.2 Agri-Food Context
Indonesia’s agri-food context is marked by competition between agriculture and
other land uses (not only forest conservation, but also urbanization and infrastructure
growth), rapid oil palm expansion, and perennial food security concerns—particularly an unyielding import dependence on rice, Indonesia’s main staple.
About 71% of Indonesia’s territory is formally forestland (Bastos Lima et al.
2013). However, the official estimates are that, in reality, about half of the country’s
land is covered by forests, without necessarily matching the same areas on paper
(Ministry of Forestry 2009; Tsujino et al. 2016). Deforestation has been the single
largest environmental issue for Indonesian agriculture and the country’s most significant source of greenhouse gas emissions (IPCC 2019). Oil palm cultivation, in
particular, has rapidly expanded across the archipelago. It grew in area at a staggering annual rate of up to 10% in the 2000s and early 2010s (Indonesia Statistics
2019), and most often at the expense of forests (Koh and Wilcove 2008; Vijay et al.
2016). Official estimates are that oil palm already occupies more than 16 million
hectares (Mha) in the country; however, illegal plantations are rampant, representing
as much as one-fifth of the total according to one governmental investigation (Listiyorini and Rusmana 2019). Indonesian civil society assesses that 21 Mha is more
likely the actual area (Suwastoyo 2018).
Indonesia’s palm oil production has become the world’s largest by far, having the
country account for 35% of global vegetable oil exports (OECD/FAO 2019). This
substantive role is even though domestic biodiesel manufacturing already captures
22% of the country’s vegetable oil supply—a share forecast to increase to 28% by
2028 (OECD/FAO 2019). Although domestic consumption is increasing, two-thirds
of Indonesia’s production is exported, mostly as crude palm oil (CPO) (Rahmanulloh
2020). Thus, oil palm expansion is largely a response to international market demand,
notably from India, the EU, China, and the United States. While part of that foreign
demand is for biodiesel and oleochemical industries, it is used primarily in processed
foods—leading some to provocatively ask whether the world is “junking its forests
for junk food” (Huay Lee et al. 2016).
That said, the share of exports in Indonesia’s palm oil production is gradually
decreasing as the country turns its attention to a booming domestic market (Rahmanulloh 2020). Domestic CPO consumption is growing fast with the expansion of
Indonesia’s biodiesel sector, along with industry enthusiasm for new bioeconomy