150
7 Bioeconomy in the Oil Palm Republic of Indonesia
uses of oil palm products, such as palm-based bioplastics (GAPKI 2020a). Besides
the biorefining of CPO, which produces refined palm oil alongside co-products such
as olein, stearin and glycerol, production of palm kernel oil (extracted from the seeds
rather than the fruit pulp) is also on the rise, with utilization in the cosmetics industry.
Meanwhile, the Indonesian government has attempted to overcome the country’s
persistent dependence on rice imports (primarily from Thailand and Vietnam). While
demand is growing, domestic production is increasing just enough not to let the import
dependency augment. Rice is grown mostly in Java and Bali, islands of high population density that have experienced a continuous land conversion to non-agricultural,
urban uses (McDonald and Meylinah 2019). Agricultural expansion on Sumatra,
Borneo, and other outer islands, in turn, has been mostly for cash-crops, such as
cocoa and oil palm.
7.1.2 Biofuel Production and Consumption Chains
7.1.2.1 Ethanol
Sugarcane has been Indonesia’s preferred feedstock for ethanol, but fuel production
is yet to take off. Sugarcane is cultivated mostly in Java and in Sumatra’s Lampung
Province, though new frontiers have been pursued in the outer islands. By world standards, however, Indonesia has only a modest sugarcane industry, producing about 2.1
million tons of sugar—less than one-tenth of the Indian production. As Indonesia
consumes twice as much sugar as it produces, imports (primarily from Thailand)
meet more than half of its demand (Meylinah 2020a). Indonesia, therefore, has
targeted only sugarcane molasses for ethanol production to avoid sugar vs. ethanol
competition. At any rate, fuel-ethanol production remains economically unattractive
to the industry and has not taken place since 2010 despite some policy incentives
(Rahmanulloh 2019). Pertamina, Indonesia’s state-controlled oil company, made an
agreement in 2012 with the US-based Celanese Corporation to advance cellulosic
ethanol production (Celanese 2013), while during the COVID-19 pandemic the oil
palm industry advertised hand sanitizers made with alcohol from palm biomass
(GAPKI 2020b). However, as far as fuel is concerned, as of 2020 neither first- nor
second-generation ethanol production had taken place at a commercial scale.
7.1.2.2 Biodiesel
Palm oil has been Indonesia’s only commercial biofuel feedstock, but others were
tried and tested in the early days. Namely, Indonesia has—like India—promoted
jatropha as a biodiesel feedstock in the belief it could grow well under marginal conditions, without irrigation or chemical inputs (see Silitonga et al. 2011). Government
agencies widely encouraged smallholders to grow it, expecting private companies
to purchase it. However, this plan never materialized due to jatropha’s low yields
7 Bioeconomy in the Oil Palm Republic of Indonesia
uses of oil palm products, such as palm-based bioplastics (GAPKI 2020a). Besides
the biorefining of CPO, which produces refined palm oil alongside co-products such
as olein, stearin and glycerol, production of palm kernel oil (extracted from the seeds
rather than the fruit pulp) is also on the rise, with utilization in the cosmetics industry.
Meanwhile, the Indonesian government has attempted to overcome the country’s
persistent dependence on rice imports (primarily from Thailand and Vietnam). While
demand is growing, domestic production is increasing just enough not to let the import
dependency augment. Rice is grown mostly in Java and Bali, islands of high population density that have experienced a continuous land conversion to non-agricultural,
urban uses (McDonald and Meylinah 2019). Agricultural expansion on Sumatra,
Borneo, and other outer islands, in turn, has been mostly for cash-crops, such as
cocoa and oil palm.
7.1.2 Biofuel Production and Consumption Chains
7.1.2.1 Ethanol
Sugarcane has been Indonesia’s preferred feedstock for ethanol, but fuel production
is yet to take off. Sugarcane is cultivated mostly in Java and in Sumatra’s Lampung
Province, though new frontiers have been pursued in the outer islands. By world standards, however, Indonesia has only a modest sugarcane industry, producing about 2.1
million tons of sugar—less than one-tenth of the Indian production. As Indonesia
consumes twice as much sugar as it produces, imports (primarily from Thailand)
meet more than half of its demand (Meylinah 2020a). Indonesia, therefore, has
targeted only sugarcane molasses for ethanol production to avoid sugar vs. ethanol
competition. At any rate, fuel-ethanol production remains economically unattractive
to the industry and has not taken place since 2010 despite some policy incentives
(Rahmanulloh 2019). Pertamina, Indonesia’s state-controlled oil company, made an
agreement in 2012 with the US-based Celanese Corporation to advance cellulosic
ethanol production (Celanese 2013), while during the COVID-19 pandemic the oil
palm industry advertised hand sanitizers made with alcohol from palm biomass
(GAPKI 2020b). However, as far as fuel is concerned, as of 2020 neither first- nor
second-generation ethanol production had taken place at a commercial scale.
7.1.2.2 Biodiesel
Palm oil has been Indonesia’s only commercial biofuel feedstock, but others were
tried and tested in the early days. Namely, Indonesia has—like India—promoted
jatropha as a biodiesel feedstock in the belief it could grow well under marginal conditions, without irrigation or chemical inputs (see Silitonga et al. 2011). Government
agencies widely encouraged smallholders to grow it, expecting private companies
to purchase it. However, this plan never materialized due to jatropha’s low yields