91
biofuels at the same price as subsidized petroleum but did not provide additional
subsidies to cover the higher costs of biofuel production (GSI 2008a, b). Therefore,
Pertamina reduced the biodiesel content to barely 1%.
Palm oil is also very important for cooking in Indonesia, so the government
became very concerned about surging prices. In response, export taxes were imposed
on crude palm oil to discourage exports and prioritize its use for cooking, and the
government also imposed a 2% export tax on biofuels (Leow 2008; Commodity
Online 2008).
The government also became concerned about the contentious debate on the
environmental impacts of biofuels – especially relating to the conversion of forests
to biofuel feedstock monoculture plantations – and concerns about their role in raising food prices also grew worldwide (e.g., Fargione et al. 2008; Searchinger et al.
2008; Pimentel et al. 2007). Land use change and deforestation in Indonesia were
identified as so significant that the country ranked third in total GHG emissions
globally. In 2008, the EU reviewed its biofuel mandate and stopped importing oil
palm from Indonesia and Malaysia citing environmental concerns (USAID-Asia
2009). The high price of palm oil and questions about its sustainability had a significant impact, and many refineries stopped operations and stalled plans for expansion
and new development. When palm oil prices declined in the later part of 2008, biofuel production levels increased once again, but this was short- lived as prices
increased again as shown in Fig. 8.2 (Reuters 2007; GSI 2008).
The government also promoted Jatropha as a biodiesel feedstock, recognizing
the volatility of palm oil prices, to avoid the food–fuel conflict. The biofuel roadmap
initially set a target of 1.5 million hectares of previously logged and nonproductive
land to be planted with Jatropha, as shown in Fig. 8.3, but as of 2008, only 10% was
planted. Initial demand for Jatropha seeds to make seedlings significantly raised
their price, generating interest from many investors and farmers. When demand for
seeds stabilized, actual yield was low (only about one-fourth of the initial estimates
of at least 5 tons per hectare per year), making it unprofitable to process them for
biodiesel. Research to create high-yielding varieties has continued.
Fig. 8.2 Palm oil monthly prices in US dollars per metric ton
8 Socioeconomic Impacts of Biofuels in East Asia
biofuels at the same price as subsidized petroleum but did not provide additional
subsidies to cover the higher costs of biofuel production (GSI 2008a, b). Therefore,
Pertamina reduced the biodiesel content to barely 1%.
Palm oil is also very important for cooking in Indonesia, so the government
became very concerned about surging prices. In response, export taxes were imposed
on crude palm oil to discourage exports and prioritize its use for cooking, and the
government also imposed a 2% export tax on biofuels (Leow 2008; Commodity
Online 2008).
The government also became concerned about the contentious debate on the
environmental impacts of biofuels – especially relating to the conversion of forests
to biofuel feedstock monoculture plantations – and concerns about their role in raising food prices also grew worldwide (e.g., Fargione et al. 2008; Searchinger et al.
2008; Pimentel et al. 2007). Land use change and deforestation in Indonesia were
identified as so significant that the country ranked third in total GHG emissions
globally. In 2008, the EU reviewed its biofuel mandate and stopped importing oil
palm from Indonesia and Malaysia citing environmental concerns (USAID-Asia
2009). The high price of palm oil and questions about its sustainability had a significant impact, and many refineries stopped operations and stalled plans for expansion
and new development. When palm oil prices declined in the later part of 2008, biofuel production levels increased once again, but this was short- lived as prices
increased again as shown in Fig. 8.2 (Reuters 2007; GSI 2008).
The government also promoted Jatropha as a biodiesel feedstock, recognizing
the volatility of palm oil prices, to avoid the food–fuel conflict. The biofuel roadmap
initially set a target of 1.5 million hectares of previously logged and nonproductive
land to be planted with Jatropha, as shown in Fig. 8.3, but as of 2008, only 10% was
planted. Initial demand for Jatropha seeds to make seedlings significantly raised
their price, generating interest from many investors and farmers. When demand for
seeds stabilized, actual yield was low (only about one-fourth of the initial estimates
of at least 5 tons per hectare per year), making it unprofitable to process them for
biodiesel. Research to create high-yielding varieties has continued.
Fig. 8.2 Palm oil monthly prices in US dollars per metric ton
8 Socioeconomic Impacts of Biofuels in East Asia