94
involved in the implementation was weak. What the farmers in the villages primarily needed was the know-how to improve production yields either by having access
to high-yield varieties or by improving their farming practices sufficiently for them
to be encouraged to plant the required biofuel feedstocks for energy purposes.
However, government funding was mostly allocated for procuring equipment and
building mini-processing facilities. To ensure a stable supply of feedstocks, farmers
should be assisted to improve their productivity and there should be more efforts to
help farmers understand the agricultural and energy benefits of biofuels (Romero
2010).
8.2.4 Analysis
In 2006, Indonesia drafted a comprehensive national biofuel development policy
with the dream of becoming the “Middle East of biofuels.” The policy was undermined even before it was fully implemented by the events leading to the sharp rise
and fall of oil prices in 2008. By 2009, the government, industry, civic organizations, and farmer groups were reconsidering their euphoric expectations for biofuels. The government’s flexible response to reduce blending targets was laudable, as
rigidly adhering to the initial targets likely would have meant more losses.
In hindsight, the policies assumed that the groundwork for establishing the biofuel industry had already been laid. Initially, most policy discussions focused on
trade and investment, neglecting the vital role of the agriculture sector. Moreover,
important assumptions underlying the expectations of the economic viability of biofuel projects were proved to be incorrect. In the case of palm oil, it was assumed that
the palm oil price would be lower than the oil price. Farmers gained when the price
of palm oil went up, although the nascent biodiesel industry nearly collapsed. For
Jatropha, the actual yield of Jatropha seeds was only about one-fourth of what had
been projected, but the necessary agricultural inputs were more than initially estimated. Small holders were the ones most adversely affected since they did not have
much capital to offset their losses.
Overall, Indonesia still has the potential to build a flourishing biofuel industry.
To achieve it, lessons learned should be incorporated in rethinking the national biofuel policy. Action plans to complement the national policies should be included, as
the lack of action plans caused confusion and competition instead of coordination
among relevant agencies. Capacity training and R&D measures should be strengthened. And the most critical of all is to eliminate fossil fuel subsidies and shift the
funds to support cleaner energy sources.
M. Elder et al.
involved in the implementation was weak. What the farmers in the villages primarily needed was the know-how to improve production yields either by having access
to high-yield varieties or by improving their farming practices sufficiently for them
to be encouraged to plant the required biofuel feedstocks for energy purposes.
However, government funding was mostly allocated for procuring equipment and
building mini-processing facilities. To ensure a stable supply of feedstocks, farmers
should be assisted to improve their productivity and there should be more efforts to
help farmers understand the agricultural and energy benefits of biofuels (Romero
2010).
8.2.4 Analysis
In 2006, Indonesia drafted a comprehensive national biofuel development policy
with the dream of becoming the “Middle East of biofuels.” The policy was undermined even before it was fully implemented by the events leading to the sharp rise
and fall of oil prices in 2008. By 2009, the government, industry, civic organizations, and farmer groups were reconsidering their euphoric expectations for biofuels. The government’s flexible response to reduce blending targets was laudable, as
rigidly adhering to the initial targets likely would have meant more losses.
In hindsight, the policies assumed that the groundwork for establishing the biofuel industry had already been laid. Initially, most policy discussions focused on
trade and investment, neglecting the vital role of the agriculture sector. Moreover,
important assumptions underlying the expectations of the economic viability of biofuel projects were proved to be incorrect. In the case of palm oil, it was assumed that
the palm oil price would be lower than the oil price. Farmers gained when the price
of palm oil went up, although the nascent biodiesel industry nearly collapsed. For
Jatropha, the actual yield of Jatropha seeds was only about one-fourth of what had
been projected, but the necessary agricultural inputs were more than initially estimated. Small holders were the ones most adversely affected since they did not have
much capital to offset their losses.
Overall, Indonesia still has the potential to build a flourishing biofuel industry.
To achieve it, lessons learned should be incorporated in rethinking the national biofuel policy. Action plans to complement the national policies should be included, as
the lack of action plans caused confusion and competition instead of coordination
among relevant agencies. Capacity training and R&D measures should be strengthened. And the most critical of all is to eliminate fossil fuel subsidies and shift the
funds to support cleaner energy sources.
M. Elder et al.