Demand for Indonesian palm-based biodiesel is likely to accelerate in 2024.  As 2023 saw the implementation of a 35 percent biodiesel blending mandate, the nation witnessed a significant annual increase of 25 percent in biodiesel consumption, reaching an estimated 13 billion liters. This increase is attributed to the higher blending rate and a modest uptick in diesel consumption post-pandemic.

It is likely also that blending mandates will be raised higher. The Indonesian Government has officially announced plans to raise the biodiesel blending rate above 35 percent. This decision follows successful road tests for trucks and passenger cars conducted in late December 2022. Furthermore, the Indonesian government expanded its testing scope to heavy machinery in the mining sector in May 2023, experimenting with two types of bio components: 40 percent Fatty Acid Methyl Ester (FAME) and a mix of 30 percent FAME with 10 percent hydrogenation derived renewable diesel (HDRD).

There is currently talk of expanding blending mandates to B50 as part of government policy going into the future.

Demand is also likely to be spurred by use of Sustainable Aviation Fuel in Indonesia’s domestic aviation markets. A new regulation has also been issued to support the use of renewable sources – including palm-based biodiesel – in electricity generation. This regulation provides a tariff reference for state-owned company PLN to purchase electricity from these renewable sources, encouraging the use of bioenergy in power generation.

Although the European Union has dampened demand for palm-based biodiesel with the imposition of tariffs – currently subject to a WTO challenge — Indonesia’s biodiesel exports in 2023 are forecasted at 630 million liters. These are driven by increased demand and narrowing price spreads between palm oil and diesel. While below the record sales of past years, this marks a considerable increase from 2020 and 2021. China remains the primary export destination, followed by the Netherlands, Peru, and the Philippines.

However, it is also possible that the European Union will find itself open to palm-based biodiesel if it loses a WTO case brought against its renewable energy mandates that effectively ban palm-based fuels. Indonesian officials have noted publicly that they are confident of winning the suit. The state of the WTO system may mean that the victory will not be enforceable. This will, however, mean a victory in principle against the EU’s ongoing discrimination against palm-based biodiesel.