Indonesia has become the first country in the world to mandate a 50 percent biodiesel blend the largest blending mandate ever. The claims are grand: ending diesel imports and saving hundreds of trillions of rupiah. However, when all the costs are calculated, the bill appears elsewhere: in the state treasury, in household kitchens, and in the forests.
A yellow tourist bus pulled up to a dispenser marked "Bio Solar B50" at the Rest Area Km 57 gas station on the Trans-Java Toll Road, Karawang Regency, on Thursday morning, July 9, 2026. Not far from there, under a white-and-blue tent, President Prabowo Subianto inaugurated the implementation of the 50 percent biodiesel mandate, which has been effective since July 1, 2026.
Minister of Energy and Mineral Resources Bahlil Lahadalia reported that national diesel consumption is 38 to 40 million kiloliters per year, with about 3 to 4 million kiloliters previously covered by imports. "With B50, we will no longer import diesel products into our country," he stated before the President.
One thing rarely mentioned in the ceremony was the scale. No other country has ever mandated such a high biodiesel blend. Brazil, a global biofuel giant, has only implemented a soy-based B15. Malaysia, the second-largest palm oil producer, only started B15 in June 2026. In terms of the volume of feedstock absorbed, Indonesia's biodiesel program is the largest blending mandate in the world.
Precisely because its scale is incomparable, three questions become urgent: where did such a massive policy originate, who actually bears the costs, and who enjoys the benefits?
Born from oversupply, not energy needs
The history needs to be clarified first. The biodiesel mandate policy was not born from energy planning, but from a commodity issue. From the beginning, its main goal was to maintain the price stability of crude palm oil (CPO), which is often overproduced and not absorbed by export markets. To address this surplus, the government created "artificial demand" through the mandate program. In this way, CPO prices are maintained, and the interests of the palm oil industry are protected.
From there, the blend percentage has been continuously raised: B2.5 in 2008, B20 in 2018, B30 in 2020, B35 in 2023, B40 in 2025, and now B50. Each increase boosts CPO absorption, but it has never been accompanied by a feedback mechanism to test whether the economic value still makes sense.
The current phase has its own name. When the European market tightened access through the EU Deforestation Regulation (EUDR), the biodiesel mandate functioned as a "demand domestication" strategy: the state creates permanent buyers domestically as a safety valve for oversupply. Consequently, the risks previously spread across the global market are now concentrated on one party: the state.
Fiscal paradox: losing in all scenarios
The exact costs borne by the state can now be answered with data. A cost-benefit analysis by Transisi Bersih for the 2014-2024 period, using data from the Ministry of Energy and Mineral Resources and audited accounting from the Palm Oil Plantation Fund Management Agency (BPDPKS), found that the net benefit of the biodiesel mandate policy has been consistently negative every year since 2015. The cumulative deficit exceeded Rp409.6 trillion throughout 2015-2024. For every Rp1 of savings in diesel imports, the state incurs a cost of Rp1.48 in the form of lost CPO export foreign exchange and biodiesel subsidies.
The design is pro-cyclical: precisely when CPO prices are high a condition that should benefit Indonesia as the largest producer the cost burden peaks because the sacrificed export value increases, and subsidies also soar. The largest loss was recorded in 2021, reaching nearly Rp120 trillion in one year.
What about B50? Transisi Bersih projects three scenarios: normal market conditions, escalation of geopolitical crises, and easing geopolitics. The result is negative in all three, ranging from minus Rp115.9 trillion to minus Rp191.7 trillion per year. Even in a crisis scenario with world oil prices at 115 US dollars per barrel the condition most often used to justify B50 the net benefit remains minus Rp178.7 trillion because CPO and crude oil prices move in the same direction.
This is the fundamental problem: price fluctuation is not just a peripheral risk, but the core issue. Because oil and CPO prices can never be guaranteed, the volume of CPO required, the amount of subsidy, and the economic value of a rigid 50 percent mandate can never be calculated with certainty. There is no price scenario that makes this policy design profitable.
Its energy security claim is also shaky. The diesel import ratio was indeed pressed from 36.4 percent (2012) to a low of 9.6 percent (2021). However, it rose back to 21.8 percent in 2024, approaching the level before B20 was implemented. This is because diesel consumption growth exceeds biodiesel expansion capacity. The Institute for Essential Services Reform (IESR) assesses that B50 may be a short-term solution to curb imports, but it is not appropriate to be the main pillar of the energy transition, and warns that if export levy revenues decline because CPO is absorbed domestically, the fiscal space supporting the program will narrow.
Who pays, who benefits
Biodiesel subsidies do not fall from the sky. The funds come from palm oil export levies managed by BPDPKS. Farmers also contribute through that chain, because the levy is ultimately transmitted to the price of fresh fruit bunches (FFB) that they receive.
Where do those funds flow? The 2024 BPDPKS allocation data gives a clear answer: 93.28 percent of the budget flows as biodiesel subsidies, the benefits of which are concentrated on fewer than 20 large-scale FAME (Fatty Acid Methyl Ester, palm-based biodiesel) producers. Meanwhile, the Smallholder Palm Oil Replanting Program (PSR), which targets 2.67 million smallholders, only received 4.11 percent. Out of every Rp100 managed by BPDPKS, only Rp4.11 actually reaches the hands of small farmers.
The pattern is not new. Throughout 2015-2023, biodiesel incentives reached approximately Rp179 trillion, and about 75 percent (Rp133 trillion) flowed to only five of the largest company groups: Wilmar, Musim Mas, Royal Golden Eagle, Permata Hijau, and Sinar Mas.
B50 deepens this inequality while simultaneously eroding its own funding source. By diverting about 36 percent of national palm oil production to the domestic market, exports are projected to plummet by 43 percent from the 2022 level. This is equivalent to a loss of 10-12 billion US dollars in foreign exchange per year. Shrinking exports mean export levies also shrink, and funds for subsidies and smallholder palm oil replanting are eroded.
No wonder palm oil farmer organizations themselves, from POPSI to the Palm Oil Farmers Union, voice the same thing: they do not reject biodiesel; what they reject is being the ones who bear the costs of a policy whose benefits are enjoyed by others.
The next bill is charged to the land
MADANI Berkelanjutan's spatial analysis notes that Indonesia's palm oil cover has reached 17.8 million hectares in 2024, equivalent to the entire area of Sulawesi Island, or nine times the size of Bali.
A higher mandate adds pressure to that figure. Transisi Bersih's analysis found a strong correlation between the increase in biodiesel consumption and the growth of palm oil land area, which although the relationship is correlational, not precise causation is consistent with economic logic: state-guaranteed demand encourages expansion. An LPEM UI study long before had estimated that a B50 scenario would require up to 9.2 million hectares of new land.
That pressure does not operate in a vacuum, but meets with food and energy estate policies that clear land in the name of food and energy security. Merauke is the most concrete and controversial example, where large-scale land clearing takes place on top of natural forests and the living spaces of indigenous communities.
Yet, truly safe space is very narrow. MADANI's spatial analysis of 19 million hectares of palm oil business permits found only about 3.7 million hectares located outside natural forests, peat ecosystem functions, customary territories, and the habitats of more than 15 species.
Yet expansion is unnecessary
This is the biggest irony of B50: the additional supply needed could actually be met without clearing a single hectare of new land if the productivity of existing plantations were improved.
MADANI data, which looks at 25 years of Indonesia's palm oil journey, shows why that has not happened. Of the 17.8 million hectares of palm oil cover in 2024, only 1.46 million hectares are indicated to be the result of replanting. The interpretation is that planned replanting is not the dominant practice; our palm oil continues to expand by consuming new land. As a result, national productivity is stuck at around 3.6 tons per hectare per year, lagging behind Malaysia, which reaches 4-6 tons.
Farmers do not not want to replant their plantations. They cannot afford to, and the funds that should help them are instead sucked into biodiesel subsidies, as outlined above. Even GAPKI, the palm oil entrepreneurs' association itself, considers intensification and productivity improvement more appropriate than new land expansion. Transisi Bersih recommends a similar path: increasing PSR allocation to at least 25 percent of the BPDPKS budget and shifting the fund's orientation from consumption subsidies to upstream productivity investment.
What is at stake: our own climate commitment
The government claims B50 cuts emissions by about 44 million tons of CO2 equivalent. That calculation stops at the exhaust. When calculated reasonably, the direct emission reduction from biodiesel combustion at 2024 consumption volumes is estimated at only 7-10 million tons of CO2 equivalent per year. Meanwhile, emissions from land-use change a component scientifically documented to be far greater than the savings at the exhaust are never calculated in the program's official evaluation.
The stakes are not just technical figures, but the achievement of Indonesia's climate commitments. The forestry and other land use (FOLU) sector has contributed nearly half of national emissions in the last two decades, and it is precisely this sector that is being used as the backbone of mitigation through the FOLU Net Sink 2030 policy a promise to make the land sector a net sink of 140 million tons of CO2 equivalent by 2030. Indonesia's first Biennial Transparency Report (BTR) in 2024 shows that national emission reduction achievements with and without the FOLU sector, and the gap toward the NDC target, remain wide. In the 2010-2022 period, there were 8 years where Indonesia failed to reach its emission reduction target when including emissions from the LULUCF sector, namely in the years: 2011, 2012, and 2014-2019. When compared with the more ambitious CM2 target, the failure is even more visible.
The question is simple: how can the sector that is the backbone of fulfilling our climate commitments continue to be prepared as a sacrificial lamb, in the name of energy security claims whose calculations themselves lose in all scenarios?
And food is dragged along
Pressure on household kitchens was already felt even before B50 was fully operational. The share of palm oil for domestic food consumption dropped from 59 percent (2019) to 40 percent after B40 was implemented, and MinyaKita cooking oil was reported to exceed Rp21,000-22,000 per liter, far above the highest retail price of Rp15,700.
Global experience confirms the same direction. A Transport & Environment (T&E) study shows that the world now uses 32 million hectares of land roughly the size of Italy to grow crops that are burned as fuel, just to meet 4 percent of global transport fuel demand; the energy from that raw material is equivalent to the minimum caloric needs of 1.3 billion people. With the largest mandate in the world, B50 puts Indonesia at the forefront of that path. Precisely when the same government makes food security a national priority.
Correcting direction, not just the blend percentage
MADANI's conclusion on all the findings above is straightforward: the B50 problem will not be solved by looking for a "safe" blend percentage. Keeping the blend at B40 still means inheriting the same architecture: public funds sucked into corporate subsidies, farmers left unable to replant their gardens, and forests continuously prepared to be expansion reserves. What must be corrected is the foundation, namely the reliance on a single raw material that has the potential to threaten the existence of forests and the maintenance of ecosystems, regardless of the blend percentage.
Alternatives are available and cheaper. After all costs are calculated, energy from B50 biodiesel reaches 0.14-0.18 US dollars per kWh three to four times more expensive than solar energy (0.044 dollars) and onshore wind (0.033 dollars) while Indonesia's solar energy technical potential, which reaches 3,286 gigawatts, is only utilized less than 0.03 percent. Energy decentralization and renewable energy diversification provide energy security without exposure to agricultural commodity price volatility, and without charging the forest as a sacrifice.
And at the site level, there is a path that has been missed: community-based energy transition. Not as a substitute for national supply because the scale is not for that. But as a complementary alternative specifically designed according to the availability of local raw materials: rubber seeds from smallholder gardens in Kapuas Hulu, nyamplung on critical land, used cooking oil in cities. The goal is bigger than just a liter of biodiesel: energy decentralization and restorative economy, namely energy owned by the community, based on local potential, and whose benefits return to the community. The authority to start it is already in the hands of the provincial government.
Ultimately, B50 shows two very different ways of building energy security. The first way is easy and fast: raising the blend percentage from 40 to 50 percent is enough with one ministerial regulation, one ceremony at a rest area, and one savings claim that has never been tested with full calculations. The second way is much harder: building an energy system that is truly tough, clean, and fair, not hanging its fate on one commodity, ensuring public funds reach the farmers who need them most, and not charging the forest as a sacrifice. The second job will not be finished in one ceremony, maybe not even in one administration. But precisely because of that, it is worth starting now, because only a system built that way will still stand when world oil prices reverse direction, when export levies dry up, and when the remaining forests can no longer be sacrificed. As long as that option is still open, the direction can still be corrected, and that correction should start today, rather than waiting for the next bill to fall due.
