Indonesia boasts that its energy sector development is more ambitious than any other country in the world. President Joko Widodo's speech at the COP26 Climate Change Summit in Glasgow claimed that Indonesia has made significant progress in utilizing new and renewable energy.
" By developing an electric car ecosystem, constructing the largest solar power plant in Southeast Asia, utilizing new renewable energy, including biofuels, and developing clean energy-based industries, including the world's largest green industrial area in North Kalimantan ," President Joko Widodo's speech at the COP26 Summit in Glasgow, Monday, November 1, 2021, quoted.
Indonesia sources its biofuel from palm oil. The mandatory biodiesel policy, for example, has been progressive, with Indonesia targeting a 20% biodiesel mix by 2025 since 2008. The 20% palm oil mix (B20) was realized in 2018 and B30 in 2020. According to a press release from the Indonesian Palm Oil Association (GAPKI) in "2020 Palm Oil Industry Reflection and 2021 Prospects," biodiesel consumption increased in 2020 compared to 2019, in line with the policy change from B20 to B30. Total consumption in 2020 was 17.35 million tons (domestic consumption), up 3.6% from 2019 (16.75 million tons).
This biofuel is touted as capable of meeting Indonesia's ambitious climate targets. The dominant feedstock, palm oil, is considered more valuable than other feedstock sources. " Having a progressive biodiesel policy will reduce the risk of requiring more land, " said Dr. Alin Halimatussadiah, Head of Environmental Economics Studies at the University of Indonesia's Institute for Environmental Management (LPEM FEB), during a workshop on examining Indonesia's biofuel potential on Tuesday, November 16, 2021.
Study Report: Biodiesel Policy Risks from a Macroeconomic and Environmental Indicators Perspective, LPEM FEB UI 2020 (assuming no replanting) found that the risk of land expansion from biodiesel policies (B20, B30, B50) requires 3% of the land (scenario 1/B20), 39% of the land (scenario 2/B30), and 70% (scenario 3/B50). Scenario 3/B50, for example, requires land expansion of 5.19 million ha (2019); 1.69 million ha (2020); 1.30 million ha (2021) and 1.11 million ha (2022).
The Minister of Energy and Mineral Resources, Arifin Tasrif, also conveyed projections for palm oil expansion to achieve Indonesia's climate ambitions. "If we want to switch to CPO for 1 million barrels per day, we need 15 million hectares of new CPO plantations. That's the result of our study," said Arifin in a meeting with Commission VII of the House of Representatives (DPR) (energy, research, technology, and the environment), Monday, November 23, 2020. 15 million hectares, fantastic, isn't it? The size of three Indonesian islands (Java, Bali, and Lampung) or the equivalent of 227 capital cities!
Indonesia has a target of 46% biofuel energy sector by 2050. The policy stated in the Long Term Strategy for Low Carbon and Climate Resilience/LTS LCCR 2050 document prioritizes the transportation sector.
" Because the choice is indeed difficult. We have no choice but to use biofuels to achieve NZE. Because electric vehicles/EVs cannot be used for all modes of transportation. The risk is in the forestry sector, " said Alin, a woman who received a doctorate from UI in natural resource and environmental economics in 2013.
Alternative Feedstock Supply from Remaining Land
Palm oil is not the only source of national biofuel. The Madani Berkelanjutan Foundation, for example, offers to find energy feedstocks that are not only low-carbon but also environmentally friendly. Fadli Ahmad Naufal, GIS Specialist at the Madani Berkelanjutan Foundation, stated that there are two potential areas for developing sustainable biofuel feedstock. First, potential land availability. There are 2.27 million hectares of land outside forests and within forest areas (permanent production forests and convertible production forests).
" Simply put, we try to sort the area based on ecological aspects (natural forest, peat, habitat of more than 15 flora and fauna). We also issue consistent permits. We try to exclude the forest and land protection aspects promoted by the government. Finally, we focus on land cover that is potentially cultivated (settlements, for example). We exclude it from this analysis to include land cover that is likely to be used for cultivation, such as shrubs, bushes, savannas, and open land," explained Fadli at the Workshop "Not Just Palm Oil, Indonesia is Rich in Diverse Biofuels ," Wednesday, November 17, 2021.
Fadli stated that the sorting left 2,269,318 hectares of the existing 138,396,905 hectares. This area is spread across the islands of Kalimantan, Sumatra, Nusa Tenggara, and Papua. Of the accumulated available land in each province, Jambi has the largest area, with 371,000 hectares available/remaining. This serves as Madani's benchmark for exploring local commodities in the monitored areas.
Of the existing regional commodities collected from the BKPM 2012-2017 with production above 20 tons per year there are Coconut (969,278 ha), cassava (913,130 ha), sweet potato (912,469 ha), corn (912,228 ha), areca nut (574,705 ha), sugar palm (538,819 ha), sugar cane (172,880 ha), castor oil palm (100,745 ha). However, Fadli said further research is needed regarding the suitability of land with existing commodity types.
Second, optimizing land within palm oil permits. "We'll look at the existing palm oil permits and see how the remaining land that hasn't been planted with oil palms can be optimized if the option is to develop palm oil for biodiesel," said Fadli.
Madani recorded data on the area of existing palm oil permits/businesses as of 2020, amounting to 22,219,508 ha. Using a similar methodology, 1,162,648 ha of remaining land within palm oil permits was found. This finding is relatively widespread. Of the accumulated remaining land in each province, East Kalimantan has the largest remaining area, at 470,000 ha. Of this remaining area, there are overlapping permits, the highest overlap with minerals and coal at 264,591 ha. From this overlapping permit area, Madani sorted and calculated again, leaving 613,000 ha. This figure includes 287,021 ha (unrecorded), 167,434 ha of IUP, 85,836 ha of HGU, 73,322 ha of ILOK, and 20 ha of freehold rights.
" There is potential land that can be utilized for biofuel feedstock development other than oil palm. However, we must examine this further to determine the suitability of the land for the commodity. Secondly, if oil palm is indeed the preferred option for biofuel feedstock development, governance is the first thing we must consider together ," Fadli concluded his presentation.
Involve Independent Farmers, Support with Government Instructions
The Decree of the Minister of Agriculture Number 833/KPTS/SR.020/M/12/2019 stipulates that the total area of Indonesian oil palm plantations in 2019 was 16,381,959 ha. This proportion of ownership includes 41% (6.72 million ha) of smallholder plantations, 53% (8.68 million ha) of private companies, and 6% (0.98 million ha) of state-owned enterprises/government-owned enterprises. This percentage demonstrates the important role of independent oil palm smallholders in the national palm oil supply chain as supporters of sustainable biodiesel policies. Data from the Directorate General of Plantations at the Ministry of Agriculture also shows that the contribution of independent oil palm smallholders reached 2,740,747 families (2019).
In Working Paper 3-2020, "Independent Smallholder CPO Supply Chains in the Biodiesel Trade System," Traction Energy Asia assumes that if each independent palm oil smallholder household employs two people, this activity has the potential to provide employment for 5,481,494 people. Traction Energy Asia also promotes transparency and traceability of the biodiesel supply chain used in the energy mix. This is crucial to ensure that biodiesel policies truly utilize low-emission palm oil feedstock. This is achieved by involving independent palm oil smallholders in the biodiesel supply chain.
The Traction Asia study found that the characteristics of independent oil palm smallholders are those who have land of less than or equal to 5 hectares, low productivity (less than 3 tons per hectare per harvest), a maximum education of high school, do not use certified seeds, do not routinely manage and maintain the garden, still depend on middlemen (in selling products/TDS), and have side businesses.
The company's partnership with independent palm oil farmers benefits both parties, including the country. Independent farmers receive market certainty, stable selling prices, and improved welfare. Conversely, the company receives a supply of raw materials without having to clear new land, strengthening its portfolio in supporting sustainable energy. Furthermore, this partnership offers the opportunity to target market segments concerned with environmental and welfare issues. Furthermore, the current global market, particularly the European Union, has set trade restrictions only for companies that support sustainable palm oil plantations.
So, what is the relevance of this partnership for the country? The Traction Energy Asia working paper reveals that the government can implement a palm oil program within its biodiesel policy in an inclusive and low-emission manner. This can be achieved if the government has the courage to issue government regulations requiring biodiesel companies to purchase their palm oil only from companies partnered with independent oil palm growers.
This step is in line with what Mr. Jokowi once said at the inauguration of the implementation of the 30 percent biodiesel program (B30) at the Pertamina gas station 31 – 128.02 Jalan MT Haryono, Jakarta, Monday, December 23, 2019, " The implementation of B30 will create a very large domestic demand for CPO, which will then create a multiplier effect on 16.5 million farmers, our palm oil plantations ."
