B50 Biodiesel Implementation in Indonesia Could Erode Palm Oil Competitiveness, Says Professor

October 20, 2025 | 11:11 am

TEMPO.CO, Jakarta - Professor Bayu Krisnamurthi from IPB University (An agricultural university in Bogor, Indonesia) emphasizes the importance of careful calculations by the Indonesian government before implementing the B50 biodiesel policy in 2026. He believes this is crucial so that the national palm oil industry can continue to be competitive and its activities can be sustainable.

According to him, the plan to increase biodiesel from B40 to B50 could increase the subsidy burden, suppress exports, raise the price of cooking oil, and ultimately erode the competitiveness of palm oil. "For several years now, Indonesia has not only had stagnant palm oil production but also stagnant investment due to uncertain policies," said Bayu citing Antara on Monday, October 20, 2025.

This is in line with the study by the Strategic and Global Studies School of Universitas Indonesia's Research Center for Development Policy (Pranata UI). The study emphasizes the importance of implementing national biodiesel policies in a measured, adaptive, and scientifically-based manner to strengthen the government's green energy transition agenda.

Policies that consider all scientific factors and parameters in the Indonesian palm oil industry will support the effectiveness of efforts to build energy self-sufficiency through increasing the mandatory blending of biodiesel from B40 to B50.

As the world's largest producer and consumer of palm oil, with a production of 48.2 million tons or 54 percent of the global supply, Indonesia faces serious challenges in supporting B50 biodiesel mandates. Domestic production needs are estimated to rise to 59 million tons per year, while the projected 2025 production is only 49.5 million tons.

Simulations show saving of import foreign exchange for diesel fuel up to Rp172.35 trillion, but the potential loss of foreign exchange due to the decline in CPO exports could reach Rp190.5 trillion. "This condition can weaken the trade balance, foreign exchange reserves, and the stability of the rupiah exchange rate. Especially when the price of Indonesian CPO is already higher than that of other vegetable oils, pushing importing countries like India to switch to competing commodities," said Bayu.

The study also shows that the obligation of B50 biodiesel impacts domestic prices. The price of cooking oil is expected to increase by up to 9 percent and Fresh Fruit Bunches (FFB) to rise by around Rp618 per kilogram due to the increasing demand for biodiesel raw materials.

Both Bayu and Pranata UI recommend that all stakeholders carefully consider the national palm oil production capacity, export competitiveness, and farmers' welfare for the benefits of this program to be felt comprehensively.

"We need a balance between energy targets, exports, and farmers' welfare. Indonesian palm oil is extraordinarily strong, it cannot be defeated unless we defeat it ourselves," said Bayu, who is also a former Minister of Trade.

Editor's Choice: B50 Tested, Energy Minister: Indonesia Eyeing Implementation by 2026 Second Half

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