Indonesia is likely to be the driving force for the global biodiesel market over the next decade, with the increasing use of vegetable oils as feedstock for biodiesel, as part of B30. The mandate requires producers to blend 30% palm oil-based fuels into the country’s biodiesel produce. The policy aims to reduce its fuel imports and drive domestic palm oil production.
The FAO and OECD Agricultural Outlook Report for the decade said that global biodiesel consumption is likely to increase by 7% over the period, with Indonesia responsible for two thirds of this increase. Indonesia’s vegetable oil production is forecast to grow by 23% to roughly 8 million tonnes over the decade to achieve this increase in biodiesel production.
The Indonesian government were initially looking to implement a B40 mandate (40% blending requirement) in 2021, however, soaring palm oil prices have meant that this policy will now commence in 2022. The Indonesian palm oil price has weakened since the beginning of May, but still remains 69% higher y-o-y at USD 1,000/MT on 7th July.
Palm oil use for biodiesel will however be hindered by policies in the EU, with the Renewable Energy Directives (RED II) guidelines limiting the use of the oil as a biofuel feedstock, due to concerns surrounding unsustainable farming practices in Malaysia and Indonesia.