Indonesia Accelerates Energy Transition with B40 to Achieve Net Zero Emission

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Indonesia plans to implement B40 biodiesel on January 1, 2025, as part of its national strategy to reach net zero emissions by 2060. The program aims to reduce dependence on fossil fuels, cut carbon emissions, and enhance national energy self-sufficiency. However, challenges such as palm oil production and biodiesel subsidy funding remain key obstacles.

Strategic Steps in Biodiesel Policy Since 2014, Indonesia has mandated biodiesel policies, starting with B15 and gradually increasing to B35 in 2023. The implementation of B35 has helped reduce fossil fuel imports and optimize local resource utilization.

The government targets full implementation of B40 by January 1, 2025. Minister of Energy and Mineral Resources Bahlil Lahadalia stated that the program will strengthen energy security and reduce imports.

To support this initiative, the government has conducted various laboratory and industrial-scale tests to ensure B40’s compatibility with vehicle engines and fuel distribution infrastructure. Test results indicate that B40 performs comparably to conventional diesel fuel, although concerns remain regarding storage stability and potential engine impacts.

Challenges in Production and Subsidy The rising demand for palm oil in biodiesel production has sparked concerns over supply. Indonesia's palm oil production has stagnated at around 51 million tons per year due to aging trees. The government is now promoting smallholder palm oil plantation rejuvenation to boost productivity. If successful, crude palm oil production is projected to reach 65–70 million tons with fertilizer subsidy support.

Additionally, biodiesel subsidies present another challenge. The government estimates that implementing B40 will require 15.6 million kiloliters of biodiesel annually. Alternative funding strategies are under review to bridge the financial gap.

Economists warn that without clear funding mechanisms, B40 implementation may face obstacles that could hinder the energy transition. The government must explore innovative financing solutions, including carbon tax schemes or industry incentives.

BPDPKS Support and Economic Impact The Palm Oil Plantation Fund Management Agency (BPDPKS) plays a vital role in supporting B40 implementation by providing biodiesel production incentives and collaborating with industry sectors. This support is expected to help reduce fuel imports and maximize local resource utilization.

Beyond environmental benefits, biodiesel development significantly impacts the domestic economy. The program creates jobs in the palm oil and biodiesel industries while stabilizing crude palm oil (CPO) prices in the global market. One of the most significant economic advantages of B40 is potential foreign exchange savings through reduced fossil fuel imports.

However, using palm oil as the primary biodiesel feedstock has drawn criticism from environmental groups. They highlight risks such as deforestation and biodiversity loss due to palm oil plantation expansion. The government aims to balance environmental and economic interests through sustainability policies like the Indonesian Sustainable Palm Oil (ISPO) certification, which mandates eco-friendly industry practices.

Net Zero Commitment and Energy Transition President-elect Prabowo Subianto has reaffirmed his commitment to phasing out fossil fuel power plants within the next 15 years, replacing them with over 75 gigawatts of renewable energy capacity. This policy accelerates the energy transition ahead of the initial 2060 net zero emission target.

As part of its decarbonization strategy, the government is also investing in green energy technologies such as hydrogen, solar, and wind power. Large-scale solar power projects in Kalimantan and wind energy projects in South Sulawesi exemplify concrete steps toward the national energy transition.

Experts caution that achieving these targets requires significant policy reforms and substantial investment in green energy infrastructure. The government must ensure that B40 implementation aligns with broader renewable energy development to enable a smooth transition.

The Future of Biodiesel and Indonesia’s Global Role As the world’s largest palm oil producer, Indonesia’s success in implementing B40 could serve as a model for other nations in energy transition efforts. On the international stage, Indonesia actively participates in global energy forums such as the G20 and COP, advocating for fair and sustainable energy policies for developing countries.