Indonesia’s ‘green diesel,’ powered by palm oil, fuels threat to forests

Indonesia’s ambitious biodiesel program will increase the risks of deforestation as more tropical forest could be cleared to grow palm oil, environmentalists have warned, urging policymakers to implement a long-term ban on new plantations.

The country — which is home to the world’s third-largest tropical forests but is also its biggest producer of palm oil — has steadily increased the portion in its biodiesel mandate derived from palm oil since 2018 to boost demand.

Looking to also curb costly fuel imports and its own planet-heating emissions, the Southeast Asian country raised the “bio” content in its biodiesel to 30% in late 2019 from 20% the year before, with the rest being fossil fuel.

Indonesian President Joko Widodo has targeted biodiesel made entirely out of palm oil, although hasn’t set a firm deadline for rolling that out widely as engines would need to be modified.

State energy company PT Pertamina started trials last month on the so-called “green diesel” after conducting tests with jet fuel late last year.

Yuyun Harmono, climate justice campaign manager at the Indonesian Forum for the Environment (WALHI), said no additional land would be used to produce palm oil for biodiesel yet but that that could change in the future, threatening forests further.

“If there is increasing demand for fuel, there will also be an increase in demand for biofuel … of course there is a (deforestation) risk,” he told the Thomson Reuters Foundation.

Indonesia was named as one of the top three countries for rainforest loss in 2019, according to Global Forest Watch, a monitoring service that uses satellite data.

Palm oil — used widely in cosmetics, food products and biofuel around the world — has faced scrutiny from green activists and consumers, who have blamed its production for forest loss, fires and worker exploitation.

A palm oil tree plantation in Borneo, Indonesia | BLOOMBERGIn response, the industry’s watchdog, the Roundtable on Sustainable Palm Oil, tightened its rules in late 2018, imposing a ban on clearing forests or converting peatland for oil palm plantations.

WALHI’s Harmono said biodiesel should not be viewed as a substitute for fossil-fuel oil and that the use of both must fall, echoing comments by green groups last month urging Jakarta to be more ambitious in its efforts to cut carbon emissions.

Harmono noted that, since 2018, use of biodiesel is mandatory for powering both privately owned and business vehicles.

“It is only 30% (biofuel) now, but when demand increases then demand for palm oil is also going to increase,” he added.

Serious threat

Indonesia’s biodiesel production last year used just over 7 million metric tons of palm oil out of total national output of 41.4 million metric tons, up from about 1.4 million in 2015, according to consultancy LMC International.

Malaysia, the world’s second biggest grower, used about 880,000 metric tons of palm oil for biodiesel production in 2020, up from 600,000 in 2015.

“Indonesia has achieved very impressive growth in biodiesel production over the past five years,” said Julian McGill, head of Southeast Asia at LMC International. “Indonesia’s success at sustaining biodiesel production has been a critical factor in the low stocks and high prices which the industry is enjoying today.”

But a slump in crude oil prices as the novel coronavirus pandemic hit demand has made Indonesia’s biodiesel program less economical, while plans to boost the biofuel-portion to 40% have been delayed.

Despite industry concerns over the cost of Indonesia’s biodiesel policy, which is funded by a palm oil export levy, the government is likely to remain resolute in its use of biofuel to replace diesel imports, McGill added.

Ricky Amukti, of climate change and energy policy advocacy group Traction Energy Asia, said smaller and independent palm oil producers had yet to benefit from the biodiesel program, due to being squeezed on prices by middlemen and larger growers.

The longer-term goal, for biodiesel to be made entirely from palm oil, could also increase competition with its procurement for food and cosmetics versus fuel, he added.

A protected area of the Rawa Singkil wildlife reserve in Trumon, South Aceh, Indonesia, is burned in preparation for the opening of a new palm oil plantation in 2018. | AFP-JIJI“The competition would potentially be detrimental for Indonesia’s remaining forest, notably in Papua, as the need for palm oil would significantly increase,” Amukti said.

Indonesia’s energy minister has estimated that 15 million hectares (37 million acres) of new palm plantations would be needed to meet the nation’s biodiesel goals, according to media reports late last year.

The country’s biodiesel program is “a serious threat to the rainforests that will be cleared to make way for these new plantations”, warned Gemma Tillack, forest policy director at U.S.-based environmental group Rainforest Action Network (RAN).

Cooking oil alternative?

In September 2018, the Indonesian president imposed a temporary ban on new permits for palm plantations for three years in a bid to tackle forest fires and protect carbon-storing tropical forests, seen as crucial to the global fight against climate change.

WALHI’s Harmono said this should be extended, so that any rise in palm oil demand for biodiesel would have to be met by improving yields rather than from new plantations.

The government also should focus on developing and promoting electric vehicles powered by sustainable energy, he added.

To further reduce the threat of deforestation, Amukti at Traction Energy said biodiesel producers could buy from mills that use fruit grown by smallholders, to limit the threat of land conversion and also increase supply chain transparency.

Making use of waste cooking oil — most of which is dumped in sewers — as a complementary component for biodiesel, to reduce the threat of deforestation in order to plant more oil palm trees, was also possible, he said.

“Deforestation-linked biodiesel is not a ‘green fuel’,” emphasised RAN’s Tillack. “As the climate crisis worsens, we can’t ignore the rising demand and use of deforestation-linked palm oil for biodiesel.”