Strategy for the implementation of sustainable green fuels in Indonesia

Erwan Hermawan, Adiarso Adiarso, Sigit Setiadi and Dudi Hidayat

ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, 2023, vol. 2023/1, issue 1, 103-139

Abstract: Global climate change has triggered the implementation of energy transition programs in many countries where renewable fuels have received great attention. While Indonesia successfully im- plements biofuels-based crude palm oil (CPO) such as biodiesel (up to B30). The program proceeds towards implementing other green fuels (such as green diesel, gasoline, and bio jet fuel). However, the current price of CPO (as a raw material) is highly fluctuated depending on the global market mechanism and mostly more expensive than the price of fossil fuels. This situation leads to an unattractive business of green fuels. So, the government?s policies are strongly required to make more attractive businesses with enhanced competitiveness of green fuels. A qualitative approach was conducted by using forum group discussion to gain information about the current status of biofuel policy in Indonesia and its challenges. The quantitative method was conducted by calculat- ing the economic analysis of palm oil-based energy crops and processing plants. The concept of integrated palm energy plantation was proposed based on the result. It may be a kind of integrated business entity owned by the government which aims at producing CPO and the following green fuels. Economic analysis shows that from the plantation side, the selling price of Fruit Fresh Bunch (FFB) is USD 0.068/kg with an IRR of 12.6%. While in the CPO processing industry, using the FFB price of USD 0.082/kg obtained an IRR of 14.4%. This result shows promising results from the calculation, keeps the sustainability of raw material supply and enhances the competitiveness of green fuels.

JEL-codes: Q14 Q48 Q54 (search for similar items in EconPapers)
Date: 2023
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