Supporting Indonesia’s Biodiesel Policy: Do We Need to Expand the Oil Palm Plantation
Until now, palm oil has been a strategic commodity supporting Indonesia's economy, serving as an export darling and dominating over 50% of the global market in the last decade. However, in 2020, it was reported that approximately 20% of the palm oil plantation area in Indonesia was indicated to be within forest areas (illegal) [1][2], raising concerns about deforestation impact, biodiversity loss, and social conflicts. Concurrently, Indonesia is committed to achieving its NDC targets, including energy transition by incorporating palm oil-based biofuels. Naturally, this is not an ideal situation as it presents a dilemma: in one hand, transitioning to renewable energy may reduce emissions, in the other hand, potential threat of deforestation due to the increasing demand for palm oil raw materials. In response to this, WWF Indonesia, along with a research team from the Faculty of Forestry at Gadjah Mada University (UGM), has formulated a policy paper to provide strategic recommendations to the Indonesian government and relevant stakeholders on how to meet palm oil needs for biofuel production without increasing pressure and damage to forests.
Indonesia initiated biodiesel policies in the 1970s as a response to the global oil crisis. Various policies, from Presidential Decree No. 1 of 2006 to Minister of Energy and Mineral Resources Regulation No. 24 of 2021, have been implemented to support biodiesel development. The establishment of the Palm Oil Plantation Fund Management Agency (BPDPKS) in 2015 further strengthened the implementation of these policies. In this context, biodiesel serves as an energy transition strategy and an economic growth opportunity for Indonesia.
An analysis of the supply and demand of Crude Palm Oil (CPO) indicates declining national supply and palm oil productivity. Contributing factors such as slow replanting programs, labor shortages, suboptimal soil health and nutrition management, and pest-disease attacks result in a downward production trend. Additionally, increasing national CPO consumption is estimated to result in up to 5 million metric tons deficit by 2030.
Strategies for Increasing Production
The four main strategies to increase palm oil production involve productivity improvements, accelerated replanting programs, increased production from social forestry forest farmer group plantations, and extensification scenarios. Productivity improvement involves three stages, including farm classification, yield gap characterization, and implementation of intensification scenarios according to yield gap categories.
The replanting program is the main activity to close the yield gap. However, the government's replanting target has not been fully achieved, triggering an increase in the area of aging plantations. Therefore, accelerating the replanting program in smallholder oil palm plantations is the key to increasing CPO production. Extensification is carried out as the last option, involving land expansion in unrealized concession areas and new concession areas. However, it needs to be ensured that extensification does not cause deforestation and is carried out sustainably.
Policy Aspects
Policy development needs to consider three main aspects. First, the policy to increase the productivity of oil palm plantations must be updated. Second, the replanting of smallholder oil palm requires improvement, including regulations on quality planting materials. Third, oil palm plantation expansion policies must be directed at optimizing unutilized concession land.
The role of oil palm farmers needs to be strengthened through the revision of Permen ESDM 24/2021. This includes the involvement of farmers as biodiesel raw material providers, quality standards for smallholder palm oil, and cooperation with cooperatives of oil palm farmers.
Recommendations
To increase the productivity of Indonesian palm oil, an integrated approach based on intensification, replanting, extensification that applies sustainable aspects, and improved policies that are integrated between ministries and institutions is needed. These efforts must be in line with environmental preservation and empowerment of oil palm farmers to achieve economic and environmental sustainability.
[1] https://sposindonesia.org/wp-content/uploads/2019/11/Buku-Hutan-Kita-Bersawit.pdf
[2] https://www.cnnindonesia.com/nasional/20210617131224-20-655637/18-juta-hektare-sawit-di-kawasan-hutan-disebut-tak-berizin