Indonesia, which planned to start producing diesel made entirely from palm oil in 2023, has delayed the target to 2026. The so-called “green diesel” is prepared by refining fossil crude oil and palm derivatives (fatty acid methyl ester, or FAME) together and the state-owned oil and gas corporation Pertamina is building refineries to process palm oil directly to fuel.
Indonesia aims at using 30% of the country's palm oil production for biofuel purposes. The minimum biodiesel blending requirement was raised from 20% (B20) (as of September 2018) to 30% (B30) on 1 January 2020 and will be raised again in 2022 to 40%. The supply of "green diesel" is intended to be reserved for the domestic market only.
In May 2020, Indonesia decided to inject US$186m in the Estate Crop Fund as well as to increase the levy on palm export by 10% to US$55/t in May 2020, in a bid to fix its biodiesel support programme funding issues. The fall in global crude oil price has more than doubled the gap between the costs of fatty acid methyl ester (FAME) and diesel between January and May 2020, making biodiesel more expensive to subsidise for Estate Crop Fund, which subsidises the cost difference between the two fuels. The levy on palm oil exports applies when palm price exceeds US$619/t.
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