Study: The Use Of Biodiesel Is Worried About The Disruption Of The Food Sector

JAKARTA - Reports from the Traction Energy Asia study reveal the use of crude palm oil (CPO) as the main raw material for green energy production such as biodiesel raise concerns about its impact on the food sector which ultimately encourages the expansion of environmentally pressing palm oil.

In addition, it also has an impact on increasing deforestation and releasing carbon emissions, especially from palm oil processing plants that emit methane gas.

"In the 2018-2022 period, CPO production for domestic biodiesel consumption has increased relatively. But CPO demand for the food sector has also not decreased," said Tommy Ardian Pratama, Executive Director of Energy Asia in a written statement at the launch of the Working Paper Report on the Impact of CPO Use in Indonesia: Between Food and Fuel Needs in Jakarta, quoted from Antara, Thursday, July 11.

It said the Government had implemented a mandatory biodiesel program since 2018. Acceleration was carried out by implementing B30 in 2020. Since 2023, this B30 has been increased to B35, meaning that biodiesel levels have been increased again from 30 percent to 35 percent in mixtures with conventional diesel fuel.

"This is in line with the government's statement to continue to increase the proportion of vegetable oil in fuel," said Tommy.

Professor of the Faculty of Economics and Business, Diponegoro Firmansyah, said that the growth of oil palm plantations is assumed to be 1 percent-1.74 percent based on historical data through deforestation or land conversion from forest to plantations.

"The policy of the biodiesel mix such as B30 and B35 can cause future CPO shortages, if the land used for oil palm plantations is limited, so the scarcity of CPOs for food will occur more quickly," he said.

As one of the most vegetable oils consumed by the world, CPO has an important role in the food industry. Data from the United States Department of Agriculture (USDA) projects Indonesia's CPO production to reach 45.5 million tons in the 2022/2023 period. The production volume projection makes Indonesia with the largest CPO producer in the world.

The fact is that Indonesia's production volume since 2019 has even exceeded the USDA projection. Based on data from the Indonesian Palm Oil Entrepreneurs Association (GAPKI), CPO production in 2019 reached its peak of 47.18 million tons. In the following years, it has decreased, but production volume remains high, in the range of 46-47 million tons. The latest data, in 2022, shows that CPO production reaches 46.73 million tons.

Based on GAPKI data, Indonesia's CPO production volume remains high even though in 2019 the European Union stopped using palm oil for biodiesel, although since then, world CPO prices have fallen.

This has an impact on Indonesia's export value in 2019 which amounted to 15.54 billion US dollars, down from the previous year which amounted to 17.9 billion US dollars. In 2022, Indonesia's CPO export volume reached 26.22 million tons with a Free on Board (FOB) value of 15.97 billion US dollars.

This indicates an increase in world CPO prices, which was mainly triggered by efforts to downstream CPOs in Indonesia. The three main routes in the downstreaming of CPO that are the focus are the complex autofood industry, the complex autochemical industry, and the biofuel industry.