Indonesia’s biodiesel program fuels deforestation threat, report warns

  • A new report adds to warnings that Indonesia’s biodiesel program will drive greater deforestation by boosting demand for palm oil.
  • It says contradictory and opaque government policies “create conditions for producers to maintain business-as-usual production systems, instead of investing in more sustainable production innovations, such as increasing land productivity.”
  • Experts also say the biodiesel program should only serve as a transition to more sustainable forms of renewable energy, and not the long-term solution that the government is touting.
  • Palm oil plantations are the single biggest driver of deforestation in Indonesia.

JAKARTA — A new report has added to growing concerns that Indonesia’s ambitious program to increase its use of palm oil-based biodiesel will drive greater deforestation across the country.

The report, by London-based nonprofit CDP, an international platform for the disclosure of environmental risks, warns of conflicting policies and lack of transparency around biofuel regulations in Indonesia. It also notes the government’s aggressive push for greater adoption of palm-based biofuel, including fines or the threat of license revocation for producers who fail to meet the government’s biofuel mandate, as well as subsidies for companies to boost their biofuel production. The report says these policies “create conditions for producers to maintain business-as-usual production systems, instead of investing in more sustainable production innovations, such as increasing land productivity.”

“Therefore, biofuel regulations in Indonesia, as they stand, may lead to increased pressure on Indonesian forests,” it adds.

The palm oil industry is already a major driver of deforestation in Indonesia. A 2019 study shows that oil palm plantations were the single largest driver of deforestation between 2001 and 2016, accounting for 23% of total deforestation nationwide.

Even though new plantations are increasingly being developed on non-forested land, 18% of those established from 2010-2015 were in forested areas, according to a 2017 study.

And unless the palm oil that goes into biodiesel can be shown to be deforestation-free, it’s misleading to claim that the biodiesel is “green fuel,” the CDP report says.

The government has introduced a series of regulations and policies to curb deforestation. But their effectiveness remains questionable and they contradict the biofuel policies, according to the report.

A prominent example is the moratorium on issuing permits for new oil palm plantations, which the government imposed in 2018 to slow the expansion of the industry and increase the sustainability and productivity of the commodity at the same time. The moratorium also calls for reviewing existing licenses and revoking them if the area hasn’t yet been cleared.

But the report highlights the apparent ineffectiveness of the moratorium: Citing data from the Ministry of Agriculture, it shows that the area of plantations actually expanded since 2018 by more than 2 million hectares (4.9 million acres), or 14%. As of January 2020, there were more than 16 million hectares (39.5 million acres) of oil palm plantations in Indonesia — an area the size of Florida.

The moratorium, which seeks to rein in plantation growth, is also at odds with the biofuel program, which calls for greater palm oil production, the report notes.

“Whilst Indonesia has established a moratorium on new palm oil plantation licenses, the acceleration of its biodiesel program contradicts those commitments as this will likely require 9-15 million hectares [22 million to 37 million acres] of additional palm oil plantations,” the report says.

Another government policy to reduce deforestation risk is an oil palm replanting program, introduced in 2017 to replace older, less productive trees with higher-yield varieties. But by 2020, only 11% of the program’s total target had been achieved due to various challenges, such as lack of data on farmers and land conflicts.

New oil palm planting near a protected area in Indonesia. Image by Rhett A. Butler/Mongabay.
New oil palm planting near a protected area in Indonesia. Image by Rhett A. Butler/Mongabay.

Low productivity

Ricky Amukti, a research manager at Traction Energy Asia, said increasing productivity is key to limiting deforestation risk. A study by Traction Energy Asia warns that the low productivity of existing plantations and ambitious target of the biodiesel program could see demand outstrip supply by 2023. That’s because the government failed to account for the inefficiency of existing oil palm plantations when setting its biodiesel targets.

“If you want to increase the blend, you have to increase the capacity of the farmers as well,” Ricky said during a recent online seminar. “Moreover, Indonesia can also include independent smallholders in the biodiesel supply chain. Right now, their productivity is still relatively small. If we can boost their productivity and involve them, we can reduce risk of deforestation.”

The government appears to have acknowledged that it can’t meet its own ambitious target. The diesel currently sold at the pump is known as B30, which means it contains a 30% blend of palm oil-derived biofuel and 70% diesel. The government had planned to reach the B50 stage, a 50:50 blend, by 2025, and eventually B100 — biofuel with zero fossil diesel. But a senior minister says the government is considering stopping the blending program at the B50 stage if there are no further improvements in palm oil yields.

Forest clearing for oil palm in Riau, Sumatra, Indonesia. Image by Rhett A. Butler/Mongabay.

Uncertified producers

Another policy contradiction is the government’s Indonesia Sustainable Palm Oil (ISPO) certification scheme. Certification is mandatory for all palm oil producers in the country — except for those producing palm oil for the biodiesel program between 2015 and 2020.

Nur Maliki Arifiandi, the policy engagement manager at CDP, said the government’s decision last year to finally make the ISPO mandatory for biofuel producers is a positive development, but that many plantations across Indonesia remain uncertified.

According to the government, only 30% of oil palm plantations in Indonesia had been certified under the ISPO by 2020. The country’s palm oil business association, GAPKI, recorded 61% of its members being certified. GAPKI deputy chairman Togar Sitanggang said the group is committed to having all of its members, which represent 60% of all plantation companies in Indonesia, ISPO certified. But because of the COVID-19 pandemic, which has limited travel, there’s been little to no progress on verification and certification, and unless there’s a way for auditors to work remotely, the process will remain stalled, he said.

Even if the ISPO were fully enforced for biodiesel producers, it lacks an all-important cutoff date, which determines when to account for deforestation. The Roundtable on Sustainable Palm Oil (RSPO), the world’s leading certification scheme for the crop, has a cutoff date of 2005 for the clearing of high conservation value forest, whilst the Forest Stewardship Council (FSC) has a cutoff date of 1994, meaning they don’t count as deforestation any forest clearing that occurred before those dates.

With no cutoff date for biodiesel production under the ISPO, none of the producers can ever technically achieve sustainability certification, said Ricky from Traction Energy Asia.

“To avoid the never-ending debates on whether biodiesel is environmentally friendly or not, there’s a need to decide the cutoff date. If there’s no cutoff date, then forests that were cleared in 1900 could be counted as deforestation,” he said.

Forest illegally cleared for oil palm in Riau Province. Photo by Rhett A Butler
Forest illegally cleared for oil palm in Riau Province. Photo by Rhett A Butler

Lack of transparency

The CDP report also highlights the lack of transparency among biofuel producers in Indonesia, which it says hampers sustainability efforts in a major way. The report authors invited all 10 corporate groups that produce biofuel — five of which are listed as among the world’s largest traders and processors — to disclose their environmental impacts to the NGO. Only three agreed to do so: Golden-Agri Resources, Musim Mas and Wilmar International.

The lack of transparency is also reflected in the low performance of most of the corporate groups as assessed by the Sustainability Policy Transparency Toolkit (SPOTT), a corporate transparency initiative launched in 2014 by the Zoological Society of London (ZSL).

The three companies that disclosed to CDP also scored very high on SPOTT. But others, such as BEST Group and Darmex Agro, performed poorly. Both companies are also the only groups in the top 10 without membership in the RSPO, widely regarded as having the strongest set of requirements among existing certification schemes for edible oils and biofuels.

SPOTT’s evaluation does not necessarily mean that a company is effectively implementing its commitments on the ground, but that it’s being transparent in its ESG reporting.

CDP’s Nur said these findings show how transparency efforts are still uneven and sporadic, concentrated mainly among the biggest players such as Golden-Agri Resources, Musim Mas and Wilmar International.

“Right now the big companies have had commitments and good scores [for transparency], but we need to pay attention to the entire supply chain and their suppliers on the ground,” she said. “Hopefully these things are followed by other biodiesel producer groups.”

And even if corporate groups have committed to transparency, the complexity of corporate structures and the biodiesel supply chain hinders the ability of companies to ensure traceability down to the plantation and mill levels and guarantee deforestation-free operations, the CDP report says.

It says this highlights the need for greater and mandatory transparency across the entire supply chain.

“Enforcing disclosure on environmental issues can help the government to understand companies’ roles in the biodiesel supply chain and better identify policy intervention areas,” the report said.

New oil palm plantation established on peatland outside Palangkaraya, Central Kalimantan, Indonesia. Image by Rhett A. Butler/Mongabay.

Exit strategy

The Indonesian government is currently preparing to move to the next stage of the biodiesel program, which is B40, or a 40% palm blend.

Effendi Manurung, an official in charge of renewable energy at the Ministry of Energy and Mineral Resources, said there are still enough existing plantations to meet biodiesel demand.

“For B30, we only need 9.2 million tons [of crude palm oil], whereas our total CPO [production] is 52 million tons,” Effendi said. “So there’s still enough supply.”

Increasing the blend to B40 will see demand increase to 12 million tons, which Effendi said can easily be met by reducing exports.

The government’s end goal is B100, replacing conventional diesel entirely with palm oil-derived fuel. Arifin Tasrif, the energy minister, said the plan is a part of Indonesia’s bid to stop importing fuel oil and liquefied petroleum gas (LPG) by 2030.

Arief Wijaya, senior manager of climate and forests at World Resources Institute (WRI) Indonesia, said the biodiesel program is a viable strategy for now to transition from fossil fuels to renewable energy, but it’s not sustainable in the long run.

“Biodiesel might be suitable as a transition energy,” he told Mongabay. “[But] at some point, as Indonesia’s population grows and food demand for palm oil increases, Indonesia has to transition to other clean energy that are proven to be clean, such as solar and wind.”

He said there won’t be enough land to supply palm oil for both biodiesel and food at the same time.

“In order to not sacrifice forests [to produce palm oil], we need to increase the productivity of plantations,” Arief said. “Once the productivity can no longer be increased, there has to be another way, which is moving away [from biodiesel to solar or wind].”



Austin, K. G., Schwantes, A., Gu, Y., & Kasibhatla, P. S. (2019). What causes deforestation in Indonesia? Environmental Research Letters, 14(2), 024007. doi:10.1088/1748-9326/aaf6db

Austin, K., Mosnier, A., Pirker, J., McCallum, I., Fritz, S., & Kasibhatla, P. (2017). Shifting patterns of oil palm driven deforestation in Indonesia and implications for zero-deforestation commitments. Land Use Policy, 69, 41-48. doi:10.1016/j.landusepol.2017.08.036


Banner image: Oil palm plantation in Riau, Sumatra, Indonesia. Image by Rhett A. Butler/Mongabay.


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