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Analyzing the economics of palm oil biodiesel production in Indonesia
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Energy and Climate Studies, ECS.
Agricultural Economics and Rural Policy Group, Wageningen University, the Netherlands.
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Energy and Climate Studies, ECS.
KTH, School of Industrial Engineering and Management (ITM), Energy Technology, Energy and Climate Studies, ECS.
2016 (English)Conference paper, Abstract (Other academic)
Abstract [en]

Indonesia is the largest palm oil producer and exporter in the world and the palm oil industry has contributed significantly to the national economy and socioeconomic development. Of the total palm oil production, 69% is exported (the third most important traded commodity in the country), 17% is used in the domestic food industry, and 11% is used in biodiesel production. Aiming at reducing fossil oil dependency, diversifying energy sources, and promoting socioeconomic development, the country has enacted several rules and regulations for biofuel production. The most important is the 30% biodiesel target for transportation by 2025. The government of Indonesia also provides subsidies to palm oil feedstock producers, processing industries, and consumers. Other regulations include a new funding mechanism for biofuel subsidies, a levy on palm oil exports, and the creation of a ‘plantation fund’. Despite increased amount of palm oil feedstock production, the stipulated biodiesel mandates have not been achieved due to a lack of competitiveness and ineffective policies. Volatile international prices of petroleum, international trade/exports of palm oil, and fossil fuel subsidies have hindered the development of a domestic market for biodiesel. This study examines the economics of palm oil biodiesel production and use in Indonesia in connection with government policies, production costs, fossil fuel substitution, and market prices of liquid fuels (i.e., biodiesel and diesel). We develop a novel biofuel economic model that captures the complexities of the palm oil-biodiesel sector in Indonesia.

Place, publisher, year, edition, pages
2016.
Keyword [en]
Palm Oil, Biodiesel, Blend Mandates, Economics, Indonesia
National Category
Energy Engineering
Research subject
Energy Technology
Identifiers
URN: urn:nbn:se:kth:diva-192468OAI: oai:DiVA.org:kth-192468DiVA: diva2:968780
Conference
the 20th International Consortium on Applied Bioeconomy Research (ICABR) Conference
Projects
INSISTs bioenergy
Note

QC 20160914

Available from: 2016-09-12 Created: 2016-09-12 Last updated: 2016-09-14Bibliographically approved

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