Indonesia targets biofuels, EVs to meet CO2 targets

Indonesia will ramp up biofuels and electric vehicle (EV) use to reach peak greenhouse gas (GHG) emissions by 2030 and be carbon neutral by 2060 under proposals submitted to the United Nations Framework Convention on Climate Change.

Transport accounted for 27pc of Indonesia's 581mn t CO2 equivalent emissions in 2019 according to Climate Transparency, the same year in which it enacted a 30pc (B30) biodiesel mandate share that will increase in the short-to-medium term before electrification becomes increasingly prominent.

By 2050 the target is for 46pc of transport energy to be biofuels based, 30pc electricity, 20pc oil fuels and 4pc natural gas.

Stakeholders have already declared their intention to raise the biofuels target to B40 by the end of 2022 having been thwarted in earlier attempts because of the coronavirus pandemic and apprehension from automotive manufacturers over the ability of their engines capability to process such high blends.

Construction is underway to raise production capacity by 3.6mn kl/yr from the end of last year to 15.2mn kl/yr by the end of 2021 to meet a B40 target which would require around 12.8mn kl/yr of biodiesel.

Investment is also going into hydro-treated vegetable oil (HVO), which is much higher quality than regular biodiesel and allow B100 blends to be used and so tackles carmakers' concerns. State-owned refiner Pertamina is leading the way on this with 27,0000 b/d of HVO capacity across its Dumai, Cilacap and Plaju refineries due to come online by 2023.

But the journey will require a delicate balancing act as curbing GHG emissions through palm-based biofuels will be mitigated by negative impacts on food security and biodiversity through indirect land use changes. The competition for land may require large-scale reforestation initiatives and greater dependence on food imports which would increase carbon discharges in exporting countries.

The cost of meeting higher mandates may also take their toll as it is funded by high export levies on palm oil which are used to subsidise the price gap between fossil fuel diesel and biodiesel so as not to pass on the cost to the consumer.

Jakarta has raised export duties to fund the B30 mandate since the beginning of 2020 but rescinded some of these measures last month on record high palm prices rendering domestic exporters uncompetitive.

These headwinds open the way for EVs though Indonesia does not yet have a clear roadmap for their rollout. But what it does possess is almost 25pc of the world's known nickel reserves which Pertamina and three other state-controlled enterprises hope to leverage the Indonesia Battery Corporation to become a global hub of EV production and exports by 2025.

By Amandeep Parmar