Can Palm Oil Help Power Indonesia’s Green Energy Transition?

On October 27, Indonesia’s flag carrier, Garuda, carried more than 100 passengers from Jakarta to Surakarta — about a 500-kilometre journey — on Indonesia’s first commercial flight fuelled, in part, by palm oil. State energy firm PT Pertamina produced the palm-oil-based jet fuel, also known as sustainable aviation fuel (SAF), designed to reduce carbon emissions.

The transportation industry is responsible for nearly one quarter of global carbon emissions. The aviation industry, accounting for two per cent of global emissions, is shifting towards more environmentally friendly alternative fuels.

Expansion of palm biofuel policies

Indonesia is the world’s largest producer of palm oil, followed by Malaysia. In 2021, the two Southeast Asian states accounted for 86 per cent of global palm oil production.

Blending certified sustainable palm oil with fossil fuels has been shown to reduce emissions. To meet its emission reduction targets, Indonesia mandates a 35 per cent palm oil blending target for ground transport and plans to increase that ratio to 40 per cent by 2030.

Indonesia initially planned to require jet fuel to be blended with three per cent palm oil by 2020, but implementation has been delayed.

‘Greenwashing’ concerns remain

Deforestation is a major concern for the palm oil industry. Even the most stringent certification standards — such as the certification from non-profit Roundtable on Sustainable Palm Oil (RSPO), which has helped to decrease deforestation to some degree — have been criticized for not including smallholder farmers, which account for 40 per cent of palm plantations in Indonesia.

Indonesia’s national certification standards lag behind those of the RSPO; the Indonesia Sustainable Palm Oil certification, a mandatory requirement in the country’s palm industry, has been criticized for not “doing enough to protect human rights or the environment.” The country’s expansion of its mandatory biofuels program will invariably mean the establishment of more palm plantations to meet the demand from the transportation sector. Further deforestation may accompany this uptick in demand.

There are also concerns that diverting palm oil towards biofuels may decrease supplies of edible oil for food consumption, a problem compounded by potentially dwindling crop yields as the climate warms.