Indonesia's B50 Biodiesel Program May Cut State Forex Earnings by $2.7 Billion

Indonesia's mandatory biodiesel program, which requires a 50% blend of biodiesel (B50), is projected to significantly reduce the country's foreign exchange earnings, potentially by as much as $2.7 billion per year. The Indonesia Strategic and Economic Action Institution (ISEAI) stated that this reduction stems from a decrease in crude palm oil (CPO) export volumes.

Based on an assumed average CPO price of $1,356 per metric ton (CIF Rotterdam) in early 2026, ISEAI references data from the Indonesian Palm Oil Producers Association (GAPKI). GAPKI projects that national palm oil exports could be cut by approximately 2 million tons in the latter half of 2026, nearing a total annual reduction of 4 million tons.

"This creates a paradox: a policy to save foreign exchange on diesel imports actually cuts export earnings from the national agricultural sector's flagship commodity," ISEAI stated in a written release on Friday, July 10, 2026. The institution argues that implementing the B50 program amidst stagnating raw material production will lead to a governance crisis in the palm oil commodity sector.

Senior ISEAI analyst Rony P. Sasmita noted that the direct impact of reallocating CPO for biodiesel is a reduction in Indonesia's export capacity to the international market. ISEAI's research indicates that the B50 program, officially launched on July 9, 2026, is being implemented when Indonesia's CPO supply growth has been stagnant. Over the past five years, CPO production has hovered between 48-51 million tons annually, attributed to slow progress in the People's Oil Palm Rejuvenation (PSR) program and declining crop productivity.

Despite a 7.26% increase in CPO production in 2025, reaching 51.66 million tons, domestic stock reserves sharply decreased by 19.79% to just 2.068 million tons due to very high domestic absorption. Consequently, allocating more CPO for domestic needs, particularly for biodiesel (B50), will inevitably lead to a decrease in export capacity. Out of a total domestic consumption of 2.141 million tons as of April 2026, the majority, 1.137 million tons, was used for biodiesel, followed by the food sector at 831,000 tons, and the oleochemical sector at approximately 173,000 tons.