As the world’s leading palm oil producer, Indonesia is using these levies to finance its B40 biodiesel policy, which mandates a 40% palm oil blend in diesel fuel, implemented in January 2025. The funds help bridge the cost gap between palm oil and conventional crude oil, making biodiesel production viable. The policy aims to enhance energy security and support smallholder farmers, but it has sparked concerns about global market competitiveness. Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), cautioned: “Our palm oil is now priced higher than that of neighbouring producers.” He highlighted that exporters face additional costs, including the domestic market obligation for cooking oil, export levy, and export duty, totaling USD221 per metric ton.
The levy is based on a CPO price of IDR14,000 (USD0.84) per kilogram, with the full impact of the 10% rate still under review, as Martono noted: “We have yet to calculate the additional burden resulting from the new 10 per cent levy.” Indonesia’s CPO production dropped from 50.1 million tons in 2023 to 47.8 million tons in 2024, while the B40 policy requires about 15.62 million kiloliters of CPO. GAPKI estimates this could reduce CPO exports by two million tons. In January 2025, CPO export value fell 16.6% year-on-year, despite prices rising from USD835 to USD1,134 per ton, due to a volume drop from 2 million tons to 1.27 million tons.
The Energy and Mineral Resources Ministry projects that the B40 program will yield significant benefits, including reduced fuel imports by IDR147.5 trillion in 2025, increased CPO value by IDR20.9 trillion, and a reduction in carbon emissions by 41.46 million tons of CO2 equivalent. The program is also expected to create 1.95 million on-farm jobs and 14,730 off-farm jobs. The Oil Palm Plantation Fund Management Agency (BPDPKS) estimates subsidies for the B40 program will range from IDR46 trillion to IDR47 trillion in 2025, supporting Indonesia’s commitment to sustainable energy and economic growth.
