Palm Oil Exports Soar, Biodiesel Narrows?

Indonesia is entering a crucial phase in energy and trade policy. The B50 biodiesel ambition for 2026 runs parallel with the need to maintain export performance, especially after trade talks with the United States resulted in a 19% tariff for Indonesian goods (lower than the threatened 32%), yet still demanding economic concessions. According to Reuters, the understanding reached in mid-July reduced tariff tensions, with details of product exemptions still being negotiated (“Indonesia still negotiating details, exemptions on US tariff deal”, July 18, 2025). Domestically, the biodiesel policy engine has been accelerated. The Ministry of Energy and Mineral Resources (ESDM) has set the government to allocate 15.6 million kiloliters (KL) of biodiesel for 2025 in line with the increase in the mandate to B40, and the technical study for B50 in 2026 is running in parallel. Eniya Listiani Dewi, Director General of New, Renewable Energy, and Energy Conservation at the Ministry of Energy and Mineral Resources (ESDM), presented the plan in a meeting with the House of Representatives, emphasizing that B50 is not just a discourse but a policy trajectory being technically tested. According to the Indonesian Biofuel Producers Association (APROBI), biodiesel production capacity needs to be increased by about 4 million kiloliters to ensure supply when the blend is increased to B50. Meanwhile, the Indonesian Palm Oil Association (GAPKI) considers the supply of Fatty Acid Methyl Ester (FAME) to be the biggest challenge, necessitating an increase in CPO output to ensure the availability of biodiesel raw materials domestically. Tensions arise when the need for foreign exchange to balance the import spending package from the United States and boost exports, including palm oil, comes into play. Based on data from the Central Statistics Agency (BPS), Indonesia's export value in June 2025 reached USD 23.44 billion, growing 11.29% compared to the same period last year. This surge was partly driven by an increase in shipments of fats and vegetable oils (including CPO) which rose 22.05% and gold which soared by more than 100%. This increase indicates that export value can continue to rise even though monthly shipment volumes have fluctuated, as commodity prices and market shifts play a significant role. On the fiscal side, the funding for the biodiesel program is also being restructured. The Ministry of Finance together with the Palm Oil Plantation Fund Management Agency (BPDPKS) set an adjustment of the CPO export levy to a range of 4.5%–10% of the reference price, up from the previous 3%–7.5%. This step is intended to strengthen BPDPKS's cash reserves to cover the price difference between CPO and diesel used in the biodiesel program. However, this adjustment could potentially increase the cost burden on upstream producers, especially when CPO prices are high. If exports are held back to ensure domestic supply for the B50 target, revenue from the export levy could also decrease, creating a dilemma between maintaining energy security and preserving fiscal space. Balancing export interests and domestic energy security is the main challenge for the palm oil sector. Based on the data and policies announced by the government, one strategic option that can be considered is implementing a counter-cyclical levy scheme, which is increased when CPO prices are high to strengthen biodiesel program funding, and lowered when prices weaken. In addition, accelerating the implementation of a traceability system is also important to anticipate the European Union Deforestation Regulation (EUDR) policy, which will be gradually enforced from the end of 2025 to 2026. This effort will help maintain global market access while ensuring the sustainability of the national palm oil industry. In this way, Indonesia can maximize export opportunities without sacrificing the long-prepared energy security and transition agenda.