Indonesia's biofuels industry continues to grow, driven by biodiesel exports to Europe.
Indonesian biodiesel production increased significantly to 1.52bn litres in 2011 from 781mn l in 2010, with the majority of production geared for the export markets, according to a report by the US Department for Agricultural (USDA) published this month.
An expected increase in Indonesia's domestic processing capacity of up to 4.28bn l in 2012 as well as strong demand from Europe has contributed to higher biodiesel production.
Indonesian biodiesel exports look likely to increase to 1.3bn l in 2012 and 1.5bn l in 2013, according to the USDA report.
Indonesian biodiesel exports rose by almost 117pc to 1.23bn l in 2011 from 563mn l in 2010.
Europe has become the single largest market for Indonesian biodiesel. Indonesian imports accounted for 39pc of all European biodiesel imports in 2011 compared with 9pc in 2008.
The rise in imports to Europe is attributable to a combination of factors, according to the USDA.
A poor European rapeseed crop has resulted in lower supply of rapeseed oil-based biodiesel. The USDA forecasts that European rapeseed production will decline to 19.13mn t in the current harvest year from 20.76mn t in the crop year of 2010/11. The USDA also predicts a further decrease in production to 18mn t in 2012/13.
Abundant Indonesian palm oil supplies and a differential export tax policy — which effectively incentivises biodiesel exports over palm oil exports as a result of lower export taxes — also have made prices for palm oil-based biodiesel more attractive.
But exports could be slowed by the introduction of non-preferential import duty on biodiesel.
Europe's biofuels pressure group the European Biodiesel Board (EBB) has been actively encouraging the EU to impose non-preferential import duty on biodiesel products from the countries that adopt differential export tax policy to include Argentina and Indonesia.
The government of Malaysia is considering a plan to reform its palm oil tax structure along the lines of Indonesia's.
