- Indonesia will require all diesel users to adopt a 50% palm oil biodiesel blend (B50) by 2028, accelerating its energy transition strategy
- Policy aligns with national priorities to reduce fuel imports, stabilise energy supply, and expand domestic biofuel production capacity
- Parallel mandates for ethanol blending and sustainable aviation fuel position Indonesia as a regional leader in biofuel deployment
Indonesia has formalised one of the most ambitious biofuel policies globally, setting a binding timeline to transition all biodiesel users to a 50% palm oil blend by 2028. The move, confirmed through a newly issued ministerial decree, places bioenergy at the centre of the country’s energy security and climate strategy.
The policy builds on Indonesia’s existing biodiesel programme, which has already scaled blending requirements over the past decade. Under the new roadmap, the country will first implement a 40% palm oil blend (B40) before moving to B50, with an accelerated rollout beginning July 1 this year.
The shift reflects both domestic and geopolitical considerations. Officials have linked the earlier introduction of B50 to broader efforts to manage energy market volatility and reduce exposure to global supply disruptions.
Phased implementation balances ambition and capacity
The decree outlines a staggered approach to ensure supply chains and infrastructure can keep pace. Subsidised diesel will adopt the B50 blend by 2027, while non-subsidised diesel may temporarily remain at B40 depending on production capacity.
By 2028, however, B50 will become mandatory across all diesel consumption.
“Through more comprehensive regulations and clear phasing, we want to ensure that biofuel utilisation can be implemented optimally, while still considering the readiness of raw materials, infrastructure, and industrial support,” said Eniya Listiani Dewi, director general of renewable energy, in an official statement.
To support the transition, the government will issue further allocation guidelines later this year. Indonesia had previously earmarked 15.65 million kilolitres of biodiesel for 2026 under the B40 programme, a figure expected to increase significantly as blending requirements rise.
Expanding beyond biodiesel into aviation and gasoline
The biodiesel mandate is part of a broader push to embed biofuels across multiple transport segments.
Indonesia plans to introduce ethanol blending into gasoline, starting with a minimum 5% mix in Java between 2026 and 2027. This will increase to 10% by 2028, targeting the country’s largest fuel consumption market.
In aviation, the government will roll out a sustainable aviation fuel mandate beginning in 2027. Flights departing from Jakarta’s Soekarno Hatta International Airport and Bali’s I Gusti Ngurah Rai International Airport will be required to use fuel containing at least 1% SAF.
Together, these measures position Indonesia among a small group of emerging economies implementing cross-sector biofuel mandates at scale.
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Governance and economic stakes for investors
For policymakers, the mandate addresses three converging priorities: energy independence, rural economic development, and emissions reduction. As the world’s largest palm oil producer, Indonesia is leveraging domestic feedstock to displace imported fossil fuels while supporting its agricultural sector.
For investors, the policy creates long-term demand certainty across the biofuel value chain, from palm oil production to refining and logistics infrastructure. It also introduces new risks tied to execution, including feedstock availability, land use pressures, and sustainability compliance.
The expansion of palm-based biofuels continues to draw scrutiny from global stakeholders concerned about deforestation and biodiversity loss. This places pressure on Indonesia to align its biofuel growth with international ESG frameworks and traceability standards.
Regional and global implications
Indonesia’s decision to mandate B50 at a national level sets a new benchmark for biofuel adoption in Southeast Asia. It signals a shift among emerging markets toward domestically anchored energy transition strategies that prioritise resilience as much as decarbonisation.
The inclusion of ethanol and SAF mandates further broadens the scope, indicating that biofuels will play a central role across road and air transport rather than serving as a transitional solution.
For global energy markets, Indonesia’s trajectory will be closely watched. Its scale means policy execution could influence palm oil demand, reshape trade flows, and test the balance between climate ambition and environmental safeguards.
By 2028, the success or strain of Indonesia’s B50 rollout will offer a critical case study for other resource-rich economies seeking to reduce fossil fuel dependence without compromising growth.
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