JAKARTA (Reuters) – Indonesia’s Energy and Mineral Resources Ministry said biodiesel with 30% palm diesel blend passed a series of cold temperature tests this week as the government aim to increase the palm content in biodiesel early next year.
Indonesian President Joko Widodo said earlier this week he wants the so-called B30 standard to be adopted in January next year, up from the current B20 standard which contains a 20% blend of palm fatty acid methyl ester (FAME).
Widodo said the higher blend of palm in biodiesel should be able to address the problem of high energy imports and slowing global demand for palm by increasing domestic consumption of the vegetable oil.
The energy ministry said a number of passenger cars were tested in Java’s highland region where they were left in cold temperatures for up to 21 days.
“The start ability test results show that the cars can be started normally. This proves that the B30 flows well in the engine even though it has been left for 21 days in cold conditions, ” Dadan Kusdiana, head of the research department at the energy ministry said in the statement.
The B30 fuel is expected to go through more tests until October.
Energy ministry estimates that consumption of FAME could increase by more than 50% next year with the implementation of the B30 standard.
Indonesian palm oil exports are under pressure after the European Union said palm should be phased out from transportation fuels in its market due to its contribution to deforestation, while India, the world’s top vegetable oil buyer, has imposed an import tax on palm oil.
Meanwhile the European Commission on Tuesday imposed countervailing duties of 8% to 18% on imports of subsidised biodiesel from Indonesia, saying the move aimed to restore a level playing field for European Union producers.
“The new import duties are imposed on a provisional basis and the investigation will continue with a possibility to impose definitive measures by mid-December 2019, ” the EU executive said in a statement.
Last week Indonesia’s trade minister said he would recommend to an inter-ministerial team a 20% to 25% tariff on EU dairy products in response to the EU targeting the country’s biodiesel, adding that he had asked dairy product importers to find sources of supply outside the 28-nation bloc.
The EU duties are another blow to Indonesian biodiesel producers after the bloc said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations’ contribution to deforestation.
The European Commission, which coordinates trade policy for the EU, launched an anti-subsidy investigation in December 2018 following a complaint by the European Biodiesel Board.
It said its investigation showed that Indonesian biodiesel producers benefit from grants, tax benefits and access to raw materials below market prices.
The EU biodiesel market is worth an estimated 9 billion euros ($10 billion) a year, with imports from Indonesia worth about 400 million euros, the commission said.
Indonesia Biofuels Producers Association (APROBI) Chairman M.P. Tumanggor told Reuters that companies affected by the anti-subsidy duties will likely be forced to renegotiate their contracts with buyers in the EU and it may reduce the country’s 2019 biodiesel exports.
“We initially targeted 1.4 million tonnes in export this year to Europe. That will not be reached, ” Tumanggor said. The exports would likely reach around 1 million tonnes, he said.
He said the association is in consultation with the government on a response to the EU duties.
Indonesian Trade Minister Enggartiasto Lukita told reporters the government will file an official objection within five days.
He also reiterated that the government is encouraging dairy product importers to start looking for new sources of supply outside the EU.
The ministry will start a programme for Indonesian dairy importers to help them find replacements for dairy products they usually import from the EU with products from the United States or other countries, he said.