Dynamic modelling of incentive policies on the upstream biodiesel supply chain: An Indonesian perspective

¹ Department of Industrial Engineering, Universitas Trunojoyo Madura, Bangkalan, Indonesia
² Department of Industrial and Systems Engineering, Institut Teknologi Sepuluh Nopember, Surabaya, Indonesia

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

Palm oil is increasingly acknowledged as a valuable feedstock that provides a substantial and sustainable supply of renewable energy and is also utilized as a food source. In Indonesia, palm oil is utilized as a feedstock for the production of biofuel, specifically biodiesel. Government regulations strictly govern the biodiesel industry. The complexity and uncertainty of biodiesel's supply chain can greatly risk the long-term effectiveness of policies that promote the massive use of renewable energy. Extensive research has been conducted on renewable energy and its supply chain over the past decade. Nevertheless, the utilization of modelling and simulation techniques in this field has not been widely embraced. This model simulates the long-term dynamics of the upstream sector of the biodiesel supply chain, which encompasses oil palm plantations and the crude palm oil (CPO) industry. The main objective of this study is to investigate the impact of incentives on farmers and their role in improving the productivity of the upstream sector of the biodiesel supply chain. Further analysis shows that the incentive policy for farmers has an impact on increasing the productivity of fresh fruit bunch (FFB) harvests (tons/ha/year) and can support the sustainability of the long-term biodiesel industry without sacrificing the needs of the food industry, oleochemical industry, and others. Furthermore, it is anticipated that the export policy for CPO will also rise in tandem with the global increase in consumption, thereby affecting the revenue generated from export taxes.