Analysis of Palm-Oil-Based Biodiesel in Indonesia using Technological Innovation System Approach

¹ Sustainable Energy Engineering, KTH Kungliga Tekniska Hogskolan, Sweden
² Industrial Economics and Management, KTH Kungliga Tekniska Hogskolan, Sweden

^* Corresponding author: naimah@kth.se

Abstract

Biodiesel blending mandate has been established in Indonesia since 2006. After 11 years of implementation, the level of biodiesel penetration on the market is still lower than the target. Technological Innovation System (TIS) approach allows to map factors that influence, either hinder or boost, the diffusion of biodiesel technology. The challenges that should be addressed are tax regulation; price fluctuation due to Crude Palm Oil (CPO) and fossil fuel price; lack of awareness from the society; inconsistency of policy; vulnerable financial funding from palm oil tax levy; lack of sustainability indicators for palm oil; and policy objection regarding palm oil tax levy. We suggest that an agreement, which contains commitment and willingness from all actors involved, should be created to reduce uncertainty towards implementation of biodiesel. Government should not only put incentive to the emerging technology but also reduce competition within the incumbent energy system to increase and stabilize biodiesel demand. Another way to increase biodiesel demand would be to raise awareness about negative consequences of increasing fossil fuel consumption and the benefits of biodiesel for the society.