The B30 programme in Indonesia will drive biodiesel production for the next decade, S&P Global Platts reported on 6 July from forecasts by the UN Food and Agricultural Organization (FAO) and the Organization for Economic Cooperation and Development (OECD).
Under its B30 mandate, Indonesia – the world's largest palm oil producer and exporter – blends 30% palm oil- based fuel into its biodiesel to lower its fuel imports and boost domestic production of the crop, according to S&P Global Platts.
“Biodiesel consumption is projected to increase by 7% over the coming decade; Indonesia accounting for two-thirds of additional consumption,” the FAO and OECD Agricultural Outlook 2021-2030 report published on 5 July said.
In Indonesia, the use of vegetable oil to produce biodiesel is projected to grow 23.2% to 7.9M tonnes between 2021-2030, the report said, citing supportive domestic policies.
While the Indonesian government was looking to increase its palm oil blending mandate to 40% or B40 in 2021, the implementation date had been pushed to 2022 due to record palm oil prices and lower fuel consumption, the report said. The FAO-OECD outlook expected Indonesia's biodiesel blending rate to remain around 30% over the projection period.
Meanwhile, in the European Union – the world's largest biodiesel market – palm oil consumption was projected to decline as the updates to its Renewable Energy Directives, or RED II, set limits on the use of palm oil as a biofuel feedstock.
“Biofuel policies in the United States, the European Union and Indonesia remain a major source of uncertainty in the vegetable oil sector given that about 14% of global vegetable oil supplies go to biodiesel production,” the outlook said.
Production of palm oil was expected to weaken due to increasing attention on sustainability concerns and the ageing of oil palm trees in Indonesia and Malaysia, according to the report.
Global palm oil production was set to grow 18% from 2020 to 90M tonnes in 2030, the report said.
While the surge in prices over the last year alongside Indonesia's blending mandate could spark investments in the palm oil sector, land availability would impact growth, the FAO and OECD said.
Indonesia and Malaysia account for about 85% of the world's supply of palm oil.