IDEAS home Printed from https://ideas.repec.org/a/fan/efeefe/vhtml10.3280-efe2023-001006.html
   My bibliography  Save this article

Strategy for the implementation of sustainable green fuels in Indonesia

Author

Listed:
  • Erwan Hermawan
  • Adiarso Adiarso
  • Sigit Setiadi
  • Dudi Hidayat

Abstract

Global climate change has triggered the implementation of energy transition programs in many countries where renewable fuels have received great attention. While Indonesia successfully im- plements biofuels-based crude palm oil (CPO) such as biodiesel (up to B30). The program proceeds towards implementing other green fuels (such as green diesel, gasoline, and bio jet fuel). However, the current price of CPO (as a raw material) is highly fluctuated depending on the global market mechanism and mostly more expensive than the price of fossil fuels. This situation leads to an unattractive business of green fuels. So, the government?s policies are strongly required to make more attractive businesses with enhanced competitiveness of green fuels. A qualitative approach was conducted by using forum group discussion to gain information about the current status of biofuel policy in Indonesia and its challenges. The quantitative method was conducted by calculat- ing the economic analysis of palm oil-based energy crops and processing plants. The concept of integrated palm energy plantation was proposed based on the result. It may be a kind of integrated business entity owned by the government which aims at producing CPO and the following green fuels. Economic analysis shows that from the plantation side, the selling price of Fruit Fresh Bunch (FFB) is USD 0.068/kg with an IRR of 12.6%. While in the CPO processing industry, using the FFB price of USD 0.082/kg obtained an IRR of 14.4%. This result shows promising results from the calculation, keeps the sustainability of raw material supply and enhances the competitiveness of green fuels.

Suggested Citation

  • Erwan Hermawan & Adiarso Adiarso & Sigit Setiadi & Dudi Hidayat, 2023. "Strategy for the implementation of sustainable green fuels in Indonesia," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2023(1), pages 103-139.
    • Handle: RePEc:fan:efeefe:v:html10.3280/efe2023-001006
    as

    Download full text from publisher

    File URL: http://www.francoangeli.it/riviste/Scheda_Rivista.aspx?IDArticolo=74240&Tipo=ArticoloPDF
    Download Restriction: Single articles can be downloaded buying download credits, for info: https://www.francoangeli.it/DownloadCredit
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Laurent, A. & Pelzer, E. & Loyce, C. & Makowski, D., 2015. "Ranking yields of energy crops: A meta-analysis using direct and indirect comparisons," Renewable and Sustainable Energy Reviews, Elsevier, vol. 46(C), pages 41-50.
    2. Komarek, Adam M. & Drogue, Sophie & Chenoune, Roza & Hawkins, James & Msangi, Siwa & Belhouchette, Hatem & Flichman, Guillermo, 2017. "Agricultural household effects of fertilizer price changes for smallholder farmers in central Malawi," Agricultural Systems, Elsevier, vol. 154(C), pages 168-178.
    3. Dannenberg, Astrid & Mennel, Tim & Moslener, Ulf, 2008. "What does Europe pay for clean energy?--Review of macroeconomic simulation studies," Energy Policy, Elsevier, vol. 36(4), pages 1318-1330, April.
    4. Fitriyanti Mayasari & Rinaldy Dalimi & Widodo Wahyu Purwanto, 2019. "Projection of Biodiesel Production in Indonesia to Achieve National Mandatory Blending in 2025 using System Dynamics Modeling," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 421-429.
    5. Osman, Ahmed I. & Qasim, Umair & Jamil, Farrukh & Al-Muhtaseb, Ala'a H. & Jrai, Ahmad Abu & Al-Riyami, Mohammed & Al-Maawali, Suhaib & Al-Haj, Lamya & Al-Hinai, Amer & Al-Abri, Mohammed & Inayat, Abra, 2021. "Bioethanol and biodiesel: Bibliometric mapping, policies and future needs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    6. Rubashkina, Yana & Galeotti, Marzio & Verdolini, Elena, 2015. "Environmental regulation and competitiveness: Empirical evidence on the Porter Hypothesis from European manufacturing sectors," Energy Policy, Elsevier, vol. 83(C), pages 288-300.
    7. Knápek, J. & Králík, T. & Vávrová, K. & Valentová, M. & Horák, M. & Outrata, D., 2021. "Policy implications of competition between conventional and energy crops," Renewable and Sustainable Energy Reviews, Elsevier, vol. 151(C).
    8. Rahman, Arief & Dargusch, Paul & Wadley, David, 2021. "The political economy of oil supply in Indonesia and the implications for renewable energy development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    9. Das, Sudip, 2020. "The National Policy of biofuels of India – A perspective," Energy Policy, Elsevier, vol. 143(C).
    10. Marin, Giovanni, 2014. "Do eco-innovations harm productivity growth through crowding out? Results of an extended CDM model for Italy," Research Policy, Elsevier, vol. 43(2), pages 301-317.
    11. Acaroglu, Mustafa & Baser, Eyup & Aydogan, Hasan & Canli, Eyüb, 2022. "A new energy crop onopordum spp.: A research on biofuel properties," Energy, Elsevier, vol. 261(PB).
    12. de Souza, T.A.Z. & Pinto, G.M. & Julio, A.A.V. & Coronado, C.J.R. & Perez-Herrera, R. & Siqueira, B.O.P.S. & da Costa, R.B.R. & Roberts, J.J. & Palacio, J.C.E., 2022. "Biodiesel in South American countries: A review on policies, stages of development and imminent competition with hydrotreated vegetable oil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).
    13. Yang, Mian & Hong, Yili & Yang, Fuxia, 2022. "The effects of Mandatory Energy Efficiency Policy on resource allocation efficiency: Evidence from Chinese industrial sector," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 513-524.
    14. Tereza Svatoňová & David Herák & Abraham Kabutey, 2015. "Financial Profitability and Sensitivity Analysis of Palm Oil Plantation in Indonesia," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(4), pages 1365-1373.
    15. Shveta Soam & Pål Börjesson, 2020. "Considerations on Potentials, Greenhouse Gas, and Energy Performance of Biofuels Based on Forest Residues for Heavy-Duty Road Transport in Sweden," Energies, MDPI, vol. 13(24), pages 1-21, December.
    16. Ebadian, Mahmood & van Dyk, Susan & McMillan, James D. & Saddler, Jack, 2020. "Biofuels policies that have encouraged their production and use: An international perspective," Energy Policy, Elsevier, vol. 147(C).
    17. Halimatussadiah, A. & Nainggolan, D. & Yui, S. & Moeis, F.R. & Siregar, A.A., 2021. "Progressive biodiesel policy in Indonesia: Does the Government's economic proposition hold?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 150(C).
    18. Palacio-Ciro, Santiago & Vasco-Correa, Carlos Andrés, 2020. "Biofuels policy in Colombia: A reconfiguration to the sugar and palm sectors?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    19. Koçar, Günnur & Civaş, Nilgün, 2013. "An overview of biofuels from energy crops: Current status and future prospects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 28(C), pages 900-916.
    20. Bampaou, M. & Panopoulos, K.D. & Seferlis, P. & Voutetakis, S., 2022. "Evaluation of novel hydrogen integration options in bio-oils introduction to petrochemical refineries," Energy, Elsevier, vol. 254(PB).
    21. Kuchler, Magdalena & Linnér, Björn-Ola, 2012. "Challenging the food vs. fuel dilemma: Genealogical analysis of the biofuel discourse pursued by international organizations," Food Policy, Elsevier, vol. 37(5), pages 581-588.
    22. Baral, Nawa Raj & Neupane, Pratikshya & Ale, Bhakta Bahadur & Quiroz-Arita, Carlos & Manandhar, Shishir & Bradley, Thomas H., 2020. "Stochastic economic and environmental footprints of biodiesel production from Jatropha curcas Linnaeus in the different federal states of Nepal," Renewable and Sustainable Energy Reviews, Elsevier, vol. 120(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Mian & Hong, Yili & Yang, Fuxia, 2022. "The effects of Mandatory Energy Efficiency Policy on resource allocation efficiency: Evidence from Chinese industrial sector," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 513-524.
    2. Wirawan, Soni S. & Solikhah, Maharani D. & Setiapraja, Hari & Sugiyono, Agus, 2024. "Biodiesel implementation in Indonesia: Experiences and future perspectives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 189(PA).
    3. Guo, Shu & Zhang, ZhongXiang, 2023. "Green credit policy and total factor productivity: Evidence from Chinese listed companies," Energy Economics, Elsevier, vol. 128(C).
    4. Antonioli, Davide & Ghisetti, Claudia & Mazzanti, Massimiliano & Nicolli, Francesco, 2022. "The economic returns of circular economy practices," FEEM Working Papers 319761, Fondazione Eni Enrico Mattei (FEEM).
    5. Mandegari, Mohsen & Ebadian, Mahmood & Saddler, Jack (John), 2023. "The need for effective life cycle assessment (LCA) to enhance the effectiveness of policies such as low carbon fuel standards (LCFS's)," Energy Policy, Elsevier, vol. 181(C).
    6. Pinto, G.M. & da Costa, R.B.R. & de Souza, T.A.Z. & Rosa, A.J.A.C. & Raats, O.O. & Roque, L.F.A. & Frez, G.V. & Coronado, C.J.R., 2023. "Experimental investigation of performance and emissions of a CI engine operating with HVO and farnesane in dual-fuel mode with natural gas and biogas," Energy, Elsevier, vol. 277(C).
    7. Ferrarini, Andrea & Serra, Paolo & Almagro, María & Trevisan, Marco & Amaducci, Stefano, 2017. "Multiple ecosystem services provision and biomass logistics management in bioenergy buffers: A state-of-the-art review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 277-290.
    8. Zhou, Di & Qiu, Yuan & Wang, Mingzhe, 2021. "Does environmental regulation promote enterprise profitability? Evidence from the implementation of China's newly revised Environmental Protection Law," Economic Modelling, Elsevier, vol. 102(C).
    9. Mazzanti, Massimiliano & Nicolli, Francesco & Pareglio, Stefano & Quatrosi, Marco, 2022. "Adoption of Eco and Circular Economy-Innovation in Italy: exploring different firm profiles," FEEM Working Papers 319762, Fondazione Eni Enrico Mattei (FEEM).
    10. Ming Yi & Yiqian Wang & Modan Yan & Lina Fu & Yao Zhang, 2020. "Government R&D Subsidies, Environmental Regulations, and Their Effect on Green Innovation Efficiency of Manufacturing Industry: Evidence from the Yangtze River Economic Belt of China," IJERPH, MDPI, vol. 17(4), pages 1-17, February.
    11. Wang, Delu & Mao, Jinqi & Cui, Rong & Yu, Jian & Shi, Xunpeng, 2022. "Impact of inter-provincial power resource allocation on enterprise production behavior from a multi-scale correlation perspective," Energy Economics, Elsevier, vol. 114(C).
    12. Stucki, Tobias & Woerter, Martin & Arvanitis, Spyros & Peneder, Michael & Rammer, Christian, 2018. "How different policy instruments affect green product innovation: A differentiated perspective," Energy Policy, Elsevier, vol. 114(C), pages 245-261.
    13. Liu, Duan & Yu, Nizhou & Wan, Hong, 2022. "Does water rights trading affect corporate investment? The role of resource allocation and risk mitigation channels," Economic Modelling, Elsevier, vol. 117(C).
    14. Djula Borozan, 2023. "Institutions and Environmentally Adjusted Efficiency," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4489-4510, December.
    15. Otrachshenko, Vladimir & Popova, Olga, 2024. "Environment vs. Economic Growth: Do Environmental Preferences Translate Into Support for Green Parties?," IZA Discussion Papers 17475, Institute of Labor Economics (IZA).
    16. Zhangsheng Liu & Liuqingqing Yang & Liqin Fan, 2021. "Induced Effect of Environmental Regulation on Green Innovation: Evidence from the Increasing-Block Pricing Scheme," IJERPH, MDPI, vol. 18(5), pages 1-15, March.
    17. Badunenko, Oleg & Galeotti, Marzio & Hunt, Lester C., 2021. "Better to grow or better to improve? Measuring environmental efficiency in OECD countries with a Stochastic Environmental Kuznets Frontier," FEEM Working Papers 316226, Fondazione Eni Enrico Mattei (FEEM).
    18. Alejandro García-Pozo & Juan Antonio Campos-Soria & J. Aníbal Núñez-Carrasco, 2021. "Technological innovation and productivity across Spanish regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(1), pages 167-187, August.
    19. Presley K. Wesseh & Boqiang Lin & Yixuan Zhang & Preslyn Sharon Wesseh, 2024. "Sustainable entrepreneurship: When does environmental compliance improve corporate performance?," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3203-3221, May.
    20. Andrea, Bastianin & Paolo, Castelnuovo & Massimo, Florio & Anna, Giunta, 2019. "Technological Learning and Innovation Gestation Lags at the Frontier of Science: from CERN Procurement to Patents," Working Papers 405, University of Milano-Bicocca, Department of Economics, revised Apr 2019.

    More about this item

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fan:efeefe:v:html10.3280/efe2023-001006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stefania Rosato (email available below). General contact details of provider: http://www.francoangeli.it/riviste/sommario.aspx?IDRivista=10 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.