Formulation of Indonesian palm oil biodiesel policy for energy security by using system dynamics model

Abstract

This study was aimed at creating policy formulation in oil palm biodiesel to meet the mandatory biodiesel requirement in order to reach energy security in Indonesia. A system dynamics model was used to formulate policy recommendations.

Identification of policies related to the existing biodiesel development was done.  Current policies were analyzed to result in possible new policies to add in.  The existing and new policies were then used as variables to develop a system dinamics model.  The model was developed by taking into account  the stakeholders involved in the supply chain system of biodiesel as a fuel mix.

Existing policy formulation included CPO disincentive, interest rate relief for investment in biodiesel plant, tax exemption or reduction for import of technology or equipment for biodiesel plant, subsidy of Rp1 million per kl for mixed diesel-biodiesel products. These policies did not make biodiesel mandatory target achieved. 

Additional policies were needed in order to achieve biodiesel mandatory target.  These included biodiesel production capacity increment, provision of incentives for biodiesel feedstock, plant productivity increment, provision of subsidy for biodiesel product to make it reach its economic price.