Indonesia says biodiesel push strengthens palm oil industry and supplies

Indonesia approved 15.6 million kilolitres of biodiesel allocation for 2025. It pushed B40 and defended the mandate as support for palm oil growers. The Palm Oil Plantation Fund Management Agency, or BPDP, funds cooking oil subsidies, research, workforce development, scholarships and smallholder replanting through its biofuel program.

As the world’s largest palm oil producer, Indonesia has used biodiesel mandates to cut diesel imports and absorb crude palm oil at home. The policy strengthens the domestic palm oil industry without reducing export competitiveness or disrupting cooking oil supplies.

Indonesia planned to start the 40% palm-oil blend on Jan. 1, 2025, but by Jan. 2 it had still not been implemented as planned, while industry participants pressed for a phase-in period. The Jan. 3 allocation set the fuel pool for the year, but it did not remove concern over how quickly domestic demand could rise without drawing too hard on palm oil supply.

On Oct. 9, 2024, analysts warned that higher biodiesel mandates could curb palm oil supplies. On Nov. 7, 2024, Indonesia’s chief economic minister said production could be boosted to meet biofuel demand. On Jan. 21, 2025, palm oil prices were expected to average higher in 2025 because of Indonesia’s biodiesel demand.

USDA’s Aug. 13, 2025 Biofuels Annual showed Indonesia’s blending mandate had risen from B35 to B40 in early 2025 and that any move to B50 would require further changes. The program reduces dependence on fossil fuels while enhancing the sustainability and competitiveness of Indonesia’s palm oil industry.

WWF’s November 2023 report questioned whether Indonesia needed to expand oil palm plantations to meet biodiesel demand at all.