Indonesia has abandoned plans to introduce the mandatory B50 palm oil-based diesel this year, citing technical and funding concerns, and will continue with the existing B40 blend instead. The move eases pressure on global palm oil supplies, as the B50 mandate was expected to absorb an additional 2.2 million tonnes of crude palm oil (CPO) for domestic use.
The B50 blend — 50% palm oil biodiesel and 50% conventional diesel — had been scheduled for rollout in the second half of 2026. Officials said the current B40 mandate, which contains 40% palm oil-based biodiesel, is sufficient given increased diesel output from the Balikpapan refinery. Trials for B50 in heavy machinery, trains, and other sectors will continue, with a potential future rollout dependent on the price gap between conventional diesel and palm oil fuel.
The decision weighed on benchmark Malaysian palm oil prices, which fell 0.52% after the announcement, reversing earlier gains. Analysts noted the B50 scrapping reduces expected domestic palm oil absorption, potentially keeping prices under pressure and making Malaysian palm oil more competitive internationally.
To sustain the biodiesel subsidy programme, Indonesia will raise its crude palm oil export levy to 12.5% from March 1, up from the current 10%, while levies on refined products will rise by 2.5 percentage points. The move is expected to support the Indonesian Estate Crop Fund Agency’s (BPDP) ability to fund the biodiesel programme, which this year is allocated 15.65 million kilolitres of palm oil-based diesel, including 7.45 million kilolitres subsidised.
Industry groups welcomed the decision. GAPKI, the Indonesian Palm Oil Association, said sticking with B40 balances domestic demand, production, and exports, helping to maintain CPO prices and safeguard revenue from export levies. Meanwhile, the Indonesian Palm Oil Farmers Association (POPSI) noted that higher levies could shift some global demand to alternative suppliers like Malaysia.
Overall, the government’s move reflects a cautious approach to biodiesel expansion, aiming to sustain domestic supply, manage subsidies, and protect Indonesia’s position in the global palm oil market.
