In January 2025, the Indonesia’s Government implemented new export restrictions on palm waste products to prevent the misuse of Crude Palm Oil (CPO) blending and ensure domestic feedstock availability for cooking oil production and biofuel blending. This policy is outlined in Ministry of Trade (MOT) Regulation No. 2/2025, which targets Used Cooking Oil (UCO), Palm Oil Mill Effluent (POME), and High Acid Palm Residue (HAPOR). The new measures have raised concerns among small-scale palm oil mills and global biofuel buyers, particularly in Europe and Southeast Asia.
This report examines the reasons behind Indonesia’s palm waste export curbs, their economic implications, the impact on the biofuels sector, and the response from industry stakeholders.
Key Developments in Indonesia’s Palm Waste Export Policy
1. Justification for Export Curbs
The GOI argues that palm waste exports have exceeded “reasonable capacity”—set at 300,000 metric tons (MT)—due to loopholes that allowed CPO to be mixed with POME. The new restrictions serve two key objectives:
- Ensuring feedstock supply for domestic cooking oil production via the “Minyakita” program.
- Supporting the B40 biofuel mandate, which requires a 40% biodiesel blend in the domestic fuel mix.
Indonesia has historically used POME as a loophole to bypass high CPO export levies, allowing exporters to sell CPO disguised as biofuel feedstock.
2. Industry Response: Impact on Small-Scale Mills
- Independent palm oil mills—especially small-scale operators—are experiencing financial distress.
- The price of HAPOR has fallen, and mills are struggling to sell the byproduct.
- Mini-mill operators have petitioned the government to revise the regulations, arguing that they rely on POME exports to sustain profitability.
3. Biofuel Demand and Global Market Implications
- EU and U.S. biofuel regulations have increased demand for waste-based feedstocks, driving interest in POME and UCO imports from Indonesia.
- Indonesia is the world’s largest exporter of POME-based biofuel feedstocks, and any disruption in supply could raise global biofuel costs.
- Major importers like Malaysia, Singapore, and the Netherlands may need to seek alternative feedstock sources.
Market Impact of the Regulation
1. Palm Waste Export Trends
According to trade data, Indonesia’s POME exports surged between 2020 and 2023:
- POME exports increased from 190,000 MT in 2020 to 1.75 million MT in 2023.
- Estimated CPO mixture content in POME exports reached up to 1.7 million MT from 2021-2024.
The GOI’s September 2024 decision to increase palm waste export levies to match CPO levies suggests that a substantial portion of POME exports were previously mixed with CPO.
2. Implications for the Domestic Cooking Oil Industry
- The restrictions aim to secure raw materials for the Minyakita cooking oil subsidy program.
- Cooking oil prices increased by 20% in 2024, prompting the government to tighten control over feedstock allocation.
- The domestic market obligation (DMO) ensures that a portion of palm oil remains in Indonesia, but its enforcement has been inconsistent.
3. Impact on Biofuel Exports
- The B40 mandate requires more biodiesel feedstock, potentially reducing available POME for export.
- Countries dependent on Indonesian POME and UCO for biofuels (e.g., the EU, U.S., Malaysia, and Singapore) may face short-term supply shortages.
- The regulation will likely reduce biofuel exports to markets enforcing sustainability criteria, such as the EU Renewable Energy Directive (RED II).
Challenges and Uncertainties Moving Forward
1. Compliance and Enforcement
- How will Indonesia ensure exporters do not continue blending CPO with POME?
- Will independent mills circumvent the restrictions through informal markets?
- How will the government balance domestic demand with maintaining global biofuel trade?
2. Potential for Future Policy Adjustments
- Will the GOI revisit these restrictions if small-scale mills continue to face losses?
- Could a quota system be introduced to allow limited palm waste exports while securing local supply?
- How will Indonesia’s export partners respond to reduced biofuel waste feedstock availability?
Conclusion
Indonesia’s new palm waste export restrictions represent a major shift in trade policy, with significant implications for the domestic cooking oil and biofuels sectors. While the GOI aims to protect local supply, the policy has raised concerns among independent mills, global biofuel markets, and major palm oil importers.
The coming months will reveal whether these restrictions stabilize the domestic market or lead to unintended supply chain disruptions. Stakeholders in biofuel production, palm oil trading, and international commodity markets must closely monitor policy adjustments and prepare for potential price volatility in the global biofuels sector.
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