EFFECTIVENESS OF BIOFUEL DEVELOPMENT FOR INDONESIA
Arie Rahmadi
Submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy
Department of Infrastructure Engineering School of Engineering The University of Melbourne
November 2018 ii
Abstract
Despite offering new opportunities in promoting rural development, enhancing energy security and a way to improve environmental condition, developing biofuel has several issues. The research question in this thesis is whether Indonesia has made conscious policy regarding biofuel that set as figure of 5% of primary energy consumption in 2025. This thesis is therefore essentially an assessment of the appropriateness of the Indonesian biofuel policy. In other words, this is to answer the question whether the cost of such a programme would be justified financially and environmentally and to find out alternative solutions to improve sustainability of the policy.
Several research objectives were defined to include identifying the type of fossil fuels that can be replaced by biofuels and to determine the amount of biofuel required to satisfy 5% of the total Indonesian energy mix up to 2025. The next objectives were to evaluate both local and global impacts of biofuels as well calculating the costs and benefits of this policy along the biofuels production chains. As a policy considered being appropriate for Indonesia would require more than metric measurements, an expert’s survey from various institutions to provide their opinions about the policy was also required. This discussion of these matter is covered in chapter 1, which intended to provide context of the research
A research gap was found in measuring the appropriateness of such a biofuel policy, in which the use simultaneous available evaluation techniques of LCA, EIA, CBA were never been attempted. This thesis proposed utilising LCA to account the global impacts of this biofuel policy, while using EIA to provide its impact on the local level. CBA is furthermore utilised to provide quantitative values to indicate whether the benefit of this policy outweighs its cost. The methods were selected after carrying literature review in chapter 2 in which cover the overall situation of energy resources in Indonesia, the role of fossil fuels in the Indonesian economy and the emergence of plant oil and starch-based plantations, as well as a review how other countries (Thailand and Australia) evaluate similar biofuel development.
The first objective was presented in chapter 3 by employing LEAP (Long Term Energy Alternative Planning) software. It was found that biofuel target of 5% from energy mix is possible based on constant energy demand growth of 6%. The target requires a total of biofuel about 8.0 to 26.6 GL in 2025. In energy terms, these are equivalent to 232 to 782 PJ or about iii
40 to 135 million barrels of crude oil. The policy was expected to create employments of 3.4 million people but requires significant land area of slightly less than 5.2 million ha.
The result of evaluating local environmental impact in chapter 4 using 22 Environmental Impact Statements (EIS) of biofuel related projects in Indonesia have partially satisfied sustainability criteria particularly on the issues of social, economy and local environmental impacts. They were however often failed to address global impacts such as GHG emissions and carbon stock accounting as well as land use and land use change. On the objective of evaluating the biofuel global impacts on the environment, this was covered in chapter 5 using a Life Cycle Assessment (LCA) and it yielded mixed results. Biofuels in general emit less particulate matter, non-methane volatile organic compounds (NMVOC) and sulphur dioxide in tailpipe emissions but emit more pollutants during upstream stages.
The CBA covered in chapter 6 additionally outlined the benefits of avoided liquid fossil fuels consumption, GHG emissions, reduction and air quality improvement due to less particulate and sulphur dioxide emissions, as well as additional benefit of increased energy security. It also covered the costs that include consumption of biofuel, ground ozone formation in major cities, biodiversity loss and additional costs involved in biofuel infrastructures. Other costs were in the form of increase cost of biofuel raw materials for food purposes, government expenditures due to engine adjustment, as well as compensation given due to displacing indigenous people during land clearing for plantation. The main finding was that the costs of meeting the target exceeds the benefits. It had a net cost of USD 24.40 billion and benefit to cost ratio (BCR) of 0.75 at the real discount rate of 6%. That amount yielded to an equivalent annual net cost of USD 2.92 billion. Additionally, the payments transfer to the people employed in the biofuel sector virtually stayed within the Indonesian economy instead of being spent for importing the fossil fuels. Further, the cost of biofuel and avoided fossil fuel benefits were significant, which showed that the prices of biofuel and liquid fossil fuels are determining factors, while other values such as energy security and environmental benefits were not significant.
Experts’ survey from government, business, academic institutions and non- governmental organizations covered in chapter 7 found that majority considered this biofuel policy positive. They considered improved energy security is important and valuable. They put energy security as the main important issue above social and environment. However, significant objections were found among the experts that are active in the environmental iv
issues. Although biofuel could provide the nation with more energy security, an appropriate biofuel policy should not be borne at the expense of social and environment. These objections were well founded given various social and environmental impacts did occur particularly during the land clearing and acquisition and overall practices in the biofuel raw material production.
The conclusion and recommendation covered in chapter 8 have shown that despite performing poorly in term of actual implementation on environmental impact management and monitoring, to realize the biofuel policy of 5% in 2025 is not an impossible task. This is not to suggest that the task will be simple. Lack of credible monitoring of actual implementation of the EIS in post project activities exacerbated the already low compliance attitude. In addition, although biofuel generally scored better than its respective fossil fuels when it comes to the LCA on the end pipe emission, the trend of the experience in the oil palm plantation expansion has indicated that preventing land use change from the forest to mono culture type industrial crops is unavoidable. LCA analysis has shown that biofuels perform better compared to their fossil fuels substitute if biofuel expansion is aimed at land that has low carbon stock cover. The CBA additionally indicated that the cost of undertaking this biofuel plan outweighed its intended benefits.
Although metric evaluations on the appropriateness of Indonesian biofuel program suggested it could have significant impact on the environment and people; and cannot be justified economically, the experts still viewed this program positively except those that work in the social and environmental activities. They suggested putting a stop of oil palm expansion for the reason of biofuel until sufficient regulatory and monitoring are effectively in place. However, decision was often made without considering those objections. The best that anyone can do is to provide all quantified values so that policy makers would act rationally. The Indonesian government could improve the appropriateness of its biofuel programme if they are more transparent in the EIA process and willing to reduce GHG emissions as well as implementing life cycle thinking in its decision-making.
During the evaluating the CBA, there were gaps in valuing the energy security as well as recognising the inter-relationship between the price of biofuel and the price of fossil fuels. Understanding these gaps through further research would lead the government to make decision more rational and beneficial. v
Declaration
The research in this thesis constitute work carried out by the candidate unless otherwise stated. The thesis is less than 100,000 words in length, exclusive of tables, figures, bibliography and appendices, and complies with the stipulations set out for the degree of Doctor of Philosophy by the University of Melbourne.
Arie Rahmadi
November 2018 vi
List of Abbreviations
ADO Automotive Diesel Oil
AMDAL Analisa Mengenai Dampak Lingkungan
BOD Bio Oxygen Demand
BCR Benefit Cost Ratio
BPPT The Agency for Assessment and Application of Technology
CBA Cost and Benefit Analysis
CPO Crude Palm Oil
EIA Environmental Impact Assessment
EIS Environmental Impact Statement
EFB Empty Fruit Bunch
EOR Extraction Oil Rate
FFB Fresh Fruit Bunch
FFA Free Fatty Acid
GHG Greenhouse Gas
GOI The Government of Republic of Indonesia
IMF International Monetary Fund
IPCC Inter governmental Panel on Climate Change
JAMALI Sistem Electricity grid of Jawa, Madura dan Bali kWh Kilo Watt Hours
LCA Life Cycle Assessment
MT Metric Ton
MW Mega Watt
OECD Organisation for Economic Co-operation and Development vii
PKO Palm Kernel Oil
Perpres Peraturan Presiden
PLN State Owned Electricity Company (Perusahaan Listrik Negara)
POME Palm Oil Mill Effluent
FFB Fresh Fruit Bunch
EFB Empty Fruit Bunch
TS Total Solid
UNEP United Nation Environment Programme
WB World Bank
WHO Word Health Organization
WTP Willingnes To Pay viii
Acknowledgements
My thanks go to:
Associate Professor Lu Aye and Associate Professor Graham A. Moore, for their invaluable guidance and encouragement.
The ADS office that provide my scholarship to study in The University of Melbourne
Managers in Bekri Plantation PTPN VII
Managers in PG Jatiroto PTPN IX
Directors of PT. Molindo Raya Alcohol plant
Directors of PT. Indobiofuel Biodiesel plant
My wife Maya and the three wonderful children Sarah, Gusman and Ken for their enduring support
Arie Rahmadi
November 2018 ix
Contents
ABSTRACT ...... ii DECLARATION...... v LIST OF ABBREVIATIONS...... vi ACKNOWLEDGEMENTS ...... viii CONTENTS...... ix LIST OF FIGURES...... xiv LIST OF TABLES...... xvi CHAPTER 1 INTRODUCTION ...... 1 1.1 Background...... 1 1.2 Aim, objectives and framework of the research...... 3 1.3 Scope...... 8 1.4 Expected output ...... 9 1.5 References...... 10 CHAPTER 2 LITERATURE REVIEW...... 11 2.1 Indonesian energy situation ...... 11 2.2 Role of fossil energy resources...... 13 2.3 Emergence of biofuel based plantation...... 16 2.4 Indonesian biofuel plan ...... 21 2.5 How other countries assess the appropriateness of their biofuel Policy...... 23 2.6 Proposed research methods...... 25 2.6.1 Environmental Impact Assessment...... 26 2.6.2 LCA Method ...... 29 2.6.3 Cost Benefit Analysis...... 31 2.7 Summary of the review...... 33 2.8 Research design...... 34 2.9 References...... 35 CHAPTER 3 THE SIZE OF INDONESIAN BIOFUEL PROGRAMME AND ITS IMPLICATIONS...... 43 x
CHAPTER 4 ASCERTAINING LOCAL IMPACTS USING ENVIRONMENTAL IMPACT STATEMENTS...... 55 4.1 Overview...... 56 4.1.1 EIS as a snap shot of local environmental impacts...... 56 4.1.2 EIA process for biofuel projects...... 57 4.1.3 The content of EIA reports ...... 60 4.1.4 Limitations to the study ...... 65 4.2 Methods ...... 66 4.2.1 EIA reports collection...... 66 4.2.2 Analysis method...... 73 4.3 Results and discussion...... 79 4.3.1 Sufficiency and reliability of Indonesian EIS reviewed in this study...... 79 4.3.2 Institutional and legal issues...... 80 4.3.3 Actual implementation...... 82 4.3.4 Comparison of compliance level based on typical Indonesian EIA indicators ...... 85 4.4 Conclusions and recommendations...... 97 4.5 References...... 99 CHAPTER 5 LIFE CYCLE ANALYSIS OF THE INDONESIAN LIQUID BIOFUEL: BIODIESEL, BIOETHANOL, AND PURE PLANT OIL...... 103 5.1 Life Cycle Inventory (LCI) of Indonesian biofuel and their respective liquid fossil fuels 103 5.1.1 Functional Unit ...... 107 5.1.2 Data collection and co-allocation...... 109 5.1.3 Inventory model...... 110 5.1.4 Impact Assessment step...... 115 5.2 GHG emissions from land use change ...... 118 5.2.1 Land classification issue...... 119 5.2.2 Land use and GHG emissions in meeting the biofuel target...... 126 5.3 LCA of Bioethanol ...... 127 5.3.1 GHG analysis of Bioethanol...... 129 5.3.2 Assessing impact category on priority pollutants emission...... 131 5.3.3 Impact assessment based on Eco-indicator 99 ...... 133 5.3.4 The effects on variation of raw materials...... 134 5.4 LCA of Biodiesel ...... 136 5.4.1 GHG analysis of Biodiesel ...... 136 5.4.2 Assessing impact category on priority pollutants emission...... 140 5.4.3 Impact assessment based on Eco-indicator 99 ...... 141 5.5 LCA of pure plant oil...... 144 5.5.1 GHG analysis of pure plant oil...... 144 5.5.2 Assessing impact category on priority pollutants emission...... 146 5.5.3 Impact assessment based on Eco-99 ...... 147 5.6 Conclusions...... 148 5.7 Policy implications...... 151 5.8 References...... 153 xi
CHAPTER 6 COST AND BENEFIT ANALYSIS OF INDONESIAN BIOFUEL PLAN ...... 159 6.1 Short review of CBA...... 159 6.1.1 Authority ...... 160 6.1.2 Discount rate ...... 160 6.1.3 Valuing method of environmental benefit and cost...... 162 6.2 CBA Model ...... 167 6.2.1 Basis of the analysis ...... 167 6.2.2 Objective, scope, and discount rate ...... 170 6.3 Identification of benefits and cost ...... 174 6.3.1 Benefits...... 174 6.3.2 Costs...... 182 6.4 Assumptions and limitations of the method...... 187 6.4.1 Assumptions ...... 187 6.4.2 Limitations ...... 187 6.5 Results and discussion...... 187 6.5.1 Direct economic impacts on the parties involved in the biofuel production...... 187 6.5.2 Cost and benefit of biofuel programme in Indonesia...... 190 6.6 Conclusions and recommendations ...... 198 6.6.1 Conclusions...... 198 6.6.2 Recommendations ...... 199 6.7 References...... 200 CHAPTER 7 EXPERTS’ OPINIONS ON INDONESIAN BIOFUEL POLICY ..207 7.1 Survey method ...... 208 Results, analysis and responses per set questions ...... 213 7.2.1 General perception on biofuel ...... 213 7.2.2 National biofuel policy response...... 214 7.2.3 Biofuel appropriateness...... 215 7.2.4 Cooperation among biofuel stakeholders...... 217 7.2.5 Outlook and moving forward...... 218 Conclusions and key issues raised...... 219 References...... 221 CHAPTER 8 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...223 8.1 Summary of the findings and discussion...... 223 8.1.1 Estimating biofuel consumption in 2025 ...... 223 8.1.2 Evaluating local impact by using Environmental Impact Statements (EIS) of biofuel related projects ...... 225 8.1.3 Life Cycle Assessment of Indonesian biofuel...... 226 8.1.4 Cost and Benefit Analysis of Indonesian biofuel...... 227 8.1.5 Experts’ opinions...... 228 8.2 Response to research aim and objectives ...... 229 xii
8.2.1 Response to research aim...... 229 8.2.2 Response to research objectives...... 229 8.3 Conclusions...... 231 8.4 Recommendations and further research...... 232 8.5 References...... 234 APPENDIX A DETAIL ENVIRONMENTAL IMPACT ASSESSMENT REPORTS...... 235 Annex A1 EIA Reports related to bioethanol project ...... 235 Annex A.1.1 Pemuka Sakti Sugar cane plantations - Province of Lampung ...... 235 Annex A.1.2 Indo Lampung Sugar cane plantations - Province of Lampung...... 236 Annex A.1.3 Gunung Madu Sugar cane plantations - Province of Lampung ...... 237 Annex A.1.4 Glenmore sugar cane mill and bioethanol plant ...... 238 Annex A2 EIA Report related to biodiesel plants projects...... 240 Annex A.2.1 Indobiofuel Biodiesel project ...... 240 Annex A.2.1 PPTMGB "Lemigas" Biodiesel project...... 240 Annex A.2.3 Ogan Komering Ulu Timur (OKUT) Biodiesel project...... 242 Annex A.2.4 Medco Methanol Bunyu...... 243 Annex A3 EIA Report on Oil Palm plantation related to biodiesel project ...... 244 Annex A3.1 Tolan Tiga Indonesia palm oil plantation and mill project ...... 244 Annex A.3.2 Tolan Tiga Indonesia Simalungun palm oil plantation and mill project ...... 245 Annex A3.3 Socfindo palm oil plantation and mill project...... 246 Annex A3.4 Andalas Wahana Berjaya palm oil plantation and mill project...... 247 Annex A3.5 Budidaya Agro Lestari palm oil plantation and mill project ...... 249 Annex A3.6 Asiatic Persada palm oil plantation and mill project ...... 250 Annex A3.7 Agromuko palm oil plantation and mill project...... 251 Annex A3.8 Banyu Kahuripan Indonesia palm oil plantation and mill project ...... 253 Annex A3.9 Perkebunan Mitra Ogan palm oil plantation and mill project...... 254 Annex A3.10 Palm Lampung Persada palm oil plantation and mill project ...... 255 Annex A3.11 Sajang Heulang palm oil plantation and mill project...... 257 Annex A3.12 Etam Bersama Lestari palm oil plantation and mill project ...... 259 Annex A3.13 Katingan Indah palm oil plantation and mill project ...... 260 Annex A3.14 Budidaya Agro palm oil plantation and mill project ...... 260 APPENDIX B DETAIL LIFE CYCLE INVENTORY OF INDONESIAN BIOFUEL ...... 263 Annex B1 Life Cycle Inventory of Biodiesel and Indonesian ADO for 1 GJ energy content .263 xiii
Annex B1.1 System description of palm biodiesel and Indonesian ADO ...... 263 Annex B1.2 Life Cycle description of Industrial Diesel Oil ...... 273 Annex B2 Life Cycle Inventory of Pure plant oil...... 275 Annex B2.1 System description of pure plant oil and Indonesian Fuel Oil/Industrial Diesel Oil ...... 275 Annex B2.2: Life Cycle description of Industrial Diesel Oil ...... 280 Annex B3 Life Cycle Inventory of bioethanol from sugar cane and molasses and Indonesian Petrol...... 284 Annex B3.1 System description of Bioethanol...... 284 Annex B3.2 Option of the raw material of bioethanol...... 289 Annex B3.3 Life Cycle description of Unleaded Petrol ...... 294 Reference ...... 296 APPENDIX C MATERIAL BCA DATA...... 298 Annex C1 Liquid Fossil Fuel ...... 298 Annex C.1.1 Historical and projection price of Liquid Fossil Fuel in US$/kL...... 298 Annex C2 Biofuel...... 299 Annex C.2.1 Historical and projection price of Biofuel in US$/kL ...... 299 Annex C2.2 The price of CPO and Molasses for the past 10 years...... 300 Annex C2.3 Calculation of typical production of palm oil ...... 301 Annex C3 Economic Data ...... 302 Annex C3.1 Indonesia’s inflation rate...... 302 Annex C3.2 Economic cost of emission of pollutant (US$/Tonne) ...... 302 Annex C3.3 CBA flow sheet...... 304 APPENDIX D: MATERIAL FOR EXPERTS’ OPINIONS ...... 305 xiv
List of Figures
Figure 1-1 Framework of evaluating the appropriateness of Indonesian biofuel to meet the 5% biofuel target in 2025 ...... 4 Figure 4-1 The EIA process in Indonesia under government regulation 27/1999...... 58 Figure 4-2 The project locations where EIA reports were produced...... 70 Figure 4-3 Overall average level of compliance of the EIA reports with 10th and 90th percentile values...... 87 Figure 4-4 Average level of compliance of EIA reports related to the type of biofuel projects..89 Figure 4-5 Average level of compliance of EISs related to biofuel projects by geographical location...... 92 Figure 4-6 Average Level of Compliance of EIA reports related to biofuel projects based on stages of biofuel production ...... 94 Figure 5-1 System boundary of biofuel...... 104 Figure 5-2 Life Cycle boundary of the liquid fossil fuels...... 107 Figure 5-3 Sample of palm biodiesel life cycle tree in SimaPro7.3...... 113 Figure 5-4 Sample of automotive diesel oil (ADO) life cycle tree in SimaPro 7.3...... 114 Figure 5-5 General representation of Eco-Indicator 99 methodology...... 116 Figure 6-1 Indonesian Biofuel System from the Perspective Indonesian Society ...... 173 Figure 6-2 Historical and projected price petrol, bioethanol, and kerosene...... 175 Figure 6-3 Historical and projected price ADO, FO, IDO, biodiesel and PPO ...... 176 Figure 6-4 CBA Chart - NPV for each aspect over the analysis period and discount rate of 6% (million USD)...... 191 Figure 6-5 CBA chart in the year 2025 (million USD)...... 191 Figure 6-6 Net cost projection of Indonesian biofuel plan up to 2025...... 193 Figure 6-7 Curves of B/C ratios equal to 1 for the biofuel feedstock's price against the crude oil price...... 196 Figure A-1 Boundary of LCA biofuel system...... 263 Figure A-2 Diagram of Palm oil mill process ...... 266 Figure A-3 Simplified palm oil trans-esterification reaction...... 267 Figure A-4 Flow diagram of palm oil transesterification ...... 268 Figure A-5 Typical Biodiesel process Source:...... 268 Figure A-6 Life cycle tree of biodiesel from palm oil at a functional unit of 1 GJ useful energy operated on heavy duty vehicle with GHG impact in kg CO2eq ...... 272 Figure A-7 LC Tree of ADO with Functional Unit of 1GJ energy and GHG impact...... 274 Figure A-8 Pure plant oil life cycle diagram...... 275 xv
Figure A-9 Life cycle tree of pure plant oil palm at a functional unit 1GJ of useful energy with GHG impact in kg CO2eq...... 282 Figure A-10 Life cycle tree of Industrial Diesel Oil at a functional unit 1GJ of useful energy with GHG impact in kg CO2eq...... 283 Figure A-11 Bioethanol life cycle diagram ...... 284 Figure A-11 Diagram of mass balance integrated sugar and ethanol factory...... 286 Figure A-12 Life cycle tree of bioethanol from sugar cane juice only with a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq...... 291 Figure A-13 Life cycle tree of bioethanol from molasses at a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq ...... 292 Figure A-14 Life cycle tree of bioethanol from combination of sugar cane juice and molasses at a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq ...... 293 Figure A-15 Life cycle tree of petrol at a functional unit 1 GJ of useful energy with GHG impact in kg CO2-eq...... 295 Figure A-16 Cash Flow Spread Sheet of Cost and Benefit Analysis of the Indonesian Biofuel Program...... 304 xvi
List of Tables Table 2-1 Potential National Energy in 2016...... 12 Table 4-1 Typical aspects covered in the EIS on plantation projects...... 62 Table 4-2 List of EIA report related to ethanol project...... 69 Table 4-3 List of EIS related to biodiesel related project ...... 71 Table 4-4 Typical indicators in assessing EIS...... 74 Table 4-5 Level of compliance score...... 76 Table 4-6 Qualitative coverage score ...... 77 Table 4-7 Comparison of the EIS score and rating against the PROPER programme report ....84 Table 5-1 Basis calculation for functional unit of 1GJ fuel used...... 108 Table 5-2 Global warming potential of major GHG emission...... 115 Table 5-3 List of priority pollutants ...... 116 Table 5-4 Normalisation and Weighting for damage assessment for Eco-indicator 99 ...... 117 Table 5-5 Projected Land Areas and Volume of Biofuel in 2025 ...... 118 Table 5-6 Comparison of land cover classification from three land use change studies...... 121 Table 5-7 Distribution area for biofuel development for scenario LUC BAU (ha)...... 124 Table 5-8 Distribution area for biofuel development for scenario LUC alternative (ha)...... 124
Table 5-9 Indonesia Land Conversion GHG Emission Factors over 30 Years (MtCO2-eq/ha) 125
Table 5-10 GHG emission in kg of CO2eq for functional unit of 1 GJ energy used...... 126 Table 5-11 Allocation factors in the combined production of sugar and bioethanol ...... 129 Table 5-12 Comparison of GHG emission from bioethanol and unleaded petrol under the scenario of LUC in Kg CO2eq ...... 129 Table 5-13 Life cycle emissions of bioethanol and unleaded petrol on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used..131 Table 5-14 Life cycle impact assessment using Eco-indicator 99 with functional unit of 1GJ..133
Table 5-15 GHG emissions from bioethanol kg CO2eq ...... 134 Table 5-16 Life cycle impact assessment using priority pollutants and Eco-indicator 99 with functional unit of 1GJ...... 135 Table 5-17 Comparison of GHG emissions between biodiesel and ADO in kg CO2eq/GJ useful energy...... 137 Table 5-18 Life cycle emissions on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used...... 140 Table 5-19 Life cycle impact assessment using Eco-indicator 99 with functional unit of 1GJ ..142
Table 5-20 Comparison of GHG emissions between pure plant oil and IDO in kg CO2eq/GJ useful energy...... 145 xvii
Table 5-21 life cycle emissions of the pure plant oil and industrial diesel oil on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used..146 Table 5-22 Life cycle impact assessment of pure plant oil and industrial diesel oil using Eco- indicator 99 with functional unit of 1GJ...... 148 Table 5-23 GHG emissions in kg for Functional Unit of 1 GJ energy used...... 149 Table 5-24 Life cycle emissions on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used...... 150 Table 6-1 Emission cost per units of impact...... 166 Table 6-2 Projected annual biofuel substitute in 2025and the fossil fuel saved...... 168 Table 6-3 Projected annual biofuel use in the year 2025 (GL)...... 168 Table 6-4 Biofuel data...... 169 Table 6-5 Incidence matrix from the perspective of Indonesian Society...... 171 Table 6-6 Summary annual domestic out of payment in 2025 and potential annual biofuel investment...... 188 Table 6-7 Variations of annual biofuel crops yield on B/C ratio and net present value...... 195 Table 7-1 List of experts ...... 209 Table 7-2 Survey questionnaires ...... 212 Table 7-3 Suggested biofuel policy instruments...... 215 Table 8-1 Projected consumption of biofuel plan ...... 224 Table 8-2 Projected annual biofuel use in the year 2025 (GL)...... 224 Table A-1 Properties of biodiesel and typical ADO ...... 269 Table A-2 Properties of Pure Plant Oil and typical Industrial Diesel Oil...... 276 Table A- 3 Typical analysis of crude, degummed bleached and RBD Palm Oil...... 277 Table A-4 Tail emission profile of palm oil methyl ester and pure plant oil with respect to ADO and IDO ...... 279 Table A-5 Additional transport data related to LCI bioethanol ...... 285 Table A-6 Properties of bioethanol and typical petrol...... 288 Table A-7 The share of potential bioethanol from molasses and from dedicated sugar cane bioethanol plantation ...... 290 Table A-9 Response to Experts’ Survey...... 308 xviii Chapter 1 Introduction 1
Chapter 1 Introduction
1.1 BACKGROUND
"Biofuels are liquid or gaseous fuels... that are predominantly or exclusively produced from biomass. From a country and region perspective, biofuels offer increased liquid fuel security over conventional fossil oil and gas. Whereas the resources of fossil energy are limited, raw materials used for the production of biofuels can be harvested annually;.." (Task 39 IEA Bioenergy 2014)
This statement by a special task group created within the International Energy Agency (IEA) describes one of the reasons many countries pursue a national biofuel plan. The relatively successful alcohol programme in Brazil has also provided inspiration. This biofuel programme was created from the necessity of being self-sufficient in energy, as well as self- serving to protect their sugar industry, and became a model for biofuel development in other countries. The Brazilian success story is quite relevant to Indonesia, which has also considered liquid biofuel as a potential renewable alternative to liquid fossil fuels.
Liquid biofuels readily available in Indonesia include methyl ester or biodiesel; pure plant oil from any oilseed crop, particularly crude palm oil (CPO); and bioethanol from fermented sugar cane juice or molasses. The biodiesel substitutes the fossil diesel fuel in diesel vehicles and high-end stationary diesel engines. Pure plant oil is an alternative for boilers in factories, power plants and low speed diesel engines in marine transportation, as well as low to medium speed diesel engines, while bioethanol can be utilised as a gasoline substitute for spark ignition engines. Lower grade pure plant oil and bioethanol can be useful as substitutes for kerosene in rural areas.
Presidential Regulation 5/2006, formally launched on 25 January 2006, stated that biofuel, as a renewable energy source, should account for more than 5% of the national energy consumption by 2025 (Government of Indonesia 2006). The development is also Chapter 1 Introduction 2 expected to be in-line with the government triple track strategy, which covers: Pro-Growth: Economic growth through export and investment, Pro-Job creation and Pro-Poor: Poverty reduction in rural areas. Among the reasons for including biofuel in the broader Indonesian energy policy is the sharp fluctuation of fossil crude oil price in 2005, when the notion of improving national energy security came to the fore against the background of the continuing decrease of Indonesian fossil oil reserves. To include biofuel in the national energy mix is also a promising alternative as Indonesia has a relative abundance of raw materials for either palm oil- or sugar cane-based biofuels. The use of palm oil, sugar cane or cassava other than for food purposes, may reduce crop surpluses during periods of low price, helping small plantation holders who are often vulnerable to price fluctuations. The same reason was behind the Proálcool programme in Brazil in which to absorb fluctuation in sugar prices (Moreira & Goldemberg 1999) and the gasohol programme in the USA to help corn growers (Solomon, Barnes & Halvorsen 2007). Producing biofuel may further create employment opportunities and promote economic growth in rural areas in the form of opening new plantations and establishment of biofuel processing industries.
In addition to those favourable reasons, liquid biofuels have proven themselves of being compatible with the engines mentioned. Howard (2007) confirmed the biodiesel compatibility in diesel engines, in which no engine or vehicle modifications are required up to a certain blending ratio. Agarwal (2007) further confirmed the technical compatibility of biodiesel in diesel engines. The Alcool programme in Brazil in the 1970's has proven the compatibility of bioethanol in spark ignition engines as a substitute for petrol. The wide use of bioethanol in spark ignition engines in the USA, Australia and several European countries provides further evidences of the engine's compatibility with biofuel. These favourable circumstances suggest that it will be relatively easy for biofuels to penetrate the Indonesian fuel market.1
Despite such advantages, having the biofuel target as part of the national energy mix may create some challenges. Certain biofuels have a poor record in relation to air quality during their use (Beer et al. 2000). Producing more biofuel raw materials may create environmental and social problems in the early life cycle as land for plantations are often
1 This claim is because the biofuel is in liquid form and the use of biofuel as a direct substitute for liquid fossil fuels is relatively easy to distribute and deliver to consumers. Chapter 1 Introduction 3 acquired from forests, and the slash-burn method is still practised widely. The expected price of biofuel is often higher than those of fossil fuels (Eidman 2007; Haas et al. 2006) mainly attributed to the higher price of raw materials, which requires government financial support in various forms. The biofuel drive worldwide moreover has been of concern as it is responsible for the continuing increase of food prices in 2008 (FAO 2008).
Despite these disadvantages, many countries including Indonesia seem undeterred in their resolve to pursue aggressive liquid biofuels targets and consider the fuel as an alternative renewable energy source in the long term. So why does Indonesia continue on a seemingly unsustainable energy path with regard to biofuel? Can Indonesia's current target of 5% by 2025 be achieved realistically given the constraints on available land and technology to produce and apply the biofuels? What are the environmental and social implications of having this biofuel target? What are the costs and benefits of achieving it? What are the risks, if any? Could this plan actually be the best option for Indonesia? It is critical to assess such a biofuel policy of 5% target to the national energy mix in 2025 to justify whether the biofuel policy launched in 2006 meets its objectives and minimise its several adverse impacts.
1.2 AIM, OBJECTIVES AND FRAMEWORK OF THE RESEARCH
The premise of this thesis is that Indonesia has made conscious policy regarding biofuel, which has a target figure of 5% of primary energy consumption in 2025. Such a policy is substantially shaped by Indonesia's economic structure, commodity trade profile, demography and geography and its past domestic energy policy that relies heavily on fossil fuels. This thesis is essentially a test of this premise or aimed to assess the appropriateness of the Indonesian biofuel target for the input of policymaking. In other words, this is to answer the question whether the cost of such a programme would be justified financially and environmentally and to find out alternative solutions to improve the sustainability of the policy.
In order to do so, several research objectives were defined as follows:
1. To identify the type of fossil fuels that can be replaced by biofuels and to determine the amount of biofuel required to satisfy 5% of the total Indonesian energy mix up to 2025. Chapter 1 Introduction 4
2. To identify the potential local environmental impacts of biofuels by reviewing the environmental impact assessment (EIA) reports of biofuel related projects.
3. To estimate the global environmental impact of biofuel production in order to meet the specified 5% target using life cycle assessment (LCA).
4. To identify the costs and benefits along the biofuels production chains using the cost and benefit analysis (CBA).
In addition to the objectives mentioned, a policy considered being appropriate for Indonesia would require more than metric measurements created in the LCA, CBA and to some extent the EIA report. Therefore, it is appropriate to add another objective of asking the experts from various institutions to provide their opinions about the program.
Given the objectives set above, the research framework adopted for this study is broadly defined as an 'outcomes oriented' approach to the assessment of the Indonesian biofuel program. The Figure 1-1 depicts the framework in which each outcome from the evaluation method employed were used for inputs of another method.
Appropriateness of 5% Indonesian biofuel target in 2025
Experts Survey
Global Env. Local Env., Social and Cost & Benefit Impacts Economy impacts (Env.&Social)
Life cycle Environmental Cost and benefit analysis impact assessment analysis
5% liquid biofuel target: volume, type of biofuels, total area for biofuel raw material, fossil fuel import saved, EIA reports, biofuel projects locations
Energy projection in 2025
Figure 1-1 Framework of evaluating the appropriateness of Indonesian biofuel to meet the 5% biofuel target in 2025 Chapter 1 Introduction 5
The argument of the framework is that the target of 5% of biofuel by 2025 can be considered appropriate if: the global environmental impact of 5% biofuel is less than or equal to the global environmental impact of the substituted liquid fossil fuels; the local social and environmental impact of the biofuel can be managed; and the benefits of realising the biofuel target are greater than the costs to produce them. As detailed further in Chapter 2, the EIA, LCA and CBA are the most widely applied and accepted methods for assessing agro-energy programs. Applying this commonly used framework to assess a biofuel programme for a developing country such as Indonesia however, requires further elaboration, since each method has a specific purpose in this thesis.
The framework started with the estimation of the amount and type of biofuels projected up to 2025. Using the figures obtained, the local environmental impacts were evaluated using EIA reports of representative samples from areas with biofuel projects. The potential sites where biofuel production were likely to take place are in Sumatra, Java, Kalimantan and Sulawesi. The global environmental impact was estimated by analysing the life cycle of the liquid biofuel and followed by evaluating its cost and benefit analysis. The results of these three analyses were then verified using an experts’ opinions survey to find out whether the critical assumption, parameters and the results were accurate, given this type of analysis can be categorised as an inter-disciplinary approach.
Accordingly, this thesis has been structured in three parts to meet those objectives. The first part was presented in Chapter 2 in the form of a literature review, which examined the background of Indonesian energy systems and outlines the roles of biofuel in the overall Indonesian energy system and how other countries evaluate their biofuel programs. In discussing the overall energy situation in Indonesia, this chapter outlines the role of fossil fuel in the Indonesian economy and the emergence of plant oil- and starch- based plantations in Indonesia. This is important to provide context for the necessity of biofuel in Indonesia. The review of how other countries evaluate related problems of biofuel includes evaluating the objectives of their biofuel program, methodologies employed and various criteria considered in their evaluations. For this purpose, sample studies from developing and developed countries were examined to critically evaluate the aspects that matter most to them. This chapter will also present a hypothesis and suggest the methods suited to ascertain whether it is appropriate for Indonesia to use biofuel. Chapter 1 Introduction 6
The second part was presented in Chapter 3, which discussed whether the current target of 5% can be realistically achieved, given the existing (and/or) projected constraints on available land and technology to produce biofuel. This chapter sets out the types and amounts of each liquid biofuel required to fulfil the 5% target by 2025. It also sets the type of potential fossil fuels replaced by biofuels, together with their annual quantities within the period of analysis, as well as the sectors in which those fuels are utilised within the Indonesian energy system.
A Long-range Energy Alternatives Planning (LEAP) system was employed to analyse the Indonesian energy system and forecast the future demand for various scenarios, including minimum and maximum biofuel alternative blending. LEAP is an accounting framework for energy analysis tool, developed by the Stockholm Environment Institute (Heaps 2008). The Indonesian LEAP model developed required data from the base year and forecasted future years using a predetermined growth rate. As it is a technique driven by end use, the LEAP model was disaggregated according to the hierarchical demands of industry, household, commercial, transportation, other sectors, and non-energy use. The base year data were taken from the 2008 handbook of Indonesia energy statistics. The country's energy demand was forecast using linear 6% energy growth, which is approximately the same as Indonesia's economy growth projection (McKibbin 2005), thus satisfy the long term Indonesian energy policy goal of having energy elasticity of less than or equal 1. Hence the projected amount of feedstock and the required additional land for plantation could then be estimated.
Part three, presented in Chapters 4, 5, 6 and 7, was designed to ascertain whether biofuel is environmentally sound with regard to local and global impacts, and whether liquid biofuels emit less emission than their fossil fuel alternatives per unit of energy they serve.
Chapter 4 presents the local impact of biofuel on the environment, evaluating various environmental impact assessment reports of biofuel related projects. Four EIA reports or generally known as environmental impact statement (EIS) related to the plantation and production of ethanol and 18 reports related to the production of vegetable oil, methanol production and the biodiesel process were collected and analysed. The locations of the projects are from potential sites where biofuel productions are likely to take place in Sumatra, Chapter 1 Introduction 7
Java, Kalimantan and Sulawesi. This chapter seeks to ascertain whether EIA reports can be used to determining the sustainability of Indonesian biofuel aspirations.
Chapter 5 deals with the environment impact of biofuel in global terms. Assessment on the life cycle of the Indonesian biofuels with corresponding raw materials uses Simapro 7.3 software. Majority of the data set in the Simapro adopted the Swiss database, while local data such as the national energy and electricity mix and typical yields of palm oil and sugar cane were collected from various primary and secondary sources relevant to Indonesian situation. The results of this assessment based on the total greenhouse gas (GHG) emissions produced and other pollutants released are to check whether these liquid biofuels emit less emission than their fossil fuel alternatives per functional unit of 1 GJ it serves.
Chapter 6 presents the cost and benefit analysis (CBA) of the long-term impact of the Indonesian biofuel plan. This analysis intends to find out whether the benefits of introducing biofuel over the long term up to 2025 would outweigh the cost. The cash flow of such a biofuel programme would yield the figure of its cost benefit ratio (CBR) and the net present value. The benefits comprise avoided liquid fossil fuels consumption, GHG emissions reduction and air quality improvement due to less particulate and sulphur dioxide emissions. Additional benefit in the form of increased energy security is also included. The costs on the other hand, include the biofuel consumed, ground ozone formation in major cities, biodiversity loss and additional costs involved in biofuel infrastructures. Other costs are in the form of increase cost of biofuel raw materials for food purposes, government expenditures due to engine adjustment, as well as compensation arises due to displacing indigenous people during land clearing for plantation. In addition to these direct components within the CBA, this chapter also presents distributional and secondary benefits of additional employment gained in the biofuel sector and other economic activities in rural areas. Although such benefits are not included in the cash flow model, this particular impacts from the growing biofuel business value chains yield a significant amount of money to enter the local economies.
Chapter 7 presents experts’ opinions from four groups of Indonesian stakeholders about the biofuel program. They are from government, business, academic institutions and non-government organisation (NGO). The intention in this chapter is to not only assess the biofuel programme itself from the experts' points of view, but also focus on the opinion of Chapter 1 Introduction 8 experts on those key parameters and their effect on the overall Indonesian biofuel policy evaluation presented in the previous chapters. In addition, this chapter also discusses required policy instrument arise from these challenges sought from those experts.
Finally, Chapter 8 reviews the approach and findings of the study and draws overall conclusions about the overall appropriateness of the Indonesian biofuel target of 5% of the national primary energy mix in 2025. The study concludes with a brief discussion of the prospects of Indonesia's achieving the target as well as the implications and future research.
1.3 SCOPE
The foremost focus of this study is on evaluating the potential use of up to 5% biofuels specified in the Presidential Regulation No. 5/2006. The evaluation is limited to the current best available commercial production of liquid biofuels in Indonesia, comprised biodiesel, bioethanol and pure plant oil. The local biofuel feedstocks are crude palm oil and sugar cane. Therefore, this thesis excludes second-generation biofuel technologies, which may not be commercially available in during the period analysis.
Second, there are limitations on the indicators selected and used to assess the appropriateness of the biofuel program. The chapters 3 to 6 discuss them in detail. The environmental impact, for example, covers both local and global terms, whereas the financial impact due to the implementation of this biofuel target is limited to the Indonesian institutions, which are either government or private institutions. Impacts that are likely fall on overseas institutions are, therefore not considered.
Third, the lands required for the biofuel, both for oil palm or sugar cane plantation are assumed to be sourced from land specifically for the biofuel programme thus separated from the current land allocated for the food productions. This is to protect the ability of Indonesia to produce palm oil and sugar cane for food purposes and minimise the effect of biofuel on the food prices, at least within its national boundary. Such an assumption is in line with the recommendation by the National Biofuel Team which suggest to develop special biofuel zones for that purpose so that government assistance and monitoring could be better coordinated (National Team for Biofuel Development 2006). Chapter 1 Introduction 9
Finally, the time-period covered by this study spans from 2008 to 2025. As described in Chapter 3, the selection of 2008 as the start year is that in 2008 the national governments began implementing the biofuel plan. Selection of the year 2025 as the end period of the analysis is consistent with the presidential regulation, which aims to have 5% biofuel target in that year. The cost and benefit analysis however, uses 2013 as the starting year for the analysis. The main reasons are that the biofuel consumption in the preceding years was not substantial and they originated from the raw materials that intended for food purposes. Thus, the cash flows were consequently discounted to the year 2013.
Moreover, as described in Chapter 3, the study made substantial use of energy data sets, compiled by the Centre for Energy and Mineral Resources Information and Data from the Ministry of Energy and Mineral Resources Indonesia, which publishes the Handbook of Indonesian Energy Statistics annually since 2007. Additional data relevant for the analysis were also sourced from international or multilateral agencies such as the International Energy Agency (IEA), Energy Information Administration USA (EIA USA), and Food and Agriculture Organization (FAO). Specifically, the World Bank recent commodity indices up to the year 2025 were used for the projected estimation of the long-term future prices of commodities.
On the basis of a preliminary examination of the data, though the results of the EIA reports, LCA and CBA analysis and conclusions would not be materially affected by the use of more recent data, except perhaps if major events occur which significantly increase the price of commodities particularly fossil fuels. Such an increase of crude oil prices, however, was often followed by the increase of food commodities, which may also raise the price of biofuel. So the cost and benefit ratio will be unlikely to drop significantly, thus strengthening the results and conclusions.
1.4 EXPECTED OUTPUT
This research may contribute to the knowledge of economic and environmental impacts of the biofuel programme in Indonesia. This research also presents useful data to estimate macroeconomic analysis in the context of overall development in the Indonesian energy and agricultural sectors. Hence, it provides useful information for stakeholders and related policy makers including government ministries that deal with energy, public transport, Chapter 1 Introduction 10 forestry, agriculture and plantation, as well as the Ministry of Finance, which is responsible for the current fuel subsidies.
1.5 REFERENCES
Agarwal, AK 2007, 'Biofuels (alcohols and biodiesel) applications as fuels for internal combustion engines', Progress in Energy and Combustion Science, vol. 33, no. 3, pp. 23371.
Beer, T, Grant, T, Brown, R, Edwards, J, Nelson, P, Watson, H & Williams, D 2000, Life-cycle emissions analysis of alternative fuels for heavy vehicles: Stage 1, CSIRO Atmospheric Research, Aspendale, Vic.
Eidman, VR 2007, 'Economic parameters for corn ethanol and biodiesel production', Journal of Agricultural and Applied Economics, vol. 39, no. 2, p. 345.
FAO 2008, The state of food and agriculture (SOFA) 2008, FAO Agriculture Series, Electronic Publishing Policy and Support Branch, Communication Division - FAO, Rome.
Government of Indonesia 2006, Presidential regulation No. 5/2006 regarding Indonesian national energy policy, Jakarta,
Haas, MJ, McAloon, AJ, Yee, WC & Foglia, TA 2006, 'A process model to estimate biodiesel production costs', Bioresource Technology, vol. 97, no. 4, pp. 671-8.
Heaps, CG 2008, An introduction to LEAP, Stockholm Environment Institute and Community for Energy, Environment and Development, 12 April 2011,
McKibbin, W 2005, 'Indonesia in changing global environment', in BP Resosudarmo (ed.), The politics and economics of Indonesia’s natural resources, ISEAS Publication, Singapore.
Moreira, JR & Goldemberg, J 1999, 'The alcohol program', Energy Policy, vol. 27, no. 4, pp. 22945.
National Team for Biofuel Development 2006, Blueprint biofuel development for poverty alleviation and job creation, Ministry for Energy and Mineral Resources,.
Solomon, BD, Barnes, JR & Halvorsen, KE 2007, 'Grain and cellulosic ethanol: History, economics, and energy policy', Biomass and Bioenergy, vol. 31, no. 6, pp. 41625.
Task 39 IEA Bioenergy 2014, Fact of biofuel, viewed 10 Jan 2014,
Chapter 2 Literature Review
This chapter explored overall energy situation in Indonesia, the role of fossil oil in the Indonesian economy and the emergence of plant oil and starch-based plantations in Indonesia. This is important as to provide background prior to discussing the advent of Indonesian bio-fuel. This chapter also presented a literature review on how other countries evaluate their biofuel targets. Those included their objectives, methodologies employed and various measuring factors considered in their evaluation. The conclusion of this chapter was a hypothesis on how to address the appropriateness issue of the Indonesian problem and to suggest research methods suited to answer the question.
2.1 INDONESIAN ENERGY SITUATION
Indonesia considers itself as a relatively rich nation in energy resources. In term of fossil energy as shown in the Table 2.1, it has an estimated of total crude oil reserve about 526,667 PJ (86.9 billion barrel) with the proven reserve of 54,545 PJ (9 billion barrel). With the current total production of 3,030 PJ (400 million barrel) per year, unless Indonesia could find newly proven reserve, the oil will last for 23 years. The situation for natural gas and coal resources are much better as their ratios of reserve and production are 62 and 147 years respectively.
For the non-fossil energy, hydroelectric power, geothermal and biomass have great potential to contribute to the national energy demand. This implies installed capacity for those energy resources have potential to improve in meeting the continuing increase of energy demand. As Indonesia comprises many islands and situated around the equator, technologies such as photovoltaic and wind power always have a place in national energy system. The solar PV home system has been a logical alternative for remote areas or regions that are outside of national electricity grid. In term of nuclear, as an alternative the primary energy supply, the reserve for such a resource is insignificant. Aspiration for having nuclear power in this country however, has been strong. The planning of the country first nuclear power plant has existed since 1990 despite having considerable resistance from various Chapter 2 Literature Review 12 political parties amid concerns of nuclear fallout and the issue of how to store the spent fuel waste.
Table 2-1 Potential National Energy in 2016
Fossil Energy Resources in PJ Reserve2 in PJ Production Ratio (original Unit) (original unit) (per year) Reserve/Prod (without Exploration) Oil 101.56 22.02 3.03 7 (16.6 billion (3.6 billion (500 million barrel) barrel) barrel) Gas 403,935 159,313 7.39 22 (384.7 TSCF) (151 TSCF) (7.0 BSCF) Coal 3,657,588 491,273 11,723 147 124 billion tones (19.3 billion (414 million tonnes) tonnes) Non-Fossil Energy Resources (in original unit) Utilization Installed Capacity Hydro 75.67 GW 6,851.0 GWh 4,200 MW Geothermal 27.00 GW 2,593.5 GWh 800 MW Mini/Micro 458.75 MW - 84 MW hydro Biomass 49.81 GW - 302 MW Photovoltaic 4.80 kWh/m2/day 8 MW Wind 9.29 GW - 0.50 MW Uranium 24.112 ton This is equal to 3 GW for 11 years (Nuclear)1 Note: 1. This deposit is only available at Kalan Region of West Kalimantan Province 2. Reserve is defined as the Proven plus Possible resources 3. Source: (Ministry of Energy and Mineral Resources Indonesia 2004) and Presidential Regulation No. 22/2017 (Government of Indonesia, 2017)
With a population of almost 240 million people in 2010 (BPS 2010), Indonesia poses massive challenges in supplying electricity to its people. A major electricity grid system covers the main islands of Java, Madura and Bali while other areas and islands have their own distributed power generation and transmission systems. The geographical condition of Indonesia as a nation of islands put strains on Indonesia’s existing electricity network that is already overextended. This overextension has resulted in some areas that are connected to the grid only received electricity for a few hours (Gunningham 2013), thus scheduled Chapter 2 Literature Review 13 blackouts even in the Java-Bali grid frequently occurred. This limited electricity grid caused the Indonesian electrification access in 2010 to remain around 65% (Anthony 2010). This means nearly 75 million people do not have access to electricity.
In terms of fuel mix applied in the electricity generation sector, it is noticeable that over reliance on fossil energy (oil, natural gas, and coal) has taken placed. The fossil fuel constitute around 88% the total electricity generated in 2008 (PT PLN-Persero 2011). Of the total generating capacity of around 30.3 GW, only 9% are hydropower and 3% comes from geothermal and other renewable sources. From the view of national primary energy mix, the power sector in 2008 consumed about 24% of the total 5,935 PJ (Suharyati et al. 2008).
Despite facing many challenges from the supply side, an average of annual electricity use per capita of 0.5 MWh (IEA 2005) suggests that the electricity situation in Indonesia is considered under-invested. This is partly an outcome of having emerged strongly after the 1997 Asian financial crises in which the growth of Indonesian economy returned to its pre- crisis level of around 6% (McKibbin 2005).
With relatively high-energy elasticity typical of a developing country, this requires substantial electricity investment to sustain the economic growth. Therefore, the Indonesian government in 2008 created a plan known as the “10,000 MW Acceleration Program” to add 10,000 MW of new capacity by 2010. Majority of the newly built power plants were coal fired purchased cheaply from China and assembled quickly to meet the deadline. Although many suffered several technical issues during commissioning and early operation, such plants have met the demand and provided a short term improvement in the operation of the electricity grid (Ardiansyah 2011). Following this success, a second phase Crash Programme was launched with the same power capacity objective but this one is aimed to build more renewable energy-based power plants including geothermal (Ministry of Energy and Mineral Resources Indonesia 2012). This second phase will incorporate a 4,945 MW of geothermal, 1,753MW of hydro, and the rest of the power plants are most likely from coal.
2.2 ROLE OF FOSSIL ENERGY RESOURCES
Every country realizes that an adequate energy supply is the key factor in prosperity. The energy resources for Indonesia, especially fossil, are for the prosperity of the people. Fossil energy resources serve two purposes, in which it is the source of foreign exchange national income and energy for driving the country development and industrialization as well Chapter 2 Literature Review 14 as for the people daily energy needs. The performance in managing the fossil energy resources will be measured how sustainable these resources are to support the both mentioned purposes.
As a source of national income, majority of extracted energy resources in Indonesia are oriented for export. About US$ 11 billion per year has flown to the state coffer from oil and gas export in 1990 to 2000, while at the same period oil import was about US$ 3 billion. According the figure reported by the Energy Information Administration USA, Indonesia even become the leading LNG exporter in 200. This country exported 23 million tons of LNG or about 16 percent of world total (EIA-USA 2013). The situation is also similar for coal in which Indonesia is the second largest coal exporter country after Australia in 2005. It posted a net export of 118 million short ton in that year. The growth in coal production is primarily due to the recent higher international price fetched by the coal producers. This trend may continue, as the domestic demand is relatively flat although the constructions of the new 10,000 MW coal power plant may change the dynamic of coal demand.
While it is being substantial in term of nominal value, contribution to the overall GDP from that sector has continued decreasing from around 13% in 1991 to about 10% in 1997. A sharp increase of about 11% was experienced in the 1998 as other sectors have declined rapidly due to the 1998 Asian financial crises. In 2001, the total energy export reached 20 to 25% of the national state revenue.
The second role of fossil energy for Indonesia is being a driver for the development of other sectors primarily in the form of stable energy supply. As it was reported by McKibbin (2005), a sustained 6% economic growth experienced up to the 1997 Asian financial crises was largely attributed to the access of relatively cheap energy sources. The cheap energy prices in this country are implication of the government policy to subsidize the fossil fuels and the electricity price. Although gradually removed, such a fuel subsidy policy, which largely contributes to the cheap access of energy, is still applied in some degree especially in the sector of fuel transportation, households and electricity generation.
The government has gradually removed the fuel subsidy from five types of fuels (gasoline, kerosene, automotive diesel oil, marine fuel oil and industrial diesel oil) to only three types (gasoline, automotive diesel oil and kerosene) which are mainly for transportation and household consumption. Fuel subsidy for industries has completely been taken in 2005, Chapter 2 Literature Review 15 which resulted in the domestic fuel prices for industry sector follow the fluctuation that occurs in the international market. Similar to the case for fuel, electricity subsidy is intentionally aimed to certain targeted households and industrial customers in which the tariffs for them are lower than their respective electricity production cost.
The government report to the parliament in 2010 has shown that energy subsidy from the period of 2005 – 2009 has decreased nominally about IDR 1.9 trillion or about 0.5 percent decline from IDR 104,4 trillion in 2005 to IDR 102,5 trillion in 2009 (Ministry of Finance Indonesia 2009). Such a reduction represents a reduction from 3.8% of GDP in 2005 to 1.9% of GDP in 2009. Despite having substantial reduction in nominal value, the subsidy percentage of total government expenditure remains relatively high at about 11 percent in the 2009 from a total state budget of 1,009 trillion IDR. The total income from oil and gas sector, meanwhile accounted to about IDR 140 trillion in 2009. These figures show how important it is the role of oil and gas sector in driving the Indonesian economy.
To continue subsidizing fossil energy in order to support the country industrial comparative advantage will not be sustainable in the long term. This artificially cheaper fuel in Indonesia not only affects the state budget but also encourages smuggling of the fuels to the neighbouring countries. In addition, there is an urgency to reduce the fuel subsidy as the Indonesia oil and gas production has been decreasing for the past 6 years.
This situation does not fare well with the fact that Indonesia has become net fossil oil importer (Pallone 2009), in which less than a decade ago, this country was a member of OPEC countries and has produced about 1.7 million barrel per day during its peak in 1991. The oil and gas production decreased over the past 10 years to become 0.874 million bbl./d in 2012 (EIA-USA 2013) while the subsidized fuel consumption, on the other hand, continues to increase exerting enormous strain on the state budget (Ministry of Finance Indonesia 2009).
The country managed to lift oil in 2004 from 1,037 million barrel per day to become 960 thousand barrel per day in 2009. This latest figure was a sharp decrease from the production figure ten years ago when Indonesia was part of OPEC countries, which can produce about 1.5 million barrel per day. On the other hand, fuel consumption continues to increase as the economy is fortunately growing steadily of about 4% since 2001. The total oil Chapter 2 Literature Review 16 and gas consumption in 2009 has grown to 1.0560 million barrel per day, thus experienced a deficit of 96 thousand barrel per day (Suharyati et al. 2008)
Given the importance of fossil energy role for this country, Indonesia must protect its supply security. This fossil oil depleting concern implies that Indonesia should explore various renewable energy sources should fossil energy sources run out. In addition, If Indonesia cannot rely upon the fossil fuel, as the source of foreign income, export commodities in alternative energy from renewable sources is an option worth to explore.
2.3 EMERGENCE OF BIOFUEL BASED PLANTATION
Combination of vast tropical land, relatively cheap labour and strong plantation culture inherited during the Dutch era has contributed to the emergence of biofuel-based plantation such as palm oil and sugar cane. Initially, the Dutch colonial government introduced palm oil in the early 20th century in the north Sumatra provinces. It has now spread around the archipelago as one of important plantation crops for the nation. The rapid growth of oil palm plantation is partially due to the programme of nucleus estate and smallholders (NES) implemented in 1980 funded by the World Bank (Siscawati 2001). Presidential Decree No. 1/1986 integrated NES approach with transmigration programme also contributed to the rapid expansion of palm oil in Sumatra and Kalimantan. Such a program, not only does it provide labours to the project, but also a solution for high unemployment to those who lived in over populated island of Java. As a result, the plantation area grew from 600,000 hectares in 1985 to 2.2 million hectares in 1996.
For the last decade, Indonesia has experienced massive palm oil expansion, which makes it the largest palm oil in the world. The total mature palm area has almost tripled from the levels recorded in 1996 and an estimation by the Indonesian Palm Oil Commission (IPOC) shows the figure could reach more than 5 million hectares. The planted immature palm area meanwhile was approximately 2.2 million hectares indicate a huge pool of new crop area is nearing productive age (Shean 2009). The Indonesian Palm Oil Producers Association (GAPKI) indicated that 2011 production is expected to reach 22.5 to 23 million tonnes or an annual increase of 9 percent with the year-end stock could stay around 1.5 to 2 million ton (Jakarta Globe 2011). Out of the total palm oil produced, majority are for export to Europe, China and India. The figure in 2009 showed that nearly 5 million tonnes are for domestic consumption(Shean 2009). Chapter 2 Literature Review 17
The structure of ownership of palm oil plantation since 2000 has changed dramatically as small plantation holders gained substantial shares (Potter, 2016). The small holders are typical plantation holders with an average farm plot of about 2 hectares. Majority of these growers are independent smallholders that do not receive direct assistance from the government or private companies in cultivating the crops. As they are in general have low access to capital, these small holders often have a low yield harvest. They sell their products to the nearby palm oil mill or via intermediary buyers.
Out of potential planted areas of 12. Millio3n hectares in 2017, less than half or about 4.8 million hectares owned by the small holders. The rest are owned by the private sectors and government estate with each about 6.9 and 0.75 million hectares (Director General Estate Crop Ministry of Agriculture, 2017). This means an increase of smallholder plantation ownership of almost fivefold from 1.1 million ha in 2000. Such an ownership structure, which smallholders have a substantial share, may pose a potential risk. Should the price of palm oil drop, the small holders will be mostly vulnerable to the shock.
As the case of oil palm plantation, Indonesia during the Dutch colonialization was one of the largest producers of sugar cane in the world in the late 19th century until before the great depression. The industry, unfortunately, started to decline during the 20th century especially after the independence. The snapshot figure in 2016 has shown a decrease in the sugar cane planted areas of about 15,000 hectares from the previous year of 445,456 ha (Director General Estate Crop Ministry of Agriculture, 2017).This has exacerbated due to El Nino conditions that milling year 2015/16 Indonesian plantation white sugar production fell which delayed planting and limited sugarcane growth (Wright & Meylinah, 2017)
The problems attributed to such a decline ranged from inefficiency in the sugar mill, low yield of sugar content and the sugar cane plantation deregulation, in which farmers can choose the crops for the season. The farmer preference for other crops that they think would produce a better return such as soybeans, corn, and rice, predominantly on the island of Java, has resulted in less sugar cane production. This fact has made sugarcane expansion in Java Island, the traditional centre of sugar cane production, to increase the production is prohibitive and expensive. The total area planted even has decreased chiefly due to non- agricultural land conversion, such as road and housing construction to cater for rapid urbanization of agricultural land. Expanding the planted sugar cane in Java island is, Chapter 2 Literature Review 18 therefore, faced with the fact that other type of land use such as for industry and residential areas offer a better financial return than planting sugar cane.
The study by Chalmers and Walden (2009) has also confirmed the demise of the Indonesian sugar industry. They argued that a combination of shrinking planting area, as well as the reduction average yield from 77 t/ha in the 1990s to around 63 tons in the 2000s, have contributed to such a decline. These structural weaknesses prevent this industry being efficient like the one in Brazil. As a result, Indonesia has become the second largest sugar importer from a position as the second largest producer.
Despite its demise, the sugar cane plantation still has an important role in the Indonesia economic sector. Apart from being one of strategic commodities for edible use, the small farmers have traditionally dominated the total planted sugar cane. The figures in 2011 by Pusdatin Kementan (2013) reported that around 60 percent of the sugar cane planted areas were owned by small farmers. This made sugar cane to be one of heavily protected commodity in Indonesia and this agricultural protection on sugar is commonly found in other countries such as the USA and Brazil.
The Indonesian government, therefore, has implemented a policy to revive this industry by introducing high yield seeds and soft loans worth IDR 3.2 trillion (Sinar Tani 2008) as well as encouraging the opening new sugar cane plantation in Papua provinces. (National Team for Biofuel Development 2006). The government of Indonesia under this scheme will also partially reimburse the sugar cane factory that needs to buy new machines for modernizing their mills provided they are domestically produced and have high technology. However, lack of supporting infrastructure and unclear land ownership problems have made efforts to develop new sugar cane plantations outside of Java has been mired with difficulties.1
Given relatively abundance raw materials for either palm oil or sugar cane, the idea of tapping the resources for biofuels is an attractive idea for the perspectives of long-term
1 The challenges to meet the sugar self-sufficiency target in 2010 have at least three factors including the existence of sugar refinery plants without plantation, low yield of domestic sugar cane harvest and the dominant structure of small farmers in the total planted areas. They contribute to the high cost of domestic sugar cane production that cannot compete with the imported sugar. Chapter 2 Literature Review 19 energy security, rural development, poverty alleviation and greenhouse gas mitigation. The biofuel in liquid form are biodiesel and pure plant oil from crude palm oil (CPO) or Jatropha as other raw material alternative, and bioethanol from either cassava or sugar cane has been quite appealing as a potential alternative renewable fuel for Indonesia. The biodiesel may substitute fossil diesel fuel in diesel vehicles and pure plant oil for marine transportation or boilers for general factories and power plants while bioethanol is used mainly for substitute of gasoline in spark ignition engines.
Many have confirmed both biodiesel and bio-ethanol compatibility to each respective engine. This includes a report by Howard (1994) on biodiesel compatibility in the diesel engine, in which no engine or vehicle modifications are required up to certain blending ratio. The biodiesel technical compatibility to the respected engines was also confirmed by Agarwal (2007). The Alcool programme in Brazil launched in the 70’s has proven the success of introducing bioethanol as a substitute for gasoline. This Brazilian success provided the catalyst for the wide use of bioethanol for spark ignition engines in the USA, Australia and several European countries provide further evidence of the engine’s compatibility towards biofuel. The fact that the biofuels are in a liquid form and have favourable properties compared to the respective liquid fossil fuels, this will make them easily accepted by the Indonesian market.
In addition to being able to produce the most compatible fuel in technical nature as biomass derived fuel for the substitutes of liquid fossil fuel (see for example (Faaij (2006); Goldemberg and Teixeira Coelho (2004); Ryan, Convery and Ferreira (2006))), developing biofuel in general and constructing biofuel plants in particular, may also offer new investment opportunities in the rural areas. Such an investment could ripple a large positive effect on the agricultural sector, increase investment in plant and equipment, and create new jobs. The use of palm oil, in the case of biodiesel, other than for edible purposes may reduce the crop surpluses during periods of low price for crude palm oil. Thus, it helps small plantation holders that are often vulnerable to the commodity price fluctuation. This is particularly important as a commodity has a major effect on the livelihood of more than 6 million people in 2008 (Goenardi 2008; World Growth 2011) and a further 2 million people as the owner of palm oil plantation (Zen, Barlow & Gondowarsito 2005). Sustained favourable price of biofuel raw material commodity such as palm oil will be viewed as beneficial. Chapter 2 Literature Review 20
Utilising the locally produced liquid biofuels as the liquid fossil fuel substitutes may also reduce government expenses in importing petroleum products. The figure of oil and gas deficit in 2009 of 96 thousand barrel per day depicted in the Suharyati et al. (2008) means that Indonesia had to spend roughly in excess of US$ 3.1 billion annually to import crude oil given an average price of 90 US$ per barrel in that year. This amount of foreign exchange could be translated into saving while induce domestic spending if the money is used on purchasing the biofuel produced locally.
Such applications of the biofuel in the transportation and industrial sectors, however, are not without problems. Biodiesel, for example, has scored poorly in relation to air quality because its production and use generate moderate amounts of hydrocarbons and considerable amounts of particulate matter (Beer & Brown 2000). The biofuel use, particularly bioethanol, has also been associated with the increased ozone formation. This effect has been reported by Milt et al. (2009) on their study on the impact of 10% biofuel substitution on ground level ozone formation in Bangkok, Thailand.
In addition to the drawbacks in terms of its end pipe emissions, several studies including the ones by Haas et al. (2006) and Shumaker et al. (2003) specific on biodiesel and (Shapouri & Salassi 2006) on bioethanol in the US and as well as study by Eidman (2007) on both biodiesel and bioethanol in the US, have demonstrated that the expected price of the biofuel type is still higher than those of fossil fuel. This is mainly attributed to the higher prices of raw materials for biodiesel such as soybean oil and sugar cane and its molasses or corn for bioethanol. In the case of biodiesel, the cost of its feedstock is usually about 80%, while it is about 60% for bioethanol. The fluctuation of the biofuel raw materials prices is, therefore, significantly affects final prices of the biofuels. This is one of the reasons why biofuel programs in many countries often require their governments to provide financial supports in various forms.
This programme is also partly responsible for the continuing increase of food price as it drives the demand for agricultural feedstock (sugar, maize, oil seeds). This would potentially ‘pose an immediate threat to the food security of poor net food buyers (in value terms) in both urban and rural areas’, according to FAO SOFA report (FAO 2008). Flamini (2008), however, questioned that the food price spikes in 2008 was driven solely by higher biofuel demand as other factors which are cyclical may also contribute to that spike. He Chapter 2 Literature Review 21 argued that the relationship between the commodity and food prices should be fully understood before drawing any conclusion. He admitted that long term and structural in nature such as the expansion of the biofuels industry or increased demand from emerging economies might potentially affect the food price.
Despite having many advantages and disadvantages, liquid biofuel is considered as one of renewable energy alternatives in the long term. This prompted the Indonesian government to launch biofuel policy in 2006 in which it will contribute significantly toward long term national energy mix.
2.4 INDONESIAN BIOFUEL PLAN
The sharp fluctuation of fossil crude oil in 2005 has forced the government of Indonesia to rethink its broader energy policy. Thus, on 25 January 2006, it has released a national energy policy through Presidential Regulation 5/2006, which stated that biofuel, parts of renewable energy sources, would contribute for more than 5% in the national energy consumption. The development is also expected to be in-line with the government Triple Track Strategy, which covers: PRO-GROWTH Economic growth through export and investment, PRO-JOB: Job creation and PRO-POOR: Poverty reduction in rural areas. The biofuels suggested are in the form of biodiesel from vegetable oil such as crude palm oil (CPO) or Jatropha oil and bioethanol from both cassava and sugar cane.
The ambitious program, however, has created several questions. Those include a question as to whether this biofuel target will be environmentally sound especially on the subject of net energy production and greenhouse gas (GHG) emission reduction during the whole biofuel production chain. In addition, the question on the whether this biofuel could contribute to sustainable development by creating direct employment in the agriculture sector thus offer a new opportunity to alleviate poverty and promote rural development must be justified. Moreover, there is growing concern that this biofuel could reduce this country ability to produce agriculture products for edible purposes as more feedstock is diverted toward fuel production.
A study to evaluate critically such a policy is, therefore, important to justify whether the policy launched in 2005 would meet its objectives and minimise its various adverse impacts. The term appropriateness is introduced to indicate a value judgement about the biofuel plan in which to compare the politically expected outcome to a carefully analysed Chapter 2 Literature Review 22 prediction. Several studies have attempted to answer these questions. However, all of them answered partially, none has considered all the questions comprehensively. Dillon et al. (2008), for example, provided an assessment on the cost of Indonesian biofuel plan and its implication on the amount of subsidy the government should provide to implement the plan. However, such assessment was limited up to 2008 period; thus, long-term cost effect on this biofuel target was not covered. In addition, they did not evaluate the effect of biofuel production on the environment as it was not the focus of their study. Hence, quantitative results for the implication of biofuel plan to meet 5% energy mix in 2025 is required.
Capstic (2007) has attempted to calculate the potential biofuel production and its potential market by year 2025, but his study was mainly aimed to explore the value chain of biofuel in Indonesia. His calculation was also based on 5% blending ratio of biofuel with respective fossil fuel instead of the target of 5% from national energy mix as stipulated in the biofuel plan. Despite thoroughly covering biofuels production aspects that include bioethanol biodiesel from palm oil and jatropha, his study did not cover the critical evaluation of the government target against several concerns including environment, food security and overall cost of implementing such a plan. His study, moreover, narrowly focused on the implication of the biofuel plan by which it is intended to replace the gasoline and diesel fuel with respective biofuels. Therefore, potential demand for using liquid biofuel such as pure plant oil mixed with kerosene, fuel oil and industrial diesel oil have not been explored.
A study by Winrock International attempted to address sustainability issues of the current biofuel production(Chalmers & Walden 2009). Such an analysis was carried out using the European Sustainability standards, unfortunately, did not address whether the present biofuel production and government policy could meet the target set in the presidential regulation. The study though rightly pointed out that economic challenges of biofuel production may affect the growth of the industry and such a European sustainability standard may only affect the biofuel for export.
Other studies, though were not on Indonesia, could be used as a comparison in evaluating similar national biofuel program. The following section presents a review how other countries, Australia and Thailand, evaluate their biofuel programs. Chapter 2 Literature Review 23
2.5 HOW OTHER COUNTRIES ASSESS THE APPROPRIATENESS OF THEIR BIOFUEL POLICY
Despite having no formal national biofuel policy target, various states including Queensland, NSW, Victoria and South Australia have announced their own target policy. Victoria and Western Australia set their biofuel target of 5% by 2010. Queensland government mandates the use of bioethanol of 5% in the regular unleaded gasoline while NSW will have 10% of ethanol and 2% of biodiesel in 2011(Biofuel Association Australia - BAA 2011). These set targets will have to be supplied by sufficient biofuel plant processing capacity in which in 2007 at a level of 140 ML with planned capacity of 1155 ML for bio- ethanol and 323 ML with a planned capacity of 1122 ML for biodiesel (O’Connell et al. 2007).
The so called “Australian biofuel target”, however, was announced by Howard government during 2001 federal election with the title of ‘Biofuels for Cleaner Transport’(O’Connell et al. 2007). Although it is not recognised as a legislative form, the target of 350 ML biofuel by 2010 in the election policy has been the basis of many studies by government and private organisations, as well as one of the main drivers in the development of biofuel in this country.
One of the studies on this policy target was carried out by CSIRO, BTRE and ABARE (CSIRO (Commonwealth Scientific and Industrial Research Organisation), BTRE (Bureau of Transport and Regional Economics) & ABARE(Australian Bureau of Agricultural and Resource Economics) 2003). They evaluated the appropriateness of such a target based on environmental, economic, regional aspects and industry viability. The environmental study included greenhouse gas emissions and air quality impacts in relation to its utilization as well as environmental sustainability on the industry. For this analysis, the study made use of Life Cycle Assessment (LCA) method to estimate the environmental impacts of the biofuel plan. The wide range economic analysis in the same study included impacts of the programme on other industries, GDP and employment as well as health associated benefit of bio-fuel use. The regional development analysis dealt with the impact of regional activities of bio-fuel productions on other regions of Australia. For these sections, ABARE’s Australian Trade and Environment Model (AUSTEM) - multi-sector dynamic general equilibrium model of the Australian economy was employed. Unique to this situation, the study also covered the Chapter 2 Literature Review 24 industry viability, as there is a concern about the future of this industry when government assistance to this production is stopped.
The study concluded that producing bio-fuel to meet the intended target has little positive impact on the environment and in general cost more than having petroleum-based fuel. In terms of energy security, such a target of replacing 1.1% of motor fuel demand with bio-fuel was considered too small to make any difference. Suggestion to increase the target in order to achieve a significant contribution to the energy security was not viewed as cost effective.
Unlike Australia, Thailand has national biofuel target. Biofuel in Thailand is in the form of biodiesel from CPO and bioethanol that is from either cassava or sugar cane- molasses. Driven primarily to improve its energy security, the Thai government launched an energy policy in 2003 in which, initially 8% of the total energy consumption should be replaced by new renewable energy including biofuel. In 2009, such a target was revised to be 20%.(DEDE 2009). The policy has set a target to increase the use of bioethanol up to 3, 6.2 and 9.0 million litre/day (ML/day) by 2011, 2016 and 2022 respectively. For biodiesel, it sets targets of 3 ML/d by 2011, 3.64 by 2016 and 4.5 ML/day by 2022 (Sajjakulnukit 2010).
In assessing the appropriateness of such a policy, a recent review carried out by Bell et al (2011) has intended to analyse the net cost of Thai bio-fuel policy implementation program. The net cost analysis comprises the terms of internal, environmental and other external costs. The internal cost includes the cost of producing biofuel and the cost of replacing respective fossil fuels. The environmental cost accounts for GHG reduction impacts and ground ozone formation while other external cost include the factor of biofuel subsidy, motor fleet replacement and other associated costs. The input for environmental cost is mainly derived from LCA studies from various sources.
Similar to the Australian study, this Thai's study concluded that it cost more to have biofuel than to have petroleum-based fuel for the same service. Their analysis however, was based on the short-term projection up to 2011, thus long-term cost effect was not considered. Moreover, they did not review the impact of such a programme on the food productions and the security of the biofuel feed stock. This aspect is crucial because majority of production cost is attributed to the cost of feedstock. In addition, short-term analysis of such programme may not affect the food production, but longer-term exercise will. Chapter 2 Literature Review 25
The review on how other countries evaluate the appropriateness of their biofuel target could provide ideas how to evaluate similar programme for Indonesia. In addition, conducting cost and benefit analysis like the Thai study could provide judgment whether the biofuel plan launched in 2006 could meet its target. The inputs of such an analysis are partially come from LCA of Indonesian biofuel, which will be able to provide the total GHG reduction and other pollutants emission figures, as well as financial evaluation of biofuel value chains in Indonesia. In addition, impact on the ability of the country to produce the biofuel raw material intended for food production could also be estimated by searching its relations of biofuel raw materials to the price of vegetable oil or sugar prices.
2.6 PROPOSED RESEARCH METHODS
Given the project’s potential adverse environmental, social and economic impacts, it important to assess the appropriateness of the biofuel target of 5% from the Indonesian energy mix in 2025. The fact that preliminary estimate of the land required for biofuel plantation could reach 6 million hectare (National Team for Biofuel Development 2006) has added the sense of its urgency.
The environmental impacts may be classified as local and global in nature. The local impacts are generally defined as environmental effects that tend to concentrate on a specific project site or focus on site-specific impact. Such effects may fall upon the physical and chemical nature of the local ecology, the biological component around the project site, as well as the effects on social, economy, and culture and health aspects. The global impact, on the other hand, could be defined as the impact that could affect trans-boundary of the nations. Notable pollutants in this category are greenhouse gas emission, and in a particular case for Indonesia is the smoke and haze emission due to slash and burn practices which affect neighbouring countries of Singapore and Malaysia(Tacconi, Jotzo & Grafton 2008).
In addition to having environmental repercussion due to the size of land required for plantations of palm oil and sugar cane, the biofuel may also affect the community either positively or negatively. There is always a pressure in the society whether this kind of biofuel development would maximise the benefit and how it could be fairly distributed for the society (Bjornstad 2004), while minimising the cost to achieve the target.
The methods to assess the appropriateness of a biofuel policy target are therefore proposed. Those are including EIA (Environmental Impact Assessment), LCA (Life Cycle Chapter 2 Literature Review 26
Assessment) and Cost and Benefit Analysis (CBA). The EIA and LCA methods are suitable to assess the impacts on the environment, with EIA tends to be suited to estimate the environmental impacts that affect local community and ecology (Ross 2003a), while the LCA would be a perfect tool in estimating the environmental impact that has a global in nature. Complement to those mentioned methods, CBA would be the method of choice for the estimating the economic evaluation. In practice, such methods may be used independently, but some cases can also be used in combination. The results of life cycle inventory such as greenhouse gas emission for example, can be used as an input for estimating the cost of mitigating the impact of the greenhouse gas in the cost and benefit analysis.
The following sub-section would hence illustrate the selected three methods mentioned above.
2.6.1 Environmental Impact Assessment
This is a procedure aims to ensure that the decision-making process concerning activities takes into account potential local environmental and social effects related to a proposed development. In many countries, including Indonesia, the EIA process could also offer an insight into the environmental effects of a particular initiative (Tukker 2000). The EIA itself could serve as a preferred tool to collect and bring together the data to improve the proposed development so that it becomes more environmentally sound and socially acceptable.
The need to identify the local impact of biofuel policy in Indonesian was hence in line with the general scope of typical environmental impact assessment (EIA) by which "...provides information about the likely environmental impacts of an individual project and is useful in implementing mitigation measures"(Eccleston 2011, p. 207). The use of this assessment method is also a common obligatory procedure in both developed and developing countries when a project that potentially causes environmental impact is proposed.
In practice however, there is no formal universal guideline for carrying out EIA up to the present though De Weerdt, Van Assche and Devuyst (1998, p. 304) has tried to summarize an eight general steps of EIA process. Those steps generally include screening, scoping, draft preparation of environmental statement, review and public participation, preparation of final environmental statement, final review, decision making and evaluation Chapter 2 Literature Review 27 and monitoring. The National Environmental Policy Act that was passed in 1970 (US EPA 2014) has tried to provide detail guideline of how the environmental impact statement should contain and gave an impression that "the EIA process is a step by step linear process". Although Sadar (1996) has suggested that the process should be iterative, where it might be necessary to return to the previous stage of scoping and identification of environmental issue after carrying out impact mitigation and monitoring as well as after evaluation of impact significance.
The reason is that EIA has been carried out in different situations; thus, it would be difficult to present uniform, detailed methods of impact assessment and system choice that would apply for every EIA. The simple checklist EIA format for a small city of 6,000 people2, Cazenovia of New York for example, is different to a full-blown complete environmental impact assessment report from typical big cities or large local state government. However, both possess the same principle of being able to predict methodically possible environmental, social, and health impacts of a proposed development or project.
It is understandable that from the beginning of its concept, this EIA is regulated through some legislation set by the government and used by designated government branch as a tool to evaluate the project development that is deemed to have environmental impact (Ahammed & Nixon 2006; Formby 1987). That is the case in the USA through enactment of NEPA in the 1970, Australia with the passing of the environment Protection (Impact Proposal) Act (EP/IP/A) in 1974 (Thomas & Elliott 2005, p. 101) , and for Indonesia, it is marked by the enactment of government regulation No. 28/1986 regarding EIA or AMDAL in the local language (Government of Indonesia 1986).
The scope of such an assessment is therefore limited to the local impacts or at least within the national jurisdiction The scoping objectives as suggested by UNEP (2002) has revealed that the EIA is intended as;
2 The local government of Cazenovia developed simple table form containing checklist of environmental review that clearly separates the choices involved for a proposed development. It is simple but clearly warn the community if some harm could potentially occur and it also shows what needs to be carried out to mitigate the impact on site. See further in the Stokes et al. (1997) Chapter 2 Literature Review 28
"to inform the public about the proposal; identify the main stakeholders and their concerns and values; define the reasonable and practical alternatives to the proposal; focus the important issues and significant impacts to be addressed by an EIA; define the boundaries for an EIA in time, space and subject matter; set requirements for the collection of baseline and other information; and establish the Terms of Reference for an EIA study.
Various state legislations3 regarding EIA in the Australia for example, have suggested drawing a boundary of the physical area that is likely to be subjected to potential impacts in the form of impacted maps. Hickie and Wade (1998) moreover, have suggested the criteria that are required for a good environmental Impact Statement in which the likely impacts upon the local areas or region should be emphasized. Those include attaching adequate information regarding the site and local environmental factors, maps of area affected, provisions of photograph and adjacent land use, local baseline conditions; and public consultations, full range identified impacts as well as mitigations are among others.
This locality feature of EIA could provide a strategy in assessing the biofuel policy by which reviewing the EIA reports (called EIS-Environmental Impact Statement) related to biofuel projects. This could also be a proxy estimate of the potential local environmental impacts if future biofuel projects are going to be developed to meet the biofuel target in 2025. In other words, the hypothesis of using EIS related to the biofuel is;
"if the EIA reports of biofuel related projects have fulfilled the requirements of a good EIA standard are approved i.e. the potential impacts have been identified and addressed properly to avoid/mitigate them, then the overall biofuel plan in this country would have the prospect to meet the environmental and social appropriateness at least in the local scale or within the national jurisdiction"
As this target of biofuel covers the whole geography of Indonesia, it is impossible to evaluate all the biofuel projects. Thus, represented samples of biofuel areas need to be selected. For that reason, samples of a large scale and a small-scale biofuel production facility for biodiesel, pure plant oil and bioethanol will suit the purpose. Hence, a proxy estimate of the extent of local social and environmental impacts because of the biofuel development
3 Both environmental legislations from the state of Victoria(Department of Sustainability and Environment 2006) and Western Australia(Environmental Protection Authority 2012) emphasize that the potential impacts should be in the context of a regional setting. That means the scoping Chapter 2 Literature Review 29 could be carried out. This can be useful if it is combined with the results of an analysis that can estimate potential impacts that have global in nature such as greenhouse gas. Thus, an LCA outlined in the following subsection could provide an alternative method for such a need.
2.6.2 LCA Method
The Life Cycle Assessment (LCA) is defined as:
"...a tool for the systematic evaluation of the environmental aspects of a product or service system through all stages of its life cycle. LCA provides an adequate instrument for environmental decision support. Reliable LCA performance is crucial to achieve a life-cycle economy. The International Organisation for Standardisation (ISO), a world-wide federation of national standards bodies, has standardised this framework within the series ISO 14040 on LCA." (UNEP 2014).
Before coming to fore front as an environmental measuring stick, the use of LCA has long been popular particularly in certain industry including packaging and steel manufacturing (Chubbs & Steiner 1998; Sanyé-Mengual et al. 2014) as well as service industry such telecommunication(Horvath 1999). Such a thinking has evolved to become accepted internationally after it has been further developed and enhanced through the development and recommendations by authoritative bodies including the United Nations for Environment Programme (UNEP), the Society of Environmental Toxicology and Chemistry (SETAC), the European Platform for LCA of the and the emerging International Reference Life Cycle Data System (ILCD)(Finnveden et al. 2009).
Such an approach adopted by this method is unique amongst environmental impact assessment techniques. As it was defined in the above quote, this method analyses all steps in the delivery, use and eventual disposal of the product or service. This makes the LCA become useful, as there is a growing commitment to the adoption of a whole-of-life approach to understand the impacts on the natural environment due to the enactment of a policy. An LCA at the screening stage can be quickly carried out and it provides relatively robust evaluation for answering the environmental questions (Goedkoop & Oele 2002). Finnveden et al. (2009) added that such a life cycle thinking could be applied in providing a justified decision for activities in different parts of the society that may have environmental Chapter 2 Literature Review 30 problems. An early study by Ross (2003b) has also indicated that LCA may be used as a tool to analyse environmental impact assessment considering the whole system over its lifetime, and thus serve as a consideration for making environmental decisions. Tukker (2000) has indeed shown in his review of five case studies of projects in Netherlands that it is feasible for elements in LCA to be used in environmental impact assessment.
This capability of LCA has made it to gain various attentions to adopt LCA principle for public policy making. The notable example is the EU commission communication on Integrated Product Policy (IPP) that promote LCA as a tool in evaluating and improving the environmental performance of goods and services product.(European Commission 2003). A further relevant example within this union is the EU directive on the use of energy from renewable sources (European Commission 2008) where one of sustainability criteria is the saving of greenhouse gas emissions from the use of renewable fuels, and it should be calculated using the life-cycle principle. Similar measure was also implemented by the US EPA (2009) regarding the allowable greenhouse gas saving from renewable fuels products qualifies for RFS (Renewable Fuel Standard) programme that also employ the thinking of life cycle analysis. This thinking was followed up by further evaluation of biofuel greenhouse gas saving, which include biodiesel from palm oil base (US EPA 2012) and ethanol from sugar cane (US EPA 2014).
Careful and wise evaluation should however, always be maintained in adopting the information from such a study for answering environmental questions. The reason is that the pressure to cut corners and generate conclusions of value to the client has caused many studies to be criticized for making claims that cannot be justified by the results (Ross 2003b). Moreover, impact assessment, a crucial step in LCA, still has problems. An attempt to combine the impacts into a single number by assigning a valuation to each impact that can be summed with other unrelated impacts makes the assessment extremely subjective (Van Gerpen 2000). Further discussion on the limitation and critique LCA can be found in (Ayres 1995; Finnveden 2000; Rebitzer & Hunkeler 2003)
Despite disagreement among researchers on the feasibility of LCA as a tool for evaluating environmental impact of a project or policy, many studies related to biodiesel have been made using this method to seek an answer as to whether bio-fuel is better than fossil diesel. Sheehan et al. (1998) used the method to study the life cycle of biodiesel and Chapter 2 Literature Review 31 automotive diesel fuel for urban buses. Their study showed that biodiesel performed better in terms of energy usage, CO2 emission, and most regulated air pollutants. The biodiesel, however, fell short in terms of solid waste production and NOx emission. Although the study was not intended as a tool to rank the fuels in terms of environmental impacts produced during their life cycle, they suggested that local regulators might use the information to develop approaches to deal with air and water pollution as well as solid waste.
Similar LCA method was also used by Beer et al. (Beer & Brown 2000) to compare the emission of various fuels including biodiesel for heavy vehicles. They used the method for determining the ranking of various different fuels in terms of their air pollution effect. Their analysis is based on greenhouse gas effect, hydrocarbon and particulate matter. The results have ranked biodiesel below other fuels in terms of health effect despite its recognition that fuel produces the least greenhouse gas during its lifecycle.
As LCA requires routine calculations along the production cycle, a commercial LCA software package called SimaPro would be used as a calculation tool. The software is an open-structure program that can be used for different types of life-cycle assessments. The production stage, the use stage and the end of life scenario can be specified in as much detail as necessary by selecting processes from the database and by building process trees. The results are presented in numerical values or graphs, varying from a list of substances (inputs and outputs), characterized, normalized or evaluated scores.
The relevant emission results of life cycle inventory of LCA using the above- mentioned software package are greenhouse gas, sulphur dioxide and particulate matter. Those emissions for each liquid biofuel (biodiesel from palm oil, bioethanol from sugar cane and pure plant oil from palm oil) will be normalised based on its functional unit, which in this case an energy unit of the biofuel (GJ of biofuel of useful energy) would suit the purpose. These results would then be used as inputs to the cost and benefit analysis, which will be outlined in detail in the following sub-section. Moreover, impact assessment using an appropriate method would be carried out.
2.6.3 Cost Benefit Analysis
Another method that can aid the decision makers in measuring the appropriateness of this biofuel target is the cost benefit analysis (CBA). The CBA definition itself can be best summarized as the following; Chapter 2 Literature Review 32
"...a method for organising information to aid decisions about the allocation of resources. Its power as an analytical tool rests in two main features; [the first] costs and benefits are expressed as far as possible in money terms and hence are directly comparable with one another; and [the second] costs and benefits are valued in terms of the claims they make on and the gains they provide to the community as a whole, so the perspective is a ‘global’ one rather than that of any particular individual or interest group"(Department of Finance and Administration - Commonwealth of Australia 2006)
Such as method is quite simple in principle so that it is suitable to almost every problem that requires an informed and well thought decision. This versatility has made the demand to apply cost benefit analysis is also indispensable as ultimate evaluation method particularly in the USA. Through the enactment of Executive Orders through OMB Circular A-94, it requires that the analysis should be carried out for major projects that have an economic impact of more than US$ 100 million or are otherwise deemed by Office Management Budget (OMB) to be important (US Office Management and Budget 1992).
In the context of environmental issue, although Ross (2003a) called this is simply a technique for comparing alternative options to achieve the stated financial goals, yet so influential that makes an organization such as United Nations Environment Programme suggested this method as a tool for evaluating project that may potentially affect the environment (Ahmad 1983). Hence, it could inform the policy makers the real cost of making use of the environment, identify the inefficiencies and being able evaluate proposals to make the overall system perform more efficiently (Ahmad 1983, p. 33). Applying this CBA principle upon analysing the implication of this biofuel target, it could provide an informed consideration as to whether enough opportunities and benefits of having biofuel as liquid fossil fuel substitute could outweigh its cost.
To be an effective analytical technique, the CBA method requires all benefit and cost aspects be valued. This is where the difficulty arises as defining and valuing the benefit and cost components of a project in question, especially involving environmental and social aspects that are classified as non-marketed goods are not easy task. While James (1994)suggest that monetary values can be assigned to goods and environmental impacts using various techniques, Hundloe et al. (1990) rightly pointed that there are limitations on valuing those externalities. The contingent valuation method for example, is capable to Chapter 2 Literature Review 33 evaluate the monetary value of the environment (Stone 1991), but it requires substantial surveys across the various levels of society, which could be cost and time prohibited.
Nevertheless, some effects on the environment due to a new proposed project are not easy to value, but the value of some effects could be quantified. These include the number of raw materials produced to satisfy the required bio fuel target, the number of employments created in rural areas, and the potential loss in other sectors such as oil refineries, which can be measured through market prices and cash flows as well as potential extra cost of vegetable oil and sugar price paid by the people. Thus, implementing CBA may provide a metric result to evaluate the appropriateness of having the biofuel target.
2.7 SUMMARY OF THE REVIEW
Several major gaps have been found from this literature review. The first one was that the size of Indonesian biofuel program should be clearly identified to provide full picture of potential biofuel utilization in the country’s biofuel target. This is to ensure its appropriateness in various sectors including electricity generation, industry, commercial, transportation and other sectors. Chapter 3 was dedicated to fulfil this gap by conducting long term energy planning analysis. This work was also intended to find out the appropriate blending ratio of biofuel to the respected fossil fuel as each biofuel has blending limit.
The second gap found in this review was that measuring the appropriateness of a program that potentially causes wide range impacts such as biofuel in a country was never been attempted using simultaneous available evaluation techniques of LCA, EIA, CBA. This thesis proposed utilising LCA at the screening stage to account the global impacts of this biofuel target, while using EIA to provide its impact on the local level. CBA is furthermore utilised to provide quantitative values to indicate whether the benefit of this policy outweighs its cost.
The three methods selected were meant to show in quantitative and qualitative terms whether implementing biofuel target. The hypothesis of this review is that the appropriateness of Indonesian biofuel plan could either be positive or negative depending the factors contributing to the cost and benefit analysis. The results obtained from the three analyses would inform decision makers in various ways including allocation of land for plantation, mitigating various impacts on the environment, sufficient allocation of biofuel raw materials. Chapter 2 Literature Review 34
2.8 RESEARCH DESIGN
Before outlining the research design, the following were objectives of this research.
1. To identify the kind of potential fossil fuels that can be replaced by the biofuels and to estimate the amount of biofuel required to satisfy 5% of the total Indonesian Energy Mix up to 2025.
2. To estimate global environmental impact as a results of biofuel production in order to meet the specified target.
3. Identifying local environmental impact using Environmental Impact Assessment method. Represented samples of biofuel areas of a large scale and a small-scale biofuel production facility for biodiesel, pure plant oil and bioethanol will suit the purpose.
4. To identify impact of the biofuel target on the food sector especially the extra spending by the people due to the rise of food crops used for bio-fuel.
5. To find out the cost and benefit ratio of this biofuel plan along the bio-fuels production chains. That includes estimation on:
a. Direct financial cost and benefit of bio-fuel implementation on parties involved in the production processes, cost of substituted fossil-based fuel, government support and fuel conversion cost.
b. Environmental cost and benefits throughout its life cycle. These include net GHG emissions and ground ozone formation. These valuations of environmental cost will be calculated using the results obtained from the LCA inventory
6. As the Indonesian biofuel policy involves various stakeholders with multitude view, identifying “what is appropriate or even sustainable” is difficult because they are social value and by nature is controversial. Hence, the next objective is to obtain experts’ opinion from various institutions about the biofuel program.
As mentioned previously that this biofuel target would likely to cover the whole geography of Indonesia, therefore Environmental Impact Assessment (EIA) reports or EIS related to biofuel projects were selected. For that purpose, 4 EIA reports related to the plantation and production of ethanol and 18 reports related to the production of vegetable Chapter 2 Literature Review 35 oil seeds and biodiesel production were collected and analysed. The locations of the projects were selected from potential sites where biofuel productions are likely to take place.
Having meet all the objectives, a conclusion on the appropriateness of the biofuel plan were drawn and an experts’ interview from four groups of stakeholders i.e. government, business, academia, and non-governmental organizations were conducted to verify the results and its conclusions. At the end of this study, proposed suggestions and strategy for achieving the bio-fuel target and alternative vision on the use of bio-fuel were presented.
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Chapter 3 The Size of Indonesian Biofuel Programme and its Implications
To determine the size of Indonesian biofuel program, a review of the Indonesian Energy Balance using the 2008 data was carried out. This is useful to provide full picture of potential biofuel utilization as it will look at the potential uses in various sectors including electricity generation, industry, commercial, transportation and other sectors. This work is also useful to find out the appropriate blending ratio of biofuel to the respected fossil fuel as each biofuel has blending limit. The results obtained were then compared to the data published by the Indonesian official government document.
For that purpose, assumed constant energy growth of 6%, which is in line with the government target of energy elasticity equals to 1, was used to calculate the consumed energy projection and to estimate the amount of biofuel required. An energy planning software called LEAP (Long range Energy Alternative Planning) was employed to perform the calculation and to conduct sensitivity analysis. The details and results on this chapter have been published in the Journal of Energy Policy Elsevier Volume 61, October 2013, Pages 12–21. The results of potential biofuel consumption however, will be presented at the beginning of chapter 6 to provide a background knowledge for the reader for examining the cost and benefit analysis of Indonesian biofuel plan for the year 2025. Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 44 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 45 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 46 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 47 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 48 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 49 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 50 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 51 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 52 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 53 Chapter 3 The Size of Indonesian Biofuel Programme and its Implications 54
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Chapter 4 Ascertaining local impacts using Environmental Impact Statements
This chapter presents an analysis of the Indonesian biofuel policy by ascertaining its local environmental impacts using the collected Environmental Impact Statements (EIS), or in this thesis, it refers to environmental impact assessment reports, on projects related to biofuel production. As the biofuel value chain covers the raw material plantation and processing, the collected reports include EISs related to raw material plantations (oil palm and sugar cane plantations) as well as biofuel processing plants (biodiesel, bioethanol and pure plant oil processing plants).
This chapter is premised on the following: institutions, whether government or private, who are planning biofuel related sugar cane plantations, oil palm plantations, or biofuel processing plants, are required to carry out an Environmental Impact Assessment (EIA) in order to get license or permit for the project. The requirements associated with the EIS (as defined in the terms of reference) include assessing the potential local biological, geophysical/chemical, socio-economic/cultural, and public health effects of the project.
Although Indonesia is experiencing positive transition toward democratization, which may have drawbacks in the actual implementation of laws or regulations, the projects ideally should not be approved unless the risks identified in the EIA are addressed properly to avoid or mitigate potential effects. If the assessment of the EIS in this research demonstrates that the reports are indeed meeting the requirements specified according the Indonesian EIA reporting standard then the overall biofuel plan in this country would have the prospect to meet the environmental and social appropriateness at least in the local scale or within the national jurisdiction.
The purpose of this chapter therefore intends to ascertain the local adverse effects of biofuel development using the collected EIS of biofuel related projects. The chapter includes Chapter 4 Ascertaining local impacts using Environmental Impact Statements 56 an overview of the background of EIA in Indonesia, the rationale for using EIS, and the results and discussion of findings and the subsequent conclusion.
4.1 OVERVIEW
4.1.1 EIS as a snap shot of local environmental impacts
The first reason of using EIS to ascertain the local impact of biofuel is that Indonesia has long practised the process of assessing the environmental impact of a particular development since the 1970s. This was even carried out before it was formally established in Indonesia's legislation. An EIA for a cement factory for example was claimed to be apparently carried out in 1974 (Dick & Diane 1994, p. 1). In the early 1970s, the Indonesian State Electricity Company (PLN) was required to carry out an EIA by the World Bank when constructing Saguling Dam in West Java (Soemarwoto 1991). Major development projects, particularly in the oil industry, have also conducted EIAs although they were not legally required to do so (Purnama 2003).
Another main reason for using the reports as a means to estimate the local impact of biofuel programs, is that the EIS is the Indonesian government‘s recognised formal document related to the project's environmental aspects. This was formally legislated by the inception of Law No. 4 (Article 16) of 1982, and government Regulation No. 29 of 1986 (Giovanna, Leitmann & Mackay 2006). The legislations stipulate that the project proponents, in both the public and private sectors, were required to carry out EIAs (called AMDAL in local language as the abbreviation of Annalisa Mengen Dipak Lingkungan) to address environmental concerns as part of their development plans. As a formal document, the EIS thus theoretically represents the formal position of all stakeholders including government, the project proponents and the local communities regarding the detailed potential environmental impacts that would be likely to occur. The EIS is also used as part of the project feasibility study, and serves as a primary reference for related government ministries when considering the proposed project (Ministry of Environment Indonesia 2006a). This suggests that any EIS's be related to biofuel, may be assumed to have been properly addressed and their potential local impacts have been analysed. The review of such reports would thus offer a standard at which local environmental risks have been identified and mitigated successfully. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 57
The following sections present the EIA process conducted in Indonesia and its relations with the biofuel projects, the analysis method which comprises of the way the reports are collected and the methods used for evaluating EISs, the results and analysis, discussion and conclusions as to whether the biofuel plan launched in 2005 could be justified.
4.1.2 EIA process for biofuel projects
Similar to environmental legislations exist in other countries, Indonesian government approval for certain types of projects requires the proponents to perform an environmental impact assessment (Government of Indonesia 1999). This environmental assessment is defined as “a systematic process to identify, predict and evaluate the environmental effects of proposed actions and projects....”” whereas “...appropriate social, cultural and health effects are considered as an integral part... ”(Sadler et al. 2002). In practical terms, the EIA legislation states clearly that the process is intended for evaluating the environmental feasibility of a project. Such a document thus serves as the means by which the authority grants or withholds the necessary permits for the project or activity (Spitz & Husin 1999). The scheme shown in Figure 4-1 describes the process in carrying out EIA process.
As not every project activity has to carry out this process, it is advisable for the project proponent to do an initial screening by contacting the EIA commission in the environmental impact management agencies (EIMA - Bapedal in the local language for Badan Pengendalian Dipak Lingkungan) found at district or provincial level. The screening is carried out through a prescribed list, which is set by the Ministry of Environment Regulation No. 11 of 2006 (Ministry of Environment Indonesia 2006b). If the project is not required to perform an EIA, the project proponents only need to submit an environmental management and monitoring documents in their standard operating procedure. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 58
Project proposal
EIA Commission in the district or provincial level
Screening process No Yes using Ministry of Environment Regulation No. 11/2006
EIA required EIS not required
EIA term of reference submitted to EIA commission Preparation of environmental management document
EIA ToR review (75 days)
Preparation of EIS and environmental management and monitoring plan (RKL/RPL)
EIS Requirements Yes Approval by the Review head of EIMA or (75 days) Governors
No
Rejected Permit and licence issuance
Figure 4-1 The EIA process in Indonesia under government regulation 27/1999. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 59
Although the Indonesian EIA legislation was adopted as best practice from other countries that have advanced economy or derived from international norms, the degree to which such norms can be implemented successfully depends on the local levels of development, which is related to transparency, good governance and local ability to enforce the EIA legislation (Boyle 1998). In other words, the types of Indonesian government structure and the culture of its society may be part of the reason why biofuel projects are not specifically included among the types of projects that require EIA in the planning stage according to the Ministry of Environment Regulation No. 11 of 2006 (Ministry of Environment Indonesia 2006b). The exception is relatively alarming because it is a common view that biofuel project potentially has a significant impact on the environment.
There may be several reasons for the existing heterogeneity of EIA regulations for biofuel projects in Indonesia. One of them is that the biofuel projects are often considered as separate and unrelated projects. The raw material production such as oil palm plantations or sugar cane farms can be categorised as agriculture projects that require EIA process. Biofuel processing plants are categorised as chemical plants, which also require an EIS. However, proponents of integrated biofuel projects, comprising both plantation and biofuel processing facilities, may argue that their projects are not in the taxonomy of the legislation. Therefore, they may be exempted from carrying out an EIA process.
Another reason is that local government is now responsible for enforcing the EIA process. This is following the realization of regional autonomy legislation (Law No. 22/1999 and its revision of 2004)1, that effectively transferred the responsibility for managing the EIA process from the central government environmental impact management agency (EIMA - Bapedal) and its related departments to local governments at the provincial and district level (Bapedalda). The local government at provincial or district level may be unaware of this
1 Law No. 22 /1999 gave broad autonomy to the regions (Daerah Tingkat II: Kabupaten/Kota) excluding defence, security, justice, foreign affairs, fiscal affairs, and religion which are explicitly retained by the Central Government. In the context of the EIA process, the autonomy law allowed for the establishment of district- level-EIA Commissions, which are responsible for the overall EIA process (The World Bank 2003). The legislation was later superseded in 2004 by the Law 32/2004 and strengthened by government regulation No. 38/2007 which detailed the structure of local and central governments together with their functions and responsibilities (Government of Indonesia 2007) Chapter 4 Ascertaining local impacts using Environmental Impact Statements 60 change or may deliberately ignore it, as the Law No. 22/1999 on regional autonomy is structurally higher than Ministry of Environment Regulation No. 11 of 2006.
This issue is one example of the problems that have arisen from the regional autonomy law. Many commentaries, including (Bedner (2010); Widianarko (2009); Zulhasni (2013)), have considered that decentralization has had mixed results in this aspect. Regions with limited capacity tend to show more uncertainty relating to the issuance of EIA permits, a lower quality review, and an increase in the average time taken for approvals. The reverse is true where there is sufficient capacity at the local level (Giovanna, Leitmann & Mackay 2006). A worrying trend is that conflicts of interest arise during the EIA process at the local government level as well as at provincial level, whereas the heads of regency or and governors may have the same interests as the project developers. However, this condition may not be acceptable, as majority of the project’s proponents would naturally look forward to having predictability in the EIA process as well as expecting environmental review using the best practice methods.
Nevertheless, many proponents of biofuel projects do voluntarily submit EIA reports as many provincial and local EIMAs realise that biofuel projects might generate significant activity in various agriculture, energy and mineral resources sectors of as well as industry in general. Biofuel projects can be classified as business activity if under the plantation category or industrial activity if situated in an industrial estate. Projects in those categories do require EIAs according to Ministerial Regulation No. 11/2006.
4.1.3 The content of EIA reports
The existing process for producing EIA documents comprises two steps, shown in the Figure 4-1. The first is project screening and scoping. This is accomplished by submitting the terms of reference (ToR) document to the appropriate license authority, which then can be evaluated by an assessment committee (Komite Amdal). The assessment committee often seeks advice from the technical team. It takes a maximum of 75 days for the assessment committee to carry out the review process. The term of reference submitted by the project proponents is usually required to address the following items: scope of the study; type of activities in the project that may affect the environment; environmental parameters likely to be affected by the project; method of data collection and analysis. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 61
After assessment committee has approved the ToR document, the second step is to prepare a full EIA process, and submitting the assessment documents for approval follows this. The documents should consist of the EIS (ANDAL -Annalisa Dipak Lingkungan), Environmental Management Plan (RKL-Rencana Pengelolaan Lingkungan), Environmental Monitoring Plan (RPL-Rencana Pemantauan Lingkungan), and Executive Summary (Ministry of Environment Indonesia 2006a). The Ministry of Environment Regulation No. 08 of 2006 prescribes general contents and guidelines of such documents. The EIS, which makes up the bulk of the EIA documents, should include abstract, introduction, proposed business plan and activities, scoping, a detailed description of the environmental background, identification of important impacts and evaluation of such impacts.
The assessment includes major items of biological, geophysical/chemical, social- economic-cultural, and public health aspects of the project (Spitz & Husin 1999). Regulation No. 8 of 2006, which issued after the decentralization came into effect, reiterated those aspects so that a uniform quality of EIA is attainable. Environmental aspects directly affected by the potential projects activities should be identified, evaluated and analysed against the background conditions before having the project. The regulation specifically adds that the social effects of the physical, chemical and biological aspects need to be discussed and analysed. It also requires the project proponents to analyse the important implications of those aspects on the business proposal and project activities on the project. Therefore, there are two additional emphases in this regard namely evaluating the identified important impacts on the social as well as on the economic and feasibility of the projects.
The relative emphasis on each aspect in reality however depends on the mutual agreement between project proponents and the assessment commission based on the field data. This is understandable because each project may have different potential impacts. As current biofuel projects mostly comprise raw material biofuel production and biofuel processing facilities, the focus of each environmental impact analysis is also different. For biofuel projects classified as biofuel raw material production, EIAs usually focus more on the development of land for biofuel plantations. Therefore, biological effects such as biodiversity on the flora and fauna, and the social impacts of the plantation development including land compensation and employment issues are heavily accentuated. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 62
For the biofuel projects classified as biofuel processing facilities, the EIA would naturally dwell on liquid waste production, air pollutants due to the use of fossil fuels such as coal or heavy fuel oil in boilers and other potential health and occupational hazards, which are the common consequences of chemical process plant operation. Social impacts such as employment opportunities and land compensation are often not considered as important issues because these facilities do not require a large area, and are usually capital intensive.
Table 4.1 shows an example of potential impact matrix from an oil palm plantation project and the typical aspects are usually identified according to the time line of the project.
Table 4-1 Typical aspects covered in the EIS on plantation projects
Assessing components A. Physical and Chemical B. Biological C 1. Climate 1. Terrestrial biology 2. Geophysics and Geology 2. Aquatic biology 3. Hydrology 3. Biodiversity of its flora and fauna a. Quality of surface water C. Social, Economy, Culture b. Quality of ground water 1. Demography c. Quantity of available water 2. Socio economy 4. Air quality a. Local economy a. Air quality b. Regional economy b. Noise 3. Socio-culture 5. Space, soil and land a. Culture a. Space b. Social structure b. Soil c. Community perception c. Public infrastructure D. Health 6. Transportation 1. Community health 2. Sanitation
It is therefore important for the project proponents to identify in detail the proposed business plan and the project activities during pre-construction, construction and post- construction (operational stage), and to describe the environmental background before the project takes place. This is required for careful identification and evaluation of important impacts by analysing the difference in quality between the projected environmental conditions after the project and the background condition. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 63
In analysing the important environmental impacts, the government regulation (Ministry of Environment Indonesia 2006a) advises the project proponents to use formal methods such as matrices method, overlay method and other reference-based methods. The regulation allows the use of non-formal methods in the EIA analysis only if the mathematical formulas are not available. Those evaluations on the hypothetical important impacts should be holistic and those include the sources and the activities that cause the impact. Various environmental components subjected to the important impacts, be either negatively or positively, should be assessed as an interconnected and inter influenced unit so that the balance of the both important positive and negative impacts could be recognized. The project’s proponents should present those hypothetical important impacts clearly in the report because the potential impacts have to be manageable. Given the EIA is normally carried out during the selection of various business alternatives, such an analysis of important impacts should also be carried our as for each proposed business alternative. The project proponents should recommend the best-selected alternatives, which related to locations of the projects, building layouts or auxiliaries and alternative production processes, in order to minimise or even rectify the identified adverse effects. The best alternatives should include the rationale for their consideration.
Having identified and selected the best alternative, the project proponents should conduct an analysis as the basis for managing the environment. Such an assessment should include causative relation between the business/activity plan and the background environment. The characteristic of such important positive and negative impacts should also be elaborated to identify as to whether they could occur one time or could continuously happen throughout the project after the pre-construction or even lasting for several generations. It is therefore important to identify the community or a group of people that are potentially affected, and the gap between the desired and the potential changes that might occur. Moreover, the affected area size as well as potential disaster and risk analysis should also be identified. Clear recommendations on the environmental feasibility are required and they should be clearly presented in the report. Those recommendations should also consider the project activities that may cause strategic (to have derivative environmental damages) or non-strategic impact. All these recommendations will be used as the basis for developing the documents of environmental management plan and environmental monitoring plan. In short, the expected EIA documents including EIS, management and monitoring plan are Chapter 4 Ascertaining local impacts using Environmental Impact Statements 64 integrated, comprehensive and to consider all aspects of potential impacts that the projects may have on the local environment.
In addition to being obliged to follow the format guidelines set by the government, public participation in the process of producing EIA documents is also highly recommended. This is due to a wide expectation that ‘‘public participation is critical to the success of EIA’’ (Morgan 1998, p. 147). Moreover, as EIA is a methodical process of decisions making on a development project, therefore, taking into account community interests in the EIA framework would avoid potential drawbacks of the project itself. Thomas and Elliott (2005, p. 60) pointed out that community participation provides an avenue to disseminate the information and relevant issues to interested communities as well as being beneficial in avoiding objections and delays in later stages of the proposed project.
The key to public participation is to preserve transparency by letting the public examine the documents and the overall EIA development. Such a principle has actually been formally recommended in the Indonesian EIA process. The head of the central EIMA decree No. 08/2000 explains the transparency of information within the EIA process. The guidelines provide advice for the governors to be flexible in arranging further implementation at provincial level regarding the type of community representation. Briefly, the objectives of this directive are to protect and empower the interests of the community, to ensure transparency in the process, and to build partnership among EIA stakeholders (Bapedal 2000, p. 1). The regulation further defined public participation as ‘‘involvement in the decision making process of EIA, in which the communities could convey their aspirations, needs and retained values as well suggestions for the problems from interested community with the intention of obtaining best decision’’.
The deliverables of EIA are the sets of completed documents submitted to the EIA committee where the project is located (be it either at the provincial or regency level). Should the EIA documents be approved, they are then kept by the relevant authorities and served as legally binding documents for reference by the Ministry of Environment, related government branches and departments, Environmental Impact Management Agency in the provincial and district region, and third party auditors. It is therefore necessary that all EIA documentation should be transparent and readily available to the public as stipulated in the Chapter 4 Ascertaining local impacts using Environmental Impact Statements 65 article 35 (Government of Indonesia 1999). Otherwise, there may be public objection at later stages of the project.
Given the rigorous process of EIA as suggested in the legislation, it is reasonably fair to conclude that theoretically, the EIA process in Indonesia consents to a fair, integrated and comprehensive assessment of major and significant impacts on the environment, which are likely to result from the proposed project or activity. Moreover, according to the latest EIA regulation (No. 08 of 2006), the EIA report should be able to provide significant coverage of the environmental issues. Serious considerations of social and economic aspects are also expected despite the limited spatial scope of the EIA, which is often bounded by the area of local government jurisdiction. The coverage of social, economic and environmental issues in the Indonesian EIA process thus addresses the bottom line sustainability principle of the Bruntland report (World Commission on Environment and Development 1987) that balances economic, social and environmental aspects. The implication for a project in which its EIA has been approved is that the project has sufficiently explored its potential impacts, although limited to the national or at least local level.
This research therefore employs the official EIA guidelines set in Ministry of Environment Regulation No. 08 of 2006 to scrutinize the collected EIS, in order to assess the local impacts of the biofuel project plan. The hypothesis in this regard is that the Indonesian biofuel programme may be appropriate if the majority of EIS collected meet the requirements set in the government regulation.
4.1.4 Limitations to the study
This analysis of local impacts of biofuel using the EIS is to examine the coverage and comprehensiveness of the EIA reports. This analysis is also to demonstrate only to the ways that the issues usually covered in the standard EIA reporting format specified in the Ministry of Environment Regulation No. 08 of 2006. The quality of the local environmental impact is assessed only in terms of quantification of impacts for each issue, i.e., whether they include quantitatively described impacts for each issue. Examining the degree of correctness, accuracy and quality of the analysed EIS as well as the fact finding whether the set of recommendations for each issues covered in a typical EIA report are indeed carried out in the implementation of the projects are outside the scope of this thesis. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 66
The limited number of EIS collected in this analysis is influential in determining the reliability of the results. Collecting more EIS from biofuel related projects could improve the results to be more reliable. Moreover, including more EIS, related either to raw material production or biofuel processing projects from both existing oil palm and sugar cane production centres and new development areas such as in Sulawesi and Papua provinces would potentially draw additional conclusions.
4.2 METHODS
This section outlines how the EIA reports were collected and the method applied to evaluate those reports.
4.2.1 EIA reports collection
Initially, full EIS were sought from integrated biofuel projects that include the establishment of both plantations and processing plant. Despite several commitments from various enterprises to set up integrated biofuel projects in Indonesia (National Team for Biofuel Development 2006), none that possessed the project feature has been realised so far. Therefore, the selection was expanded to include summaries of EIS and other shorter reports from separate projects viewed as relevant to the biofuel project. It includes EIS from separate projects such as oil palm plantations, biodiesel processing plants, sugar cane plantations, and alcohol plants. Collection of the reports was also planned to be representative of the localities where biofuel is most likely to be produced (Sumatra, Kalimantan, Java and Sulawesi).
1. Four approaches were used to collect the relevant EIS reports: 2. Personal inquiries to researchers and experts such as professors and researchers as well as individual EIA consultants. 3. Internet searches, as EIA related reports are classified as public documents. 4. Directly approaching project proponents through personal contacts in the association of biofuel producers (APROBI). 5. Directly approaching the Ministry of Environment, Ministry of Energy and Mineral Resources and the Ministry of Science and Technology.
The first approach yielded only one document, but it revealed the difficulty of getting hold of EIA reports as well as personal advice. It is uncommon for individuals or Chapter 4 Ascertaining local impacts using Environmental Impact Statements 67 institutions, either public or private, to share EIA documents. Misunderstanding and suspicion still plague some of the EIA stakeholders (Purnama 2003). This is because transparency is viewed negatively due to the fear of weaknesses being exposed and consequent bad publicity among both project proponents and government approval institutions. Moreover, project proponents fear that this would attract environmental litigation from various NGOs, which may lead to criminal charges as well as financial loss. Government officials are also reluctant to share for fear that their integrity has been compromised if they approve projects that may harm the environment. This is clearly a breach of the principle of transparency and public participation, whereby these documents should be available to the public for informational purposes or scrutiny. Internet searches did not yield any documents, which is understandable because online information is particularly limited in Indonesia and many documents are still only in hard copy form. The Ministry of Environment has set up an online EIA database at
Directly approaching project proponents also resulted in only one EIS. The author's field trip research revealed reluctance on the part of the project proponents to disclose their EIA documents. One argument was that after the project has been approved, there is no need for other stakeholders to review EIA documents. Another argument was that notification regarding the proponents‘ EIA was already in the newspapers, albeit with a limited distribution and relevance to stakeholders. As noted by Heroepoetri (1992) quoted in Leonen and Santiago (1993), there are, in theory
“...three possible avenues for public participation in the EIA process: (1) the obligation of authorized government agencies to notify the public of a proposed activity requiring Environmental Impact Assessment (AMDAL); (2) Public access to AMDAL documents. (3) The possible inclusion of affected people in central as well as in the provincial committee, however, the above has never been executed. In fact, it is difficult for a member of the public to ask for the document.”
The fourth approach was the most successful one. Out of 22 assessments included in this thesis, 20 were obtained using this approach. As stipulated in the article 35 of Government Regulation No. 27/1999 regarding EIA, the copies of EIA documents should Chapter 4 Ascertaining local impacts using Environmental Impact Statements 68 be kept for reference at the Ministry of Environment, related government branches and departments, and the Environmental Impact Management Agency in the provincial and district region or it is called Bapedalda in the local language (Government of Indonesia 1999). Although the number of collected reports is purely based on reasonable efforts at a given reasonable time and may affect the reliability of the analysis results, given the obstacles faced. Such a collection of 22 EIS by no means is a small feat.
Those 22 collected EIS comprises of four reports related to the plantation and production of ethanol and eighteen reports related to the production of vegetable oil seeds and biodiesel production. The locations of the projects were selected from many potential sites where biofuel productions are likely to take place. Figure 4-2 shows the location of biofuel plantations and processing, in which majority of the biofuel plantations are located in islands outside Java, while processing plants are mostly in Java where the majority of biofuel consumers are located. Tables 4-2 and 4-3 list the projects together with their brief description, while Appendix A details all the projects listed in this thesis. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 69
Table 4-2 List of EIA report related to ethanol project
No. Company Location Year Description 1. PT. Pemuka Regency of 2001 Sugar cane plantation with total area Sakti Manis Way Kanan, of 18,643 ha and Sugar mill of Indah a Lampung 6,000 tonnes cane per day (TCD) province 2. PT. Indo Regency of 1999 Sugar cane plantation with total Lampung Tulang Bawang, area of 21,401.40 ha and Sugar mill Perkasab Lampung of 8,000 tonnes cane per day (TCD) province or 84,000 tonnes sugar per year and 36,000 tonnes molasses per year 3. PT. Gunung Regency of 2000 Sugar cane plantation with total area Madu Lampung of 16,955 ha and 12,742 ha, with Plantationsc Tengah, Sugar mill of 12,000 tonnes cane per Lampung day (TCD) province 4. PTP XII, East Municipality of 2012 Integrated plantation of sugar mill Javad Glenmore, and anhydrous ethanol plant with Regency of capacity of 5,000 tonnes cane per Banyuwangi, day (TCD) and approximately East Java 90,000 tonnes raw sugar per year Province and 50 kL anhydrous ethanol per day. This plant is expected to produce 20 MW of power, of which 10 would be sold to the grid. The raw material such as sugarcane juice or molasses would be sourced from its own plantation estates and sugar mills as well as from other sources around the plantation concession land.
Source: a. AMDAL - PT. Pemuka Sakti Manis Indah, 2001, b. AMDAL PT. Indo Lampung Perkasa, 1999, c. AMDAL PT. Gunung Madu Plantations, 2001, e.UKL and UPL PTP XII, East Java, BPPT, 2012 Chapter 4 Ascertaining local impacts using Environmental Impact Statements 70
Figure 4-2 The project locations where EIA reports were produced2
2 The Indonesian map was sourced from the PT. PLN Persero report on its business plan for 2013-2025 (PT PLN-Persero 2011) Chapter 4 Ascertaining local impacts using Environmental Impact Statements 71
Table 4-3 List of EIS related to biodiesel related project
No. Company Location Year Description 1. PT. Tolan Tiga Regency of Aceh 1994 Oil palm plantation with a total of Indonesiaa Timur, Aceh area of 2,547 ha Province 2. PT. Tolan Tiga Regency of 1993 Oil Palm plantation with a total area Indonesiab Simalungun, North of 5,398 ha and palm oil mill at 40 Sumatra province tonnes FFB (Fresh Fruit Bunch) per hour 3. PT. IndoSocfinc Regency of Deli 1994 Oil palm plantation with area of Serdang, North 3,389.72 ha in Bangun Bandar estate, Sumatra province 1,349 ha in Tanjung Muria estate, 2,352.81 ha in Mata pao estate, 1,386 in Tanah maria estate. Palm Oil Mill 20-30 tonnes FFB per hour, 5 tonnes KK per day in Tanah maria estate, 5.6 tonnes KK in Tanah bersih estate, and crumb rubber mill of 0.475 tonnes per day. 4. PT. Andalas Regency of 2007 Oil palm plantation with a total area Wahana Berjayad Dharmasraya, West of 17,800 ha and palm oil mill of 60 Sumatra Province tonnes FFB per hour 5. PT. Asiatic Regency of 2003 Oil palm plantation with a total area Persadae Batanghari, Jambi of 27.250 ha comprised of Asiatic province Persada: 20,000 ha, Maju Perkasa Sawit estate 3,381 ha, Jammer Tulen estate 3,871 ha. It has palm oil mill of 45 tonnes FFB per hour 6. PT. Agro Mukof Regency of 2005 Oil palm and rubber plantation with Mukomuko, a total area of 22,928 ha and palm Bengkulu Province oil mill capacity of 120 FFB per hour and 0.5-tonne dry rubber per hour. 7. PT. Banyu Regency of Musi 2005 Oil palm plantation with a total of Kahuripang banyuasin, South area of 44.000 ha and Palm Oil Mill Sumatra Province of 60 tonnes FFB per hour 8. PT. Perkebunan Kabupaten Musi 2008 Oil palm plantation with a total of Mitra Oganh Banyuasin, South area of 16.000 ha and Palm Oil Mill Sumatra Province of 60 tonnes FFB per hour 9. PT. Palm Regency of Way 2000 Oil palm plantation with a total area Lampung Kanan and Lampung of 24,910 ha and palm oil mill of 2 Persadai Utara, Lampung x 60 FFB per hour province Chapter 4 Ascertaining local impacts using Environmental Impact Statements 72
No. Company Location Year Description 10. PT. Sajang Regency of 2000 Oil palm plantation with a total of Heulangj Kotabaru South area of 40,000 ha and Palm Oil Mill Kalimantan province of 2 x 60 tonnesFFB per hour 11. PT. Etam Regency of Kutai, 2000 Oil palm plantation with a total area Bersama Lestarik East Kalimantan of 12,000 ha and palm oil mill of 60 Province tonnes FFB per hour 12. PT. Methanol Bunyu Island, East 2009 Environmental compliance report Bunyul Kalimantan Province (PROPER) in 2009 13. PT. Katingan Regency of Kota 2007 Oil palm plantation with a total area Indah Utamam Waringin Timur, of 22,126 ha and palm oil mill of 90 Central Kalimantan tonnes FFB per hour Province 14. PT. Budidaya Regency of July Oil palm plantation with a total area Agro Lestarin Ketapang, West 2003 of 20,598 ha and palm oil mill of 60 Kalimantan Province tonnes FFB per hour 15. PT. Kurnia Regency of Poso, July Oil palm plantation of 13,000 ha Luwuk Sejatio Central Sulawesi 1999 and palm oil mill of 2 x 60 tonnes Province FFB per hour 16. PT. Indobiofuel City of Cilegon, 2011 Biodiesel plant with a capacity of Energyp Banten Province 47,297.25 tonnes biodiesel per year, 5,148 tonnes per year of glycerine and 3,682.8 tonnes per year of biodiesel from Free Fatty Acid 17. PPTMBG Cipulir, Regency of 2006 Research facility with a capacity 10 Lemigasq South Jakarta tonnes Biodiesel per day 18 Local Regency of Ogan Dec Jatropha plantation with a total area government Komering Ulu 2006 of 500 ha. It has 3 x 5 tonnes of Regency of Timur, South jatropha fruit per day, mill and 5 Ogan Komering Sumatra Province tonnes of biodiesel processing plant. Ulu Timurr
Source: They were collected from various EIS reports3
3 a. AMDAL of PT. Tolan Tiga Indonesia,1994, b. AMDAL of PT. Tolan Tiga Indonesia, 1993, c. AMDAL of PT. IndoSocfin, 1994, d. AMDAL PT. Andalas Wahana Berjaya, 2007, e.AMDAL of PT. Asiatic Persada, 2003, f. AMDAL of PT. Agro Muko, 2005, g. AMDAL of PT. Banyu Kahuripan, 2005, h. AMDAL of PT. Perkebunan Mitra Ogan, 2008, i. AMDAL of PT. Palm Lampung Persada, 2000, j. AMDAL of PT. Sajang Heulang, 2000, k. AMDAL of PT. Etam Bersama Lestari, 2000, l. PROPER report PT. Methanol Bunyu, 2009, m. AMDAL of PT. Katingan Indah Utama, 2007. n. AMDAL of PT. Budidaya Agro Lestari, 2003, o. AMDAL of PT. Kurnia Luwuk Sejati, 1999, p. AMDAL of PT. Indobiofuel Energy, 2011, q. UPL/UKL document of PPTMGB Lemigas, 2006, r. UPL/UKL of Local government Regency of Ogan Komering Ulu Timur, 2006 Chapter 4 Ascertaining local impacts using Environmental Impact Statements 73
The list consists of two types of biofuel projects, bioethanol and biodiesel/pure plant oil type of projects. Bioethanol projects consist of sugar cane plantations and alcohol processing plants projects. The biodiesel projects include oil palm plantations and biodiesel/pure plant oil processing plants projects. Since pure plant oil, terminology is relatively new and there is no dedicated processing plants for pure plant oil, so no EIS exists in this category. The potential impact of such a processing plant can be represented by a typical biodiesel processing plant, as half of a biodiesel plant's acts as refinery process that is similar to the process for pure plant oil. One project, a methanol plant, was found but its EIS was not obtainable. However, their regular environmental report document to the ministry of environment has been collected and used as a source of this analysis. As most major environmental impacts of biofuel raw material projects in Indonesia come from sugar cane and oil palm plantations, these types of project dominate the EIS documents collected in this thesis.
4.2.2 Analysis method
In order to analyse the coverage of general EIA reports in relation to the environmental acceptance criteria, this thesis employs the method of scaling-weighting checklist, also known as weighted summation. This method of summation of value judgement is popular in multi criteria analysis of EIAs, as it is relatively simple. A linear function is used to standardize the quantitative scores and the overall score is calculated as the weighted average of the standardized scores (Janssen 2001). The following section describes details of the method.
Step 1: Selection and definition of indicators
The step is to select and define the indicators that address biological, geo- physical/chemical, socio-economic-cultural, and public health aspects of the project. The indicators were adopted from typical Indonesian EIS coverage set out in the Indonesian EIA regulation no. 8/2006 (Ministry of Environment Indonesia 2006a).
The first indicator describes social and economy feature that covers demography, economy social and social culture aspects. The second is environmental feature comprises of physical and chemical and biology aspects. The physical and chemical aspect comprises of sub aspects of climate, geophysics and geology, hydrology, air quality, transportation and the sub aspect of space, soil and land. The biology aspect within environmental feature Chapter 4 Ascertaining local impacts using Environmental Impact Statements 74 meanwhile includes terrestrial and aquatic biology. The third indicator is the social and environmental feature that comprises of health aspect. The community health and sanitation are central in this aspect.
Table 4-4 outlines the typical indicators used to assess the quality of EIS of the biofuel projects.
Table 4-4 Typical indicators in assessing EIS
1. Socio Economy and Cultural (equitability) feature 1.1 Demography 1.2 Socio economy 1.3 Culture and social a. Local economy a. Culture b. Regional b. Social structure economy c. Community perception 2. Environmental feature 2.1 Physical and Chemical 2.1.1 Climate 2.1.4 Atmosphere 2.1.5 Pedosphere 2.1.2 Geophysics and a. Air quality a. Space Geology b. Noise b. Soil 2.1.3 Hydrosphere c. Public infrastructure a. Quality of surface water 2.1.6 Transportation b. Quality of ground water c. Quantity of available water 2.2.Biosphere 2.2.1 Terrestrial biology 2.2.2 Aquatic biology 3. Socio Environment (liveability) feature 3.1 Health 3.1.1 Community health 3.1.2 Sanitation
Step 2. Defining level of compliance
To define the level of compliance, standardizing the scores is necessary in order to make the indicator comparable with each other. This is then followed by defining the weighting of criteria for assigning priorities to them. The definition in the level of compliance was adopted from the work by Englund et al. (2011) on the suitability of EIS for Chapter 4 Ascertaining local impacts using Environmental Impact Statements 75 fulfilling EU directive sustainability. The scoring assignment however was modified to provide numerical assessment.
Table 4-5 describes the level of compliance criteria and the score. If an EIS has deliberately avoided any potential impact or planned necessary actions so that no impact would occur in all given aspects, it would earn a score of 8 to 10. The next score of 6 to 8 is be awarded to an EIS report that has identified and quantified both positive and negative impacts from those aspects and proposed suitable measures to deal with the impacts. However, such impacts due to the existence of the project would not be completely avoided. The next compliance score of 5 to 6 goes for the report that is able to identify positive impacts but unable to quantify them, and no action has been proposed to avoid such an impact.
The level compliance score of 4 to 5 indicates that the report has important impacts of being discussed, while the lesser score of 3 to 4 suggest that the report has briefly discussed or indirectly discussed any potential impacts that likely occur on each given aspect because of the project. The next lower score is 0 to 1 given to any EIS that viewed any of the aspects being irrelevant to their environmental impact assessment.
The lowest score of 0 is awarded to an EIS report that do not discussed any possible impact fall in to the given aspects set in the typical indicators of EIS. Moreover, such a score is also assigned to an EIS report that deliberately avoids taking any actions although negative impacts have been identified and quantified. This is particularly designed to score down the project, which recognize very well that the operation would likely cause any social, environmental, or/and economic damages, but simply ignoring such impacts and proceeding to continuing with the project. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 76
Table 4-5 Level of compliance score
Description Level of compliance Score Englund et al. (2011) A Deliberately avoided 9-10 P – Planned (in cases where there is a required action) NI No impacts would occur (if proposed measures are implemented) Impact identified, measures proposed 6-8 + positive impact(s) negative impact(s) - Q quantified impact(s) + positive impact(s) identified, no measures proposed 6 Feature discussed 5 Feature briefly or indirectly discussed 4 Feature not discussed 3 Assumed to be of lesser importance for the project 2 Not relevant to the EIA 1 - Negative impact(s) identified, no measures proposed 0 - Not possible to determine
Step 3. Evaluating each report and assigning the value of level of compliance
The collected EIS reports were then evaluated and judgment values were assigned to the set of indicators shown in Table 4-4. Table 4-5 describes the assignment of judgement values.
Step 4. Calculating the overall score
After assigning the judgment values on each feature (described in Table 4-4) of the collected EIA reports, the mean value on each feature was calculated. Each mean value represents the average compliance on each feature in the EIS reports. The result of this average compliance represents qualitative coverage score of EIS reports. Table 4-6 presents the qualitative score of 1-10 that relates to a qualitative description from very low to very high. These qualitative descriptions are indicators of how well the EIS reports assessed the impacts of biofuel projects. If the average calculated value produces very high qualitative Chapter 4 Ascertaining local impacts using Environmental Impact Statements 77 coverage that signifies the potential local environmental impacts have been deliberately avoided when the project was proposed. In addition, some actions or measures may have been planned and implemented to tackle the anticipated local impacts such that they could not lead to more problems that are considerable at the later stage or would result in no impact at all.
Table 4-6 Qualitative coverage score
Qualitative Coverage Score Very high >8-10 High >6-8 Intermediate >4-6 Low >2-4 Very low 0-2
The high qualitative coverage indicates that the EIS report has identified both positive and negative impacts in all aspects of the criteria and measures have been proposed. However, negative impacts have not been completely avoided but they recognise them in their reports. An intermediate coverage with a score of >4-6 indicated that the EIS report has covered positive impacts and the features have been discussed. However, measures are only proposed for the positive aspects. The low coverage score of >2-4 is awarded for the EIS reports that either briefly discussed the impacts of each aspect of the criteria listed in Table 4-4 or assumed the aspects to be less important in their analysis. The very low coverage is the qualitative score that indicates the impacts on each aspect criteria has not been discussed at all, assumed to be irrelevant to their EIA or knowing very well that their project proposal have negative impacts but chose to ignore them.
By taking the mean as an average qualitative coverage score, this evaluation implicitly assumes that each aspect has an equal value of weighting. Though such an assumption may not be realistic and suffer from various weaknesses, it could still provide a quick and useful description of the state of anticipated local impacts of the biofuel development and the promised measures to manage them. As majority of categories (12 out of 20) are classified as purely environmental impacts, this equal weighting would at the end still favour the preservation of environmental over socio-economic and socio-environmental aspects. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 78
By assuming further that the projects‘ proponents will act in accordance with the suggested measures in their EIS reports, it can be concluded that by reviewing these reports, one could draw a conclusion as to whether the particular development proposed in the EIA will take adequate care in managing the potential local impacts. Low to very low quality coverage (qualitative scores of >2-4 and 0-2) represents a weak coverage of potential local impacts. This means the project proponents consider the aspects listed in the Table 4-4 are not relevant or less important for the projects. This also indicates that the development of the biofuel related project that may have significant local impacts would actually be realized and no measures have been proposed to manage them.
In addition to evaluating the overall average compliance score, this analysis could also be expanded to find out the qualitative coverage score of EIA reports based on various types of biofuel projects, for example the type of biofuel, whether it is bioethanol (sugar cane origin) and biodiesel-pure plant oil (oil palm origin). Other variation could also be examined based on location of biofuel projects at different stages. The location-based evaluation of the collected EIA reports comprises of projects in Sumatra, Kalimantan, Sulawesi and Java. This is to investigate whether biofuel projects outside Java islands are being carried out properly and compared to those in Java. Biofuel projects in Java would naturally face tougher environmental challenges due to the scarcity of available land. On the other hand, Java possesses the best infrastructure facilities in the country as well as a generally well-educated population and the fact that the majority of liquid fuels are consumed in this region. In contrast, biofuel raw material plantations will likely be developed in the outer islands of Java, where land is more abundant and less densely populated.
The stages of the biofuel business chain for this evaluation meanwhile are separated into sugar plantation, alcohol processing plant, oil palm plantation and biodiesel or pure plant oil processing plants. The reason for this is to identify which stages among biofuel production chains have the highest and lowest qualitative coverage. The policy makers can then use this to determine which biofuel production stage should be focussed on to improve the EIA report's quality as well as to manage the potential environmental impacts. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 79
4.3 RESULTS AND DISCUSSION
4.3.1 Sufficiency and reliability of Indonesian EIS reviewed in this study
Given the assumption that this EIA process has ideally been carried out in a transparent way (IAIA 1999), and the years it has been legislated in this country, it was initially assumed that EIA reports should be readily available and should provide accurate description and analysis of potential impacts of biofuel projects. In fact, collecting any EIA reports in Indonesia through normal channels or by contacting the projects proponents proved to be difficult. The same difficulties have been experienced by many non- governmental organizations (Joewono 2010). The collection of 22 EIA reports thus may not be enough to represent accurately the environmental conditions caused by all biofuel related projects in Indonesia.
Another concern in this study is the reliability and quality of the Indonesian EIA reports. Wood (2003) has confirmed that the EIA's performance in the developing countries generally falls far behind that of EIA in developed countries. Such a concern may be hard to believe as EIA process has been adopted in Indonesia since the mid- 1970s and formally enacted in the 1999 through the government regulation no. 27/1999. The regulation of Ministry of Environment number 8/2006 further reinforced this by including provisions to improve EIA quality through encouraging public participation and standardisation of EIA reports.
Observation of the collected EIA reports also reveals some problems. Several EIS were carried out after the projects had already been started. This indicates that the EIA process is not inherent within general Indonesian business practices and consequently the project proponents did not manage potential environmental impacts of such projects in the early stages. Rather, the EIA is seen as a formality to comply with the government regulation. Many researchers, including George (2013, p. 49) and Briffett (1999) have argued that the reason for the lower quality of EIA report is that the imperative did not come from the need to preserve the environment, but rather from the pressure of outside parties. They also added that environmental assessment process during the early enactment of the EIA law of 1982 owed more to external factors such as conditions imposed by financial donor agencies including the World Bank or the Asian Development Bank and other multinational companies. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 80
Some of the collected reports deliberately use non-scientific or "non-technical" methods in their analysis. This clearly deviates from the EIA regulation, which may either come from inadequate capacity on the part of EIA consultants or likely pressure within the EIMA or whoever has approval authority at local level, to approve the project without proper scrutiny for the sake of economic development. A study by the World Bank (Giovanna, Leitmann & Mackay 2006) has also identified systemic weaknesses in the EIA reports. These include an occurrence in which scoping often fails to focus assessment on key issues leading to unnecessarily thick documentation but lack of accuracy in impact identifications. They also found that several reports surprisingly have no assessment for significance impacts.
It was also observed that some of the collected reports rely too much on subjective judgment, so that impact prediction and signification were often not well accomplished. The impacts were often identified qualitatively rather than being assessed quantitatively. Moreover, as baseline data for air, water and soil conditions are often scarce, secondary data were frequently used and cited in the reports, which could be due to cost and time constraints. These may contribute to the similarity in EIA reports for sites with very different environmental characteristics, as the project proponents are suspected to "copy and paste" data. Such weaknesses were unnoticed as the processes generally lack public participation (Purnama 2003).
As it was previously anticipated, partly due to the project-level scope of a typical EIA, none of the collected reports mentioned important issues related to global air pollutants such as the greenhouse gases. Local environmental impacts including on flora and fauna, water quality in the nearby rivers, noise and health aspects as well as employment opportunities dominated the issues in the impacts assessment. Moreover, cumulative or indirect impacts, such as land use change toward the emission of GHG from other places, increasing use of fertilizers and pesticides as well as nitrous oxide were often unaddressed. These concerns regarding the reliability and quality of the collected EIS can be attributed to both institutional/legal and operational issues, which are discussed in the following section.
4.3.2 Institutional and legal issues
Indonesia‘s overall performance on integrity according to Global Integrity organisation is considered strong. The organisation gave an overall score of 81 of 100 (considered strong) Chapter 4 Ascertaining local impacts using Environmental Impact Statements 81 in which the legal framework component contributed a score of 95 which is valued as very strong (Global Integrity 2011). Significant improvement was noted in the area of good governance, particularly in access to information and judicial accountability, in which the avenue for an appeal of a refusal to release information has been included in the freedom of information legislation. However, commonly occurs in a country that experiencing positive transition toward democratization, the high score for Indonesia in the legal framework component has been dragged down by the component of actual implementation. The 2011 Global Integrity report has considered Indonesia of being weak in the category of actual implementation with a score of 69. The general agreement is that "laws are only as good as the extent to which they are enforced and implemented in practice"(Reding 2013). It is therefore important to analyse the so-called "implementation gap (obtained by deducting the implementation score from the legal framework score). Global Integrity rated Indonesia in the top quarter percentile with an implementation gap of 26. This shows that rules are beginning to be applied in practice.
In relation to the quality of EIS on biofuel related projects, this strong integrity index for Indonesia is reflected in the completeness of EIA legislation as well as its legality aspect. The drawbacks in implementing the legislation are related to corruption due to a lack of accountability and transparency in the related institutions, and lack of awareness of EIA legislation, even among those officials who are important in the EIA process(Giovanna, Leitmann & Mackay 2006). In addition, it was found that lack of coordination and poorly defined decision-making processes especially between central and local government often occur as unintended consequences of decentralization of EIA process to the regencies4 and provincial government (Bedner 2010).
The process of decentralization initiated since 1999 has to some extent, paralysed the effectiveness of Environmental Act number 27/1999 and its subordinate regulations. The decentralization policy allows some space for local governments i.e. regency (kabupaten) and city (kota) to exercise greater autonomy. The EIA approval decisions have been effectively made by the head of regency or governors. This has encouraged local governments to be more revenue-oriented, which led to over-creation of local regulations (Perda) at the expense
4 Local regency is also known in the local language as Daerah Tingkat II: Kabupaten/Kota and provincial area is also known as Daerah Tingkat I: Propinsi Chapter 4 Ascertaining local impacts using Environmental Impact Statements 82
of environmental concerns (McCarthy & Zen 2010). This also led to the EIA process towards becoming a mere regulatory exercise without serious intention to use it as a part of overall planning and business feasibility study.
4.3.3 Actual implementation
The results of evaluating EIS's based on the way they were carried out and presented have demonstrated that the 22 reports are adequate according to the Indonesian EIA guidelines. Most of the reports have covered major items of biological, geo- physical/chemical, socio-economic-cultural, and public health aspects, thus has adequately considered the triple bottom line sustainability definition, which balances the social, environmental and economic aspects. As predicted, the reports emphasized local impacts while global effects were not considered. Nevertheless, they have provided an insight into the depth and potential of both positive and negative environmental impacts of bio-energy projects in Indonesia.
Unfortunately, verifying the collected EIA reports against the realities on the field was not conducted, as it was difficult and costly. However, scant information on the individual projects based on the secondary data has revealed that some of the projects particularly related to the biofuel raw material plantation do have problems. These range from inadequate management of wastewater effluent to social and economic problems such as land compensation. However, some EIAs were relatively good in terms of industrial health and safety aspects. Recent successes in the sugar cane plantation in Lampung province5 as well as the palm oil operation in the East Kalimantan province6 help to prove that carrying out EIA process properly could minimise and even avoid potential negative impacts, be either environmental, social as well as economic related aspects.
The only formal post EIA monitoring report that has been carried out widely in Indonesia is probably the one produced from the PROPER programme for Pollution
5 Located in the regency of Central Lampung, this PT. Indo Lampung Perkasa as part of the sugar group company (SGC) said to be the pride of the local community. It is not surprising as company create a record job and conducts its corporate social responsibility (CSR) activities. The SGC has obtained a Green certificate from the Ministry of the Environment, in which all industrial waste from the sugar cane is utilized and recycled into various useful products including fertilizers and bioethanol.(Soegiarto 2013) 6 PT Etam Bersama Lestari is palm oil plantation situated in the Kutai regency, East Kalimantan province. It has been awarded zero accident certificate bay the local governor. (Viva Borneo 2014) Chapter 4 Ascertaining local impacts using Environmental Impact Statements 83
Control, Evaluation, and Rating. It was set up initially to mitigate the problems associated with pollution under the umbrella of the Government of Indonesia’s Environmental Impact Agency (BAPEDAL) in June 1995 with the support from Canadian and Australian development agencies and the World Bank, USAEP/USAID (Kanungo & Torres 2003). The programme employed colour-coded rating scheme7 of gold, green, blue, red, and black to grade the institutions’ compliance against the regulatory standards. The gold and green ratings signify above compliance, blue rating means that compliance has been met, while red and black are indications of below compliance that suggest to have more public pressure and legal enforcement (Ministry of Environment Indonesia 2013b). Though it is designed as a voluntary reporting by the potential polluters, it has been effective as an effort to overcome the Indonesia’s inability to handle environmental crises because of BAPEDAL’s limited capacity and the increasing industrial expansion (García, Afsah & Sterner 2009).
Comparison of the results from EIA reports analysis of the 22 sample biofuel projects against the PROPER programme results is presented in the Table 4-7. The actual implementation using the report of 2013 PROPER programme (Ministry of Environment Indonesia 2013a) has revealed that 8 out of 22 selected projects (about 36%) has met compliance rating. The rest are either below compliance rating or they do not report their operation and thus their compliance toward post EIA process cannot be verified. This implies that despite a reasonable regulatory framework which obliged the biofuel related project to fully comply the EIA standard, a proxy verification using the latest PROPER report suggest that unless this changes, the Indonesian biofuel target is probably not appropriate as it cannot be expected to be achieved without significant harm to the environment.
7 "..A gold rating is awarded to facilities that demonstrate excellent performance by going beyond the requirements of regulatory standards, and by exhibiting similar results in control of air pollution and hazardous waste. A green rating implies that the factories’ environment management procedures go beyond the expected compliance level, A blue rating signifies compliance with national regulatory standards. A red rating indicates a poor performance level, in which the factories display some sort of pollution control effort but do not comply with the regulatory standards in absolute terms. A black rating ranks lowest in the performance level. Factories are assigned a black rating if they do not make any attempt to control pollution, thereby being major contributors to serious environmental risks". (Kanungo & Torres 2003) Chapter 4 Ascertaining local impacts using Environmental Impact Statements 84
Table 4-7 Comparison of the EIS score and rating against the PROPER programme report
Projects Name and location EIS score and rating PROPER Rating 2012- 2013 PT. Pemuka Sakti Manis 6.45 High Red Non Indah, Lampung Compliance PT. Indo Lampung Perkasa, 6.45 High Blue Complied Lampung PT. Gunung Madu 6.45 High Green Above Plantations, Lampung compliance PTP XII, Glenmore, East 5.25 Intermediate Not Non Java reported Compliance PT. Tolan Tiga Indonesia, 5.25 Intermediate Blue Complied East Aceh PT. Tolan Tiga Indonesia, 5.25 Intermediate Blue Complied Simalungun, North Sumatra PT. IndoSocfin, Deli 5.20 Intermediate Blue Complied Serdang, North Sumatra PT. Andalas Wahana 6.45 High Not Non Berjaya, West Sumatra reported Compliance PT. Asiatic Persada, Jambi 6.45 High Red Non Compliance PT. Agro Muko, Kab. Muko 6.45 High Red Non muko, Bengkulu Compliance PT. Banyu Kahuripan 6.45 High Not Non Indonesia, reported Compliance PT. Perkebunan Mitra 6.45 High Blue Complied Ogan, South Sumatra Pemda kabupaten Ogan 5.95 Intermediate Not Non Komering Ulu Timur reported Compliance PT. Palm Lampung Persada, 6.45 High Blue Complied Lampung PT. Sajang Heulang, 6.59 High Blue Complied Kotabaru, South Kalimantan PT. Etam Bersama Lestari, 6.59 High Not Non Kutai, East Kalimantan reported Compliance PT. Methanol Bunyu, Bunyu 6.42 High Green Non Island, East Kalimantan Compliance Chapter 4 Ascertaining local impacts using Environmental Impact Statements 85
Projects Name and location EIS score and rating PROPER Rating 2012- 2013 PT. Katingan Indah Utama, 6.69 High Red Non Kota Waringin Timur, Compliance Central Kalimantan PT. Budidaya Agro Lestari, 6.53 High Not Non Ketapang, West Kalimantan reported Compliance PT. Kurnia Luwuk Sejati, 6.53 High Not Non Poso, Central Sumawesi reported Compliance PT. Indobiofuel Energy, 5.35 Intermediate Not Non Merak, Banten reported Compliance PPTMBG Lemigas, Jakarta 6.40 High Not Non reported Compliance
4.3.4 Comparison of compliance level based on typical Indonesian EIA indicators
The overall mean score of the collected EIA reports was 6.15, which indicates a relatively high qualitative coverage of the potential local impacts. The results depicted in Figure 4-3 have indicated that on average the project proponents have identified both potentially positive and negative impacts and have tried to quantify them as well as proposed suitable measures. They however, have failed to convince the stakeholders that the potential negative impacts have been completely avoided and were unable to produce required action plans that could completely guarantee that potentially negative impacts would not occur.
One example is the impact of palm oil mill effluent (POME) leaking out of a wastewater process plant and thus polluting surface water. Despite elaborate efforts to contain such an impact, there is no guarantee that a POME leak into rivers or lakes could be completely avoided. Most of the proposed methods of treating this effluent are to store them in a pond and let the BOD content decrease naturally through anaerobic digestion, discharging the effluent after ascertain period to the local rivers. In addition to the potential escape of methane gas into the atmosphere, that leads to the greenhouse gas effect, such a measure may lead to a leak when there is a flood or when the treatment facilities can no longer cope with the ever-increasing POME volume. These circumstances could force the operators to release the effluent above the standard allowable discharge. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 86
Of the aspects usually covered in the EIS reports, environmental related issues in general scored better than other aspects such as socio-economic and social environment. Most of the reports cover the local and regional economic impacts with a rating of being intermediate. This indicates that impacts related to this issue whether positive or adverse, have been identified and quantified but no measures have been proposed to manage them. For example, issues on the potential employment creation/preference and land compensation for the locals have for example, been identified and appraised, but the proposed adequate actions to prevent social conflict due to unfair land compensation or local resentment toward workers recruited from other regions were not proposed. The social-environmental issue category that related to the potential impacts on community health and sanitation, for example contamination of ground water or surface water, were discussed. However, the discussion does not extend its coverage on the positive and negative impacts, let alone propose a measure to avoid or rectify the potential problems or guarantee that they would not occur. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 87
Figure 4-3 Overall average level of compliance of the EIA reports with 10th and 90th percentile values Chapter 4 Ascertaining local impacts using Environmental Impact Statements 88
The aspect covered least in the collected reports was the potential local impact on the public infrastructure and transportation. The qualitative coverage of these items could be considered adequate, but the issues were just discussed, not elaborated. This could be explained by the fact that these project proponents are private companies, and it is the domain of the local government to provide, maintain and eventually proposed measures to minimize or avoid such a local impact.
The following section outlines the results of reviewing the EIS reports from different perspectives. a. Compliance based on the type of biofuel i.e. ethanol and biodiesel/pure plant oil
The level of compliance of EIA reports from ethanol related projects has an average value of 6.5 while that of the biodiesel-pure plant oil project is 6.1. Since the values are of 6 to 8, these scores are considered high although they fall into the lower range of these criteria. This suggests that the local impacts have been identified and quantified. Moreover, the project proponents have deliberated enough to propose suitable measures, though there is no clear guarantee that potential negative impacts would be completely avoided.
A detailed comparison of each type of the impacts feature is shown in Figure 4-4. The level of EIA compliances in the biodiesel/pure plant oil related projects is relatively weaker than to the one carried out in the ethanol related projects for all features of the EIA reports except in the area infrastructure and transportation. This could be because most recent palm oil related projects are situated in the remote parts of Sumatra, Kalimantan and Sulawesi, and often on sites that were formerly controlled by logging companies. As palm fruits are often carried in trucks from the plantation estate to the CPO mill, depending on the location, the CPO can make use of trucks or barges before being transported to the nearby port, impact analysis due to the additional transportation and infrastructure development is therefore usually required. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 89
Figure 4-4 Average level of compliance of EIA reports related to the type of biofuel projects Chapter 4 Ascertaining local impacts using Environmental Impact Statements 90 b. Compliance based on geographical site in Sumatra, Kalimantan, Sulawesi and Java
The compliance analysis based on geographical sites revealed that a high level of qualitative coverage was observed at all sample project locations. The average overall score of 6.0 show this for EISs from biofuel projects in Java and 6.4 for biofuel developments in outer Java islands. This is evident particularly in the environment-related features, in which all sites have an average compliance score of more than 7.0, except one project in Sumatra. It also indicates that this feature has been investigated thoroughly as expected in the standard EIA reports.
In contrast to the relatively high environmental compliance score at all sites, the biofuel projects in Sumatra scored relatively less at 6.6. This is because several oil palm plantations have their EIAs carried out long after the plantations had been set up. Thus, the local environmental impact because of such a development could not be exactly identified, and it is difficult to ascertain whether those impacts were managed properly.
Figure 4-5 details the level of compliance for each feature in the collected EIA reports by geographical location of the projects. It indicates that the qualitative coverage score of the projects situated in Java are relatively weaker than that from the islands outside Java. The graph shows that projects in Java have suffered from weak compliance, particularly in term of social economy and social environment. The average scores in these features are 4.2 for social economy and 3.0 for social and environment. Sites in Sumatra, Kalimantan and Sulawesi, by contrast, have average scores of 5.6 and 5 respectively for social economy and social environment.
There may be several reasons attributed to this issue. Majority of biofuel projects in Java are the type of biofuel processing or chemical plants, which naturally do not require a large area. Those projects are capital intensive and mostly automated so that they do not employ many people. The environmental impacts associated with demography, sanitation and community health, social and culture as well as community perception are therefore not subjected to rigorous discussion within the EIA reports. There is also a perception in the community that such projects are common activity in an industrial area. Therefore, people from the local community do not feel compelled to participate, even if the project proponents hold community meeting to address the issues. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 91
Secondly, majority of the projects in the Java Island are situated within an industrial zone and usually located far from residential areas. The complex is often surrounded by manmade or natural physical barriers such as massive fence protection or rivers, thus giving an impression of being separated from the local community. The biofuel development project of this type thus has limited impacts on the social structure of the people around the site. Moreover, an industrial complex such as this usually has its own adequate environmental management measures. On the other hand, potential chemical leaks that would lead to surface water contamination causing grievances from the local community are important features of these reports. Environmental features related to hydrology, water availability, and quantities of wastewater are important aspects of these EIS reports. Therefore, their qualitative coverage score relatively low in the social-environmental related features but more emphasize on the purely environmental aspects of their operation as well as local and regional economic development.
Given the necessary measures proposed by all the biofuel related project proponents, it can be inferred that the any biofuel related project, regardless of the site where the project is built, would have a high qualitative coverage score, particularly over the local environmental issues. An exception is the projects in Java, whereas social related features were not really covered thoroughly. Nevertheless, these types of projects, generally typical chemical plants such as biodiesel, pure plant oil or fermentation plant such as bioethanol, naturally do not have a massive land footprint. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 92
Figure 4-5 Average level of compliance of EISs related to biofuel projects by geographical location Chapter 4 Ascertaining local impacts using Environmental Impact Statements 93
c. Compliance based activities of biofuel production i.e. plantation and processing sector
Figure 4-6 has shown that the qualitative coverage score for projects that involve biofuel processing is relatively less than for projects that produce biofuel raw materials. The average overall scores are 6.5 and 6.2 for EIA reports from sugar cane plantations and oil palm plantations respectively, with a score of 5.7 from biofuel processing industries. As a comparison, a methanol plant that can be classified as raw material production but technically is a chemical plant, scores better than biofuel processing activities. This is particularly apparent in the features of social economy and social environment. Both sugar cane and oil palm plantations scored relatively better in those features, at 6.7 and 5 respectively while biofuel processing plants scored 4.6 and 3.7.
The average qualitative score of the EIA reports from biofuel raw material production indicated that identification and quantification of positive and negative impacts have been carried out. Examples on the issues of local economic development and community perception have indicated that the majority of the EIA reports from sugar cane and oil palm plantations have identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The reports also identified potential positive aspects of job creation and its positive impact on the local economy, as well as increasing income of the local people. However, not all the reports clearly specify concrete measures to rectify the negative issues. Some recommend an intensive socialization of the project to the community together with providing fair land compensation, as well as carrying out community projects and prioritising local employment as much as possible. However, detailed plans to carry out such measures were not clearly outlined, thus problems related to those issues would potentially arise during the construction and operation of the plantation. Chapter 4 Ascertaining local impacts using Environmental Impact Statements 94
Figure 4-6 Average Level of Compliance of EIA reports related to biofuel projects based on stages of biofuel production Chapter 4 Ascertaining local impacts using Environmental Impact Statements 95
In contrast to the qualitative average of EIA reports from the raw material production projects, the EIA reports from biofuel processing plants such as bioethanol or biodiesel plants do not consider those aspects such as demography, social culture, and perception in the community as the immediate issues. As it was mentioned in the previous section, majority of biofuel processing type of projects do not require a large area, but capital intensive, automated and employ small number of specialist people suited for operating typical chemical plants. The social-economic and social-environmental related aspects such as community health and its sanitation issues are not so much problem and they are even found irrelevant. That is why the EIS reports concentrate more on the potential environmental issues that would likely exacerbate the local environmental background. The argument is that if measures to manage potential environmental impacts have been in place, potential problems of such issues would consequently be avoided.
Moreover, majority of standalone biodiesel or bioethanol plants are built within an industrial zone and is usually located far from residential areas, thus physically separated from the local community. In a typical industrial complex, adequate provisions of environmental management have been established properly. It is therefore understandable that limited impacts on the social aspects were frequently observed, which lead to less coverage of these issues in their EIS reports.
While there is a difference in the qualitative coverage of EISs on the issues related to socio-economic and socio-environment between the projects of biofuel processing plant and biofuel raw material plantations, the Figure 4-6 demonstrated that both types of the projects do agree specifically on the environmental issues. The average score in the aspects of environment for all types of projects is above 6.0, which indicates a high qualitative coverage, particularly for sugar cane plantations. Environmental concern related to waste water for example, has been identified and quantified, together with the required measures as expected in a standard EIA reports.
The sugar cane plantation together with sugar mill and bioethanol plant in the Glenmore municipality of East Java province in particular, has specifically address renewable energy for their operation by constructing a 20 MW cogeneration power plant for the sugar mill operation. A plan to sell the excess electricity of about 10 MW to the local utility company was also documented in the report. The liquid waste (vinasse) from their plant Chapter 4 Ascertaining local impacts using Environmental Impact Statements 96 would be processed as fertilizer and applied to the sugar cane field, while the solid waste is going to be converted as the cattle feeding material.
Similar measures driven out of necessity and commercial purposes were also apparent in the Indo Lampung sugar cane plantation and its mill in the Lampung province. As part of an integrated holding company of the Sugar Group, these particular emphases on the environment together with social and economic aspects are deemed important. Sufficient wastewater treatment would be built so that the quality of sugar mill effluent can meet the specified standard. The EIA report also noted significant impact due to noise generated from the operation of sugar mill. In addition to having various measures to overcome the environmental issues, direct settlement or out of court land compensation with the local community was carried out to overcome negative perception from the community. Moreover, corporate social responsibility activities empowering the locals as well as providing free education and health services to the community surrounded the projects are also being carried out (Soegiarto 2013).
The measures to manage local environmental impact were also apparent in the biofuel processing projects. The chemical leak from biofuel processing plants such as biodiesel, bioethanol and to some extent the crude palm oil mills, which lead to that surface water contamination may cause grievances from the local community is an important feature in their EIS reports. Therefore, environmental features related to hydrology, water availability, quantity of wastewater, and odours are covered and discussed thoroughly. Necessary measures, to ensure the local potential impacts of this type are manageable, are in place. Those include constructing wastewater treatment facilities, monitoring air emission due to the use of coal in their boilers, safety management for handling methanol in the biodiesel plants as well as monitoring the surface water quality to which the treated wastewater will be discharged.
Given all these necessary measures proposed by all the biofuel related project proponents, it implies that their environmental management and monitoring plan should be based on the conclusions and measures recommended in the EIS reports. Based solely on these reports, it seems that both types of biofuel related projects, raw material plantation and biofuel process plant, could ideally be expected to manage and monitor the potential local environmental impacts successfully. However, as Indonesia is notoriously good in Chapter 4 Ascertaining local impacts using Environmental Impact Statements 97 formulating environmental policy and legislations, but not so good in the implementation stages and little evidence of post project compliance or a culture of valuing the environment, the state of environment because of the biofuel development could not be preserved properly.
4.4 CONCLUSIONS AND RECOMMENDATIONS
The following is a table summary of major finding found based on the EIS reports
Table 4-8 Summary of major findings based on the EIS reports
Indicators of Average EIS score and rating Explanation average compliance Overall 6.15 High The project proponents have identified both compliance score potentially positive and negative impacts and have tried to quantify them as well as Compliance in 6.1 high Ethanol proposed suitable measures. They however, have failed to convince the stakeholders that production the potential negative impacts have been Compliance in 6.5 High completely avoided and were unable to Biodiesel/pure produce required action plans that could plant Oil completely guarantee that potentially negative impacts would not occur. Compliance of 6.0 intermediate The projects in Java suffered from weak projects in Java compliance, particularly in term of social economy and social environment. The Compliance of 6.4 High reason is that they are capital intensive and projects in outer mostly automated so that they do not islands of Java employ many people. The environmental Compliance of 6.5 for oil High impacts associated with demography, project related to palm and 6.2 sanitation and community health, social and biofuel raw for sugar culture as well as community perception are material cane therefore not subjected to rigorous Compliance of 5.7 intermediate discussion within the EIA reports. The project related to project in outer islands of java are mostly biofuel those that produce raw material, thus social processing and environmental aspects were covered very well. However, not all the reports clearly specify concrete measures to rectify the negative issues.
Since only one EIS covered integrated biofuel projects that comprises of plantation and biofuel processing, it seems that majority of the reports consider impacts only relevant to their operation. The EIA reports that cover solely on “plantation projects” obviously fail Chapter 4 Ascertaining local impacts using Environmental Impact Statements 98 to consider features related to feedstock-to-biofuel processing, and EIA reports that focus on biofuel processing plant projects often fail to consider aspects related to the biofuel raw material production. This finding confirms the study by (Englund et al. 2011) in which integrated biofuel project tends to be more comprehensive in their analysis. Therefore, biofuel projects should consider producing EIA report that covers both biofuel raw material plantation and biofuel plant aspects in order to have them being useful information sources in assessing the appropriateness of biofuel project from the perspective of local impacts.
The analysis also reveals that despite being generally far behind the one practiced in the developed countries and often being a formality without genuine intention to manage the environment, majority of the project proponents in this analysis are carrying out EIA process in the early stage of development. Moreover, they highly covered the local environmental issues as the most important aspect in their EIS. As the law 32/2009 regarding environmental protection and management has recognised the effect of global warming, it is recommended that the future EIA process including biofuel related projects should increase its coverage on the features that address global impacts such as GHG emissions and carbon stock accounting as well as land use and land use change. Therefore, a life cycle analysis addressing the global impact in nature may provide significant feature in improving the usefulness of EIA reports as sources for sustainability assessments.
The finding in this analysis however hinted that the recent relatively strong transparency index of this country from Global Integrity organisation does not automatically make efforts in obtaining EIA documents any easier despite being clearly stated as public document according the relevant legislation. Moreover, obtaining evidence of regular monitoring of post project compliances is equally difficult. As the transparency idea for a developing country like Indonesia is a work in progress, it is important to continue canvassing the idea of centrally documented EIA reports so that everyone could access them online. Project proponents, local EIMA offices and related government institutions should therefore be required by law to upload their documents in their web portal.
As majority of the projects have promised in their reports to produce the environmental management and monitoring plan, they should ideally follow and implement the recommended measures in the reports. However, lack of transparency in accessing EIA related documents, lack of evidence for post project compliance and combined with the Chapter 4 Ascertaining local impacts using Environmental Impact Statements 99 culture of valuing the environment have made the actual implementation of such a plan could be dubious. Unless these factors change, the Indonesian biofuel target is probably not appropriate, as it cannot be expected to be achieved without significant harm to the local environment. Such a statement however, needs to be confirmed by identifying global impact of the Indonesian biofuel policy. The next chapter will discuss the impact of this Indonesian biofuel programme through the scope of global issues using LCA as the method of choice.
4.5 REFERENCES
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This page is intentionally left blank Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 103
Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil
This chapter evaluates the precursor of the difference between fossil fuels and biofuels emission in term of anthropogenic CO2 and other emissions using the life cycle assessment (LCA) method. As described in chapter 2, this LCA estimates the overall potential environmental impacts and resources used throughout the product's lifecycle (ISO 2006). Ross and Evans suggest that the environmental impacts resulting from a biofuel product or service, "...could only be properly understood after a comprehensive assessment in which all process steps from extraction through to disposal had been evaluated" (Ross & Evans 2002). The biofuel life cycle includes raw material production, production of the biofuel itself and utilisation. The environmental effects of the life cycle, and the process steps themselves, could span across national boundaries. The life cycle assessment in this thesis therefore possess a global sense
The premise in this chapter is that if the liquid biofuel in question has less of a global environmental impact than their substitutes, it is proper to argue that the development of the biofuel in Indonesia is appropriate. The chapter therefore comprises several sections including the life cycle inventory (LCI) of the Indonesian liquid biofuel and the liquid fossil substitute, Life Cycle Impact Assessment (LCIA) that comprises of its the rationale of selecting its indicators and discussion of findings, and conclusions.
5.1 LIFE CYCLE INVENTORY (LCI) OF INDONESIAN BIOFUEL AND THEIR RESPECTIVE LIQUID FOSSIL FUELS
The most likely raw materials for Indonesian biofuels are oil palms and sugar cane. Sugar cane is the raw material for producing bioethanol while palm instead of other vegetable oil sources is the realistic raw material available for producing biodiesel and pure plant oil for Indonesia. As the inventory stage of LCA generally covers the entire life cycle Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 104 of a product, this analysis also includes raw material production to the final use of the biofuel. For each type of biofuel, the boundary of its inventory therefore would start from the prior land use stage, biofuel plantation, biofuel extraction and processing stage. Figure 5- 1 outlines the scope of the life cycle inventory system for the biofuels.
Input: Land, used up materials including: raw material, and others such as fertilizers, methanol, chemicals, and energy
Prior Biofuel Palm Oil Biofuel Energy Use Land Use Plantation and Sugar Processing of 1GJ Mill
Output: Emissions to environment
Figure 5-1 System boundary of biofuel As depicted in Figure 5-1, the first stage of biofuel utilisation is prior land use, which indicates that the projected development of biofuel requires new land specifically for the biofuel. It is necessary to emphasize that by obtaining biofuel from the new land specifically allocated for biofuel production, it would avoid the conflict of raw material for food versus fuel. The previous land use may be forest, shrub land, peat land or even degraded land.
The next stage is a process of growing biofuel feedstock. As argued in the chapter of literature review, the oil palm is the obvious choice for biodiesel and pure plant oil, while sugar cane is the most likely choice for bioethanol. The palm fruit undergoes crushing process to extract its oil in a palm oil mill, and so is sugar cane to extract its juice. The extracted palm oil sent to biodiesel plant reacts with methanol to produce to palm fatty acid methyl ester or called famously as biodiesel. To produce the pure plant oil however, does not require chemical reaction process. The palm oil instead undergoes physical process for cleaning and fatty acid removal. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 105
Bioethanol meanwhile, utilizes either sugar cane juice directly or from molasses as less valuable by product of sugar production as the raw material feedstock. The pioneers1 of ethanol production in Indonesia are using molasses for commercial reason, as their main business is sugar production.
Since biofuel production is mainly from dedicated biofuel crop plantation, the assumption is that the bioethanol used in this analysis would utilise all the sugar cane juice produced from the dedicated biofuel plantation. The fact that sugar-based companies are also currently involved in the bioethanol production by utilising the surplus molasses from sugar mill, it is also befitting to explore an alternative production of bioethanol from molasses. This implies that the bioethanol production structure in Indonesian could follow what happened in Brazil, where ethanol is produced from both sugar cane juice and molasses. To accommodate the uncertainty, LCA of bioethanol from sugar cane juice, molasses, and a combined sugar cane juice and molasses are therefore included in this chapter.
The utilisation of each liquid biofuel will depend on that of the corresponding liquid fossil fuel. The final use of bioethanol is for the spark ignition engine commonly found in road transport vehicles. In the case of biodiesel, though it is suitable for the fuel in the gas engines as substitute for high-speed diesel oil (HSD) or fuel for boilers, this analysis will focus on its use as automotive diesel oil (ADO) substitute in diesel fuel vehicles.
This analysis assumes that the pure plant oil, being a less valuable vegetable oil-based biofuel, will be utilised as an industrial diesel oil and fuel oil substitute. Its application is usually in electricity generation by stationary diesel engines as well as for marine diesel engines and industrial boilers, despite being successfully tried in diesel engines in road transportation (The 2ndVegOil consortium 2012). The reasons contributed to the decision not to take up the pure plant oil in the transportation in Indonesia can be found in the (Rahmadi, Aye & Moore 2013)
1 The current overall capacity of an ethanol plant produced by PT. Molindo Raya is around 270,000 kL per year (Tjakrawan 2013) with a confirmed ethanol fuel grade of 10,000 kL per year (Panaka & Yudiarto 2007) and the ethanol plant recently completed by the Sugar Group in Lampung has a capacity of around 70,000 kL/year (Gopal &Kammen 2009). Both plants use molasses instead of cane juice. The former is a standalone fuel grade ethanol plant that relies on molasses produced from the nearby sugar cane factories, while the latter is a typical integrated sugar cane industry. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 106
Figure 5-1 includes the energy and environmental emission that result directly from biofuel production and use, as well as those generated during the land acquisition and production of raw materials. For example, methanol for biodiesel process contributes life cycle flows that go back to the extraction of natural gas used as a feedstock. The life cycle accounting will not only consider the emissions from the production of methanol, but also emissions and energy flows from the contribution of this fossil fuel to the biodiesel. Likewise, other chemicals required to produce ethanol and pure plant oil will have to be accounted for. Similarly, life cycle flows from intermediate energy sources such as electricity and other fossil fuel required in the biofuel life cycle are also included from the point of land acquisition, through plantation, and extraction of raw material fuels, biofuel processing and the biofuel delivery to the point of use. Unlike products of life cycle systems, the only outputs are emissions because the conversion of the final product, the biofuel, occurs within the boundary and the function unit output of the life cycle is energy.
Figure 5-1 also indicated that the energy and environmental emission flows occur directly in the biofuel process and the biofuel use are included as well as the ones that are generated during the land acquisition and production of any raw materials. For example, methanol for biodiesel process contributes life cycle flows that go back to the extraction of natural gas used as a feedstock. In addition, not only is it the emissions for production of methanol, but emissions and energy flow due to the contribution of this fossil fuel to the biodiesel also need to be accounted. Likewise, other chemicals required to produce ethanol and pure plant oil will have to be accounted. Similarly, lifecycle flows from intermediate energy sources such as electricity and other fossil fuel required in the biofuel lifecycle are also included from the point of land acquisition, plantation, and extraction of raw material fuels, biofuel processing and the biofuel delivery to the point of use.
Though the inventory here is limited to the use of biofuel to replace corresponding liquid fossil fuels in Indonesia, this does not mean that all the steps involved in the life cycles are restricted to the national domestic boundaries. Several chemicals such as phosphoric acid, sodium hydroxide, yeast, and other chemicals for example, are coming from other countries in Europe and Asia. This means that the life cycle inventory of the biofuels expands their geographic limits to include this situation. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 107
A similar comparison also occurs in the life cycle of the liquid fossil fuels by which around 35% of petroleum finished products are imported (IAE 2008) and most of the domestic refineries use lower grade imported crude oil mostly from Saudi Arabia, Brunei and Nigeria (Petroleum Report Indonesia 2008). Figure 5-2 shows that the life cycle of liquid fossil fuels for which bioethanol, biodiesel and pure plant oil could substitute, comprises various stages including drilling, shipping, refinery, distribution, and final use. Being global commodities, the liquid fossil fuel life cycle inventory would consequently produce emissions spread geographically beyond national boundaries. Therefore, the environmental indicators coming out of LCA would be global in nature, such as the greenhouse gas effect.
Parallel to the liquid biofuel life cycle, the life cycle of liquid fossil fuels also shows that energy and environmental emission flows occur directly from every step of their production, delivery, and final use. Therefore, other chemicals needed in production, as well as the intermediate energy sources such as electricity and the fuels needed for delivery to the point of use could be accounted.
Input: chemicals and energy
Crude Oil Shipping from Liquid Energy Use Drilling the Middle East Refinery fossil of 1GJ Fuels
Output: Emissions to environment
Figure 5-2 Life Cycle boundary of the liquid fossil fuels
Having defined the life cycle boundaries of the biofuels and the corresponding liquid fossil fuels, the next step in the analysis is to determine the functional unit against which their environmental performance is measured.
5.1.1 Functional Unit
As part of the life cycle assessment procedure, and to provide a fair comparison between the two products, it is necessary to determine the functional services of the liquid fossil fuels and assess their substitute biofuels on the same basis. This study therefore Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 108 selected a functional unit of one gigajoule of useful energy of each type of fuel. The 1 GJ represents the net portion of final energy, which is available to the consumer after final conversion. In this analysis, the final conversion of chemical energy stored in the fuels signifies the distance travelled by the vehicles powered by a diesel or spark ignition engine, the electricity produced by stationary diesel engines, or the amount of heat produced by a furnace.
For each type of liquid fossil fuel and its biofuel substitute analysed, the selection of one GJ of useful energy as one functional unit will produce emissions that depend on the technology utilising the fuel. Table 5-1 describes the basic calculation of the functional unit of 1GJ fuel used. In this calculation, all environmental flows occurring during the life cycle of the biofuels and fossil fuels were normalized to the functional unit of 1GJ fuel expended.
Table 5-1 Basis calculation for functional unit of 1GJ fuel used
No. Type Biofuel Type of Basis calculation for application Fossil Fuel 1 Bioethanol Unleaded Spark 2.66 MJ fuel energy per km or 1 petrol ignition GJ expended energy, which is 376 passenger car km travelled by a spark ignition passenger car in the European driving cycle. Linear regression was carried out to estimate the tailpipe emission of the full application of E100. 2 Biodiesel Automotive Lorry 28t 10.2 MJ fuel energy per km travel Diesel Fuel powered by or 1 GJ expended for 28-ton lorry diesel engine travelling for 98 km
3 Pure plant oil Industrial Heating using 1.05 MJ fuel energy required to Diesel Oil 1MW produce 1 MJ heat and 0.02342 kg Industrial of industrial diesel oil required to furnace produce 1 MJ of fuel energy
For bioethanol and petrol, the emissions are based on the 1 GJ expended energy, which is 376 km travelled by a spark ignition passenger car in the European driving cycle, and 98 km travelled by a 28-ton truck powered by a diesel engine is used to analyse the LCA of biodiesel and automotive diesel oil. For the analysis of pure plant oil and industrial diesel fuel, the unit is the useful energy 1GJ spent on the operation of a 1 MW furnace, which is Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 109
1.05 MJ fuel energy required to produce 1 MJ heat and 0.02342 kg of industrial diesel oil required to produce 1 MJ.
5.1.2 Data collection and co-allocation
The inventory data for this study were taken from the bioenergy report of Eco invent Database (Jungbluth et al. 2007) for several typical production process models (Simapro 2011). These data include life cycle inventories for biodiesel, pure plant oil derived from Malaysian database. Bioethanol life cycle inventory meanwhile adopted the Brazilian database as the country has experienced with ethanol programme since in the 70’s. The data however, were adjusted to suit the Indonesian context, primarily for circumstances related to transportation, electricity generation, and crops yields.
A field trip to Indonesia in May 2013 intended to obtain those life cycle inventory data for Indonesian context. Those data relevant to palm oil plantation were collected from the Bekri palm oil plantation in Lampung province, which is owned by PTPN VII, a state-owned plantation company. Sugar cane plantation data were collected from the Djatiroto sugar cane plantation of PTPN IX, a state-owned plantation company in the East Java province. The data for bioethanol production were obtained from PT. Molindo Raya in Malang, East Java province, while biodiesel data were collected from various local plants in Indonesia including PT Indo biofuel Energy in Merak-Banten province, BPPT owned biodiesel plants in Jakarta and Riau as well as the one operated by Lemigas Indonesia in Jakarta.
As currently there are no plants dedicated to pure plant oil, the life cycle inventory data for this biofuel will use the one from a typical palm oil refinery production plant. The refined bleached deodorised palm oil (RBDPO) properties is the closest to the Indonesian pure plant oil standard and indeed, in some cases the requirements are more stringent as RBDPO is intended for edible purposes. The LCI on these aspects adopted the Malaysian LCI produced by Tan et al. (2010).
As in typical production processes for biomass to fuel, biofuel production flow often produces co-products and by-products. These by products for example apparent for biodiesel production in which Glycerol is produced along with palm methyl ester. The co- products for biodiesel life cycle during the oil palm production however, are minimised. The model and analysis assume that the plantations are solely for biofuel production. Though it cannot be denied that there is always a leaking the feedstock initially allocated for food Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 110 purposes is diverted to biofuel production whenever there is a glut of palm oil stock and depressed palm oil price.
The default treatment of co allocation in the Ecoinvent database is by specifying market allocation criterion. The energy content of the products has normally not been used to derive allocation factors. For ethanol production from sugar cane molasses, economic allocation approach is used, with allocation factors of 100% for ethanol. However, if ethanol is produced from sugar cane in sugar cane refinery, the allocation factors would be 84.3% sugar, 13.6% ethanol, 0.6% electricity, 1.5% bagasse, and 0% vinasses as it is returned to the sugar cane field, respectively applicable to common stages including feedstock (Jungbluth et al. 2007). Similarly, for palm oil production, in which palm oil is 81.3%, palm kernel oil 17.3% and palm kernel meal is 1,4%.
5.1.3 Inventory model
The model intended to simulate the life cycle of both liquid biofuels and fossil fuels in the SimaPro software. This analysis however only considered the greenhouse gases, air, water, and solid pollutants (if any) associated with each of the steps. Therefore, output from this life cycle model consists of the priority pollutants CO2 CH4, N2O, NOx, CO, NMVOC (Non-Methane VOC), particulate matter and other broader environmental indicators. These also include photo-oxidant potential, heavy metals, carcinogenic substances, and solid waste
Energy, raw material and emissions associated with the production during the plant-life for the equipment (embodied aspects) were not included. The embodied aspects contained in every step of the fuel cycle are related to vehicle manufacture, maintenance and disposal, and road building that are applicable to the total transportation emissions. In the fossil fuel life cycle, those consist of capital goods of the petroleum refinery plant, crude oil tankers, and the fossil fuel distribution infrastructure. The embodied aspects for the biofuels cover producing plantation equipment, trucks to transport fresh fruit bunch during the harvesting, CPO mill, biodiesel plant and infrastructure associated with the palm biodiesel distribution. There are several reasons for excluding the embodied factors. Firstly, both products, the liquid biofuel and their corresponding liquid fossil fuels, may have many of the same steps in their life cycle. These include factors in the transportation such as using the same kind of bus, roads and even fuel distribution infrastructure. Secondly, Beer et al. (2000) have illustrated that using the European study of VW Golfs and the NSW RTA’s studies, the Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 111 contribution from such factors in the fuel life cycle are not likely to vary significantly with the nature of the fuel used. They also showed that the VW Golf study revealed that material production, assembly and disposal accounted for less than 15% of the total energy used.
To illustrate the life cycle of a fuel modelled in SimaPro, Figure 5-3 for example, shows the life cycle tree model of greenhouse gas (GHG) emissions from 1GJ palm biodiesel production. It describes the flow from the plantation up to the retail fuel station or generally called pre-combustion stages. The model therefore excluded the prior land use stage and the stage of biodiesel utilisation in the diesel engine vehicle. This accumulated pre-combustion GHG emissions include the emission from production of fresh fruit bunch (FFB) of palm oil, transportation to the crude palm oil (CPO) mill, palm oil extraction, CPO refining to refined bleached deodorised palm oil (RBDPO), palm methyl ester (biodiesel) production and distribution up to the retail fuel station.
As the biodiesel production process has multiple input and output namely palm methyl ester and glycerol, care should be taken to accommodate the allocation factor and mass balance for this production process.
Palm methyl ester at biodiesel plant is produced at 972.7 kg per 1000 kg palm oil with allocation factor of 87.1% Glycerine from palm oil at biodiesel plant is produced 106.1 kg per 1000 kg of palm oil with allocation factor of 12.9%
Therefore, the input of 1.0 kg palm oil at biodiesel plant is multiplied with the allocation factor of 87.1% and divided by 0.9727 (the amount of palm methyl ester produced per kg of palm oil). Hence, 0.895 kg of palm oil input is attributed to the production of 1kg palm methyl ester and 1.216 kg of palm oil is attributed to the production 1kg glycerine. The value at the top of each box on the LCI tree in figure 5-3 shows the quantity of material and services in that stage. For a functional unit of 1 GJ energy expended, 26.9 kg of biodiesel is required for 1GJ energy equivalent. Similarly, the fourth- row boxes indicate that 24.1 kg of Palm Oil and 2.66 kg of methanol, about 35 MJ heat and electricity required to produce 26.9 kg biodiesel. The value of accumulated GHG emitted at each stage is expressed in kg CO2eq and presented in the bottom of each box. This value is also indicated by the flow line weight and vertical bar on the right side of each box. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 112
The figure shows a final accumulated value of GHG emission at 43.3 kg CO2eq. It also indicates that the oil extraction process of palm fruit in the milling stage has contributed to 55% of the total emission. This is due to the practice of treating palm oil mill effluent with a high Chemical Oxygen Demand (COD) content of in the open pond. The second largest greenhouse gas contribution, around 15% of the total, is from palm fruit production. This makes up the greenhouse gas emission from producing palm oil is around 78% of the total
GHG emission or about 36.6 kg CO2eq for every 1GJ equivalent of biodiesel in the retail fuel station. The contribution of methanol as the reactant in the trans-esterification reaction and the use of energy in the biodiesel production process are about 11% of the overall greenhouse gas emission.
The same method for simulating the palm biodiesel was used in modelling the lifecycle of automotive diesel oil (ADO). It also aimed to evaluate GHG emissions per 1 GJ of the fuel delivered in the retail fuel station. This GHG emissions from this pre-combustion stage includes the production of crude oil from the Middle East, transportation to Indonesia and refining the crude oil to produce 1GJ equivalent or 23.4 kg of ADO. The Figure 5-4 shows a final accumulated GHG quantity of 8.39 kgCO2eq emitted for 1GJ equivalent of ADO. The width of line stream flow indicates that majority of the emission comes from crude oil production (33%), comprised of flaring the natural gas in the onshore facilities, heavy fuel oil burned in the furnace and diesel oil burned in the diesel electric set. The second largest contribution (21%) occurs during the burning of refinery gas in the refinery complex, while transporting the crude oil from the Middle East contributes around 13%.
Comparing the LCI snapshot of biodiesel and ADO, one may observe that the liquid fossil fuel emits less GHG emissions than biodiesel. However, the liquid fossil fuel will emit significant greenhouse gas during combustion (the use in vehicles), while biodiesel from palm oil is considered carbon neutral, hence its emission at this stage is considered zero. Therefore, an analysis of the full life cycle between the two based on the same functional unit, which is followed by suitable impact assessment need, is necessary to provide a complete picture.
Similar inventory activities were also carried out for other biofuels and their corresponding fossil fuel substitutes. Detailed description life cycles of those fuels were modelled in SimaPro and they can be found in the Appendix B. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 113
Figure 5-3 Sample of palm biodiesel life cycle tree in SimaPro7.3 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 114
1E3 MJ Automotive Diesel Oil energy contentl/ID U 8.39 kg CO2 eq
23.4 kg Automotive Diesel Oil, at regional storage and service 8.39 kg CO2 eq
23.4 kg 3.61 tkm Automotive Diesel Transport, lorry Oil, at refinery/ID U 20-28t, fleet average/CH U 6.86 kg CO2 eq 0.689 kg CO2 eq
23.4 kg 31.5 MJ 7.28 MJ Crude oil, production Refinery gas, Heavy fuel oil, RME, at long burned in burned in refinery distance furnace/MJ/CH U furnace/MJ/CH U 3.74 kg CO2 eq 2.12 kg CO2 eq 0.672 kg CO2 eq
23.7 kg 191 tkm Crude oil, at Transport, production transoceanic onshore/RME U tanker/OCE U 2.74 kg CO2 eq 1.07 kg CO2 eq
9.02 MJ 14.8 MJ 191 tkm Diesel, burned in Natural gas, sweet, Operation, diesel-electric burned in production transoceanic generating set/GLO flare/MJ/GLO U tanker/OCE U 0.778 kg CO2 eq 1.01 kg CO2 eq 0.879 kg CO2 eq
Figure 5-4 Sample of automotive diesel oil (ADO) life cycle tree in SimaPro 7.3. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 115
5.1.4 Impact Assessment step
The next step in the life cycle analysis was to carry out an impact assessment. Before the LCA using specified method such as Eco Indicator 99, it is importance to collect impact categories suited to this study. They are greenhouse gas emission during the life cycle and the emission of priority pollutants. The selection of GHG emission is of importance to evaluate the biofuels and their corresponding fossil fuels as it is the leading cause of climate change. Selecting the greenhouse gas accounting was also relevant because several studies has shown that the expansion of vegetable oil based biofuel, particularly from palm oil, led to an increase in GHG emissions (Bessou et al. 2012; Henson, Ruiz & Romero 2012). The Malaysian study also confirmed this, in which GHG emission primarily come from land conversion (60%), methane emissions from palm oil mill effluent treatment via anaerobic digestion (13%), fossil-fuel combustion (13%), and fertilizer application (4%) (Hassan, Jaramillo & Griffin 2011). Though the work by Searchinger et al. (2008) and Fargione et al. (2008) were not based on empirical studies, they also have shown that converting natural habitat to biofuel plantation could lead to GHG emissions exceeding the amount emitted by the fossil fuel that it tries to replace. .
This method itself is based on the IPCC climate change factors developed by the Intergovernmental Panel on Climate Change (IPCC 2007). It contains the climate change factors of IPCC with a timeframe of 100 years. As such, normalization and weighting GHG refers to the IPCC and some of the gaseous pollutants are presented in the Table 5.2
Table 5-2 Global warming potential of major GHG emission
Pollutants Unit Normalisation factor Weighting Factor CO2 g CO2 0.001 1 Methane g CH4 0.001 21 N2O g N2O 0.001 310 Sequestration g CO2 0.001 1 Varies according to the Other g CO2 eq. 0.001 substance’s relative GHG Greenhouses effect
As this study is related to utilising biofuel which mostly for transportation, it is of a particular interest to identify the total emission of each biofuel as well as their fossil substitutes on several priority pollutants, namely NOX, NMVOC, particulate matter and Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 116 sulphur dioxide. These pollutants are common and important tailpipe emissions which are frequently measured (Beer, Grant & Campbell 2007; Sheehan et al. 1998). Knowing how much each fuel emits and at which stage in its life cycle could inform the magnitude and severity of the fuel’s local environmental and health impact. The following table 5-3 shows the list of priority pollutants and its normalisation factors.
Table 5-3 List of priority pollutants
Priority of Pollutants Unit Normalisation factor NOx as NO2 g NOx 0.001 SOx g SO2 0.001 Non Methanic VOC g NMVOC 0.001 Particulates g PM10 0.001
Final impact assessment in this study employs Eco Indicator 99,which was developed by the Dutch housing ministry as an upgrade of Eco'95 (Goedkoop & Spriensma 2001). Though it is old method and could not answer all the environmental concerns, it is powerful in producing a single end point metric. It has been commonly used in LCA studies on biofuel including those by (Contreras et al. (2009); Zah et al. (2009)) and Emmenegger et al. (2011). This method analyses three different types of damage: human health, ecosystem quality and resources.
Figure 5-5 General representation of Eco-Indicator 99 methodology
Source: Goedkoop M., Spriensma, 2001 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 117
Figure 5-5 shows general representation of Eco-Indicator 99. It started with characterization step that include several impact categories. This means impact category indicator results, calculated in the characterisation step, were added to form damage categories. The addition without weighting was justified here because all impact categories that refer to the same damage type (like human health) have the same unit (for instance DALY-disability adjusted life years). The damage assessment step was performed by calculating the indicator point through normalization and weighting. The normalisation and weighting values are shown in the Table 5-4. The results are presented in terms of both nominal values and single unit score. The single unit score represents the sum of normalized weighted nominal values of each indicator. If a product has a higher score of Eco-indicator '99 than others, it indicates that the product has a greater environmental burden during its life cycle. By evaluating the emission generated during the life cycle of both fuel categories, we can distinguish the environmental impact performance of both fuels.
Table 5-4 Normalisation and Weighting for damage assessment for Eco-indicator 99
Impact category Unit Damage Normalization Weighting Category Fossil fuels MJ surplus Resources 1.325E-4 400 Minerals MJ surplus Land use PDF*m2yr Acidification/ PDF*m2yr Ecosystem 1.748E-4 400 Eutrophication Quality Eco toxicity PAF*m2yr Ozone layer DALY Radiation DALY Climate change DALY Human Health 1.141E2 400 Resp. inorganic DALY Resp. organics DALY Carcinogens DALY
The following section therefore covered the results of the life cycle analysis, from the cradle to wheel or final service, using the same functional unit (that is, 1 GJ of useful energy) for each biofuel and its corresponding liquid fossil fuel. It began by assessing the GHG emission focusing on the land use change. This was followed up by a similar assessment of Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 118
the biofuels in terms of priority pollutants such as NOx, particulate matter, SO2 and NMVOC as well as assessment using Eco-indicator 99.
5.2 GHG EMISSIONS FROM LAND USE CHANGE
Using the results from the biofuel projection up to 2025 carried out in Rahmadi, Aye and Moore (2013) , the biofuel aspiration would be achieved by blending the biofuels with the liquid fossil fuels at maximum blending ratio. The total biofuel consumption would reach about 27.2 million kL and they require a total of 4.82 million hectares of land. This assumes biodiesel will be from palm oil with the yield rate of 5.28 ML/ha/year. Pure plant oil is also from palm oil, which has a yield of 5.16ML/ha/year. Both figures were based on the average yield of palm oil at 5.0 t of CPO/ha. Bioethanol is produced from sugar cane with an average yield of 6.47ML/ha/year. To achieve the biofuel target, one needs to specify potential land required. This is used as a basis to determine the extent of environmental, social, and economic impact of this biofuel programme. The total land would be obtained by multiplying the biofuels yield rate and its corresponding target for 2025. Details of biofuel consumption along with the required area for the biofuel plantation are presented in the Table 5-5.
Table 5-5 Projected Land Areas and Volume of Biofuel in 2025
Biofuel Biofuel Volume (million kL) Land required (million ha) - Biodiesel 11.4 2.11 - Bioethanol 10.0 1.54 - Pure Plant Oil 5.8 1.13 Total 27.2 4.82
The figure of 4.82 million ha land used as the basis for this LCA analysis is lower than the early prediction by the government, in which an additional 6 million ha should be allocated for biofuel programme (National Team for Biofuel Development 2006). However, the figure is still substantial as new land requisition for the biofuel production should not come from the current biofuel crops plantations that are initially intended to produce food.
Given the total land in Indonesia is approximately 181.16 million ha, around 53.6 million ha in 2009 was used for agricultural purposes, with the forest area covering about half of the total land area (The World Bank 2012). On the issue of land availability for this Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 119 biofuel plan, a white paper by Chalmers and Walden (2009) of Winrock International has demonstrated that the slightly less than 6 million ha required for the biofuel plan are potentially available. The availability in this context based on the suitability of land types that exclude peat, forest, protected areas, highly water and soil erosion land and the existing residential areas, oil palm and sugar cane plantations.
Using national scale GIS analysis, they identified about 57.2 million ha of land is suitable for sugar cane plantation. By excluding peat land, forest, areas that are prone to water and soil erosion, the current sugar cane plantation area, as well as sufficient land allocation for rice production, the available land is about 4.92 million ha. This so-called geophysical plus available land for sugarcane plantation may potentially produce 27.5 million kL of bioethanol (approximately 20 million kL petrol equivalent). The same study also identified about 92.4 million ha of land suitable for growing oil palm. If the same classified areas were excluded, that would leave 18.6 million ha to be available for oil palm projects.
Given a conventional figure of 0.85 kL of biodiesel for every ton of CPO produced, the potential "geophysical plus‟ area for palm oil could produce around 53 million kL of biodiesel. A more detailed study of land cover classification in the three main oil palm plantation islands, i.e. Sumatra, Kalimantan and Papua by Gunarso et al. (2013) has noted that sufficient non-environmentally sensitive areas, classified as shrub and grassland up to 18 million ha, could be available for the biofuel development.
5.2.1 Land classification issue
Several researchers have attempted to quantify the impact of land use change due to certain human activities. However, these studies often produced different results due to variations in land classification and the fact that there are inconsistencies in data from formal institutions in Indonesia. Each local government as well as related ministry classify the land under its authority and one may think that the national data coming out of the governmental ministries are a compilation of the local data. However, that is not the case. The ministry of forestry for example, has classified almost 70% of the total land, or about 140 million ha, as forest area (Chalmers & Walden 2009). Land classified as agricultural, either for annual or perennial crops, must therefore overlap the claimed forest area.
Two studies on the impact of land use change for oil palm in Kalimantan by Carlson et al. (2012) and by Gunarso et al. (2013), provided further detail. They both have relatively Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 120 similar original data, such as the total area of study, and use a similar manual digitisation process of the spatial area occupied by oil palm plantations, yet there is a difference in land cover classification for Kalimantan. These studies hence may produce different results on the extent and rate of the future oil palm expansion.
Another study by the US EPA (2012) revealed yet another difference in land cover classification. The study was intended to evaluate renewability of overall palm biodiesel from the view of GHG emissions and to provide analyses of palm oil used as a feedstock to produce biodiesel and renewable diesel under the Renewable Fuel Standard (RFS) program. The study projected oil palm expansion development in a scenario in which the forest and mixed land cover types would account for over 80% of the land impacted by oil palm expansion. The mixed land cover category assumes equal shares of forest, grassland, shrub land and cropland. The authors asserted that these projections are in line with recent historical data, USDA reports and peer-reviewed literature, all of which indicate that much of the recent expansion in palm oil has been at the expense of tropical forest. Table 5-6 highlights the difference.
If the land classification and the extent of land use change are different, different results may be produced, which affects the analysis of environmental impact such as GHG emissions. The dissimilar results are also exacerbated if each study uses different datasets for land use change GHG emission factors, because each land category has different values of carbon stock per ha and thus different GHG emission factors. The dissimilar results from various studies due to different GHG emission factor databases have been confirmed by Broch, Hoekman and Unnasch ( 2012). One of their conclusions was that difference in emission factors for land use change, such as the one from Winrock database (Harris, Grimland & Brown 2010) and Woods hole data base (California Air Resources Board 2009) ) may contribute to dissimilar estimates of GHG emissions from land use change. In addition, a recent study by the RSPO (Roundtable on Sustainable Palm Oil) working group has also proposed suggested GHG emission factors regarding land use change in the South East Asia region to be used by individuals or business entities as a reference for palm oil development in that region (Agus et al. 2013). Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 121
Table 5-6 Comparison of land cover classification from three land use change studies
Carlson et al. (2012) Gunarso et al. (2013) US EPA (2012)1 Land cover types Oil Palm Land cover types Oil Palm (%) Land Cover Oil Palm (%) type (%) Primarily Intact 47 Undisturbed 0.09 Forest 38% Forest Upland Forest Logged Forest 22 Disturbed Upland 35.1 Mixed2 33% Forest Agri-forest 21 Upland Shrub Land 38.8 Shrub land 0.06% Non-Forest 10 Upland Grasslands 1.1 Savannah 9% Intact Forest: Closed-canopy Undisturbed 0.1 Grassland 1 forest without detectable Swamp Forest evidence of disturbance and ≥ Disturbed Swamp 8.4 Croplands 6% 88% PV fraction. Forest Logged Forest: Forest with detectable evidence of Swamp Shrub Land 7.6 Wetland 1.0% disturbance and ≥75% PV Swamp Grassland 0.1 Peat 12% fraction. Agroforest: Tree-based with agricultural production systems Rubber Plantations 1.3 Barren land 0.09% including >3 yr. old dry rice Pulp Plantations 0.3 1) based on FAPRICARD fallows, rubber, coconut groves, and Geomod model and fruit tree gardens with Mixed Tree Crops 0.3 estimation ≥60% PV fraction; excludes oil palm. Rice Paddy 0.01 2) Rubber, timber Agriculture plantations, agroforestry Non-forest: Roads, rivers, open mines, human settlements, Upland Agriculture 4.1 grasslands, dry rice gardens, wet rice gardens and fallows, young (<3 yr.) dry rice fallows, burned/cleared areas, and all other land cover types with <60% PV fraction; excludes land cleared for or planted with oil palm. Oil Palm Areas being cleared for or planted with oil palm.
Despite differences in classifying the land covers, and thus the past years land use change of oil palm plantation, all the studies agree that much of the recent expansion in palm oil has been at the expense of tropical forest. In addition, such expansion may also come from conversion of other plantation such as coconut, rubber, pulp plantation and mixed tree crops. This has potentially generated GHG emissions in the form of carbon release and N2O. However, the amount it emits per hectare varies greatly as it depends on the type of prior land use, the classification of land cover and the selection of the related Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 122 emission factors. This implies two scenarios of land use trajectory for biofuel development should be explored.
The first scenario follows the current trend in Indonesia, which we call land use change with business as usual (LUC BAU). The scenario in which oil palm plantations for example, tends to be developed on land classified as forest although other less environmentally sensitive land such as grass land (imperata cylindrical) is available. This is despite the soil in the land areas are often sufficiently fertile (Friday et.al., 1999). Income from logging the timber is suspected as a major driver in forest conversion to the plantation (Hunt 2010). The land development trajectory based on past year trend may also present realistic outcome as the nature of plantation expansion will likely to be successfully realised if the new expansion would occur within concession boundaries to save initial cost of building infrastructures.
Moreover, conversion from mixed crops areas to biofuel plantation could also be included in this LUC scenario, as the rising of crude fossil oil price would increase the development of biofuel, which led to more conversion from other crops such as rubber and coconut. Expansion on peat soil was included in this scenario as many studies (Bessou et al. 2012; Panaka & Yudiarto 2007; Tjakrawan 2013) have confirmed that oil palm expansion occur in the peat areas in Sumatra and Kalimantan. The proportion of prior land cover types in this scenario thus resembles the pattern that the US EPA has suggested. Therefore, LUC BAU in this study would comprises of barren land 0.09%, forest 38%, mixed land cover 33%, savannah 9%, grassland 1%, croplands 6%, wetland 1.0% and peat 12%.
In an alternative scenario (LUC ALT), all biofuel development is located on the land type that minimises environmental impact. The potential utilisation of abandoned logged concession area may reach 20 million ha (Dillon, Laan & Dillon 2008), which could provide an avenue for reducing the GHG effect. In this scenario, new biofuel development should come from the use of degraded land, grassland, shrub land or disturbed upland. Thus, it can avoid conversion from the forest and peat areas to biofuel plantation.
This is relevant, given that expansion to peat areas for oil palm plantation is naturally discouraged as plantation developers have sound economic reasons for avoiding peat swamps. The establishment of oil palm plantation on peat soil requires extra cost for drainage as well high expenditures on fertilizer application as the peat soils also often exhibit Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 123 nutrient deficiencies (Lane 2011).Productivity of oil palm planted on peat land consequently is lower than the one produced in mineral soils. Hence, planting on peat land is something that most plantation companies would rationally avoid. Both oil palm developments for biodiesel and pure plant oil, are expected to take place in major biofuel plantation regions. Under a land classification as in LUC-ALT, forest, cropland, mixed land cover, wetland and peat are excluded for biofuel development. Following Gunarso et al. (2013), this scenario would comprise of barren land 5%, grassland 5%, savannah 10% and shrub land at about 80%.
Using a simple arbitrary selection method, the projected area of around 4.72 million ha using LUC BAU scenario would comprise of 3.25 million ha for oil palm and 1.48 million ha for the sugar cane. In the absence of detail physical land data in Indonesia, the land selection of oil palm expansion for both scenarios assumes to be equal at the administrative regions of South Kalimantan, East Kalimantan, Central Kalimantan, West Kalimantan, and Papua provinces. For sugar cane, the projected development allocation would be shared equally between Lampung and Papua. Details of projected areas for both scenarios are presented in the Table 5-7 and Table 5-9 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 124
Table 5-7 Distribution area for biofuel development for scenario LUC BAU (ha)
Administrative area Barren land Crop land Forest Grass land Mixed area Savannah Shrub Wetland Peat Lampung 662 45,014 278,247 6,399 246,252 68,183 441 7,061 87,159 West Kalimantan 581 39,505 244,198 5,616 216,118 59,839 387 6,197 76,493 South Kalimantan 581 39,505 244,198 5,616 216,118 59,839 387 6,197 76,493 Central Kalimantan 581 39,505 244,198 5,616 216,118 59,839 387 6,197 76,493 East Kalimantan 581 39,505 244,198 5,616 216,118 59,839 387 6,197 76,493 Papua 1,243 84,519 522,445 12,015 462,370 128,022 829 13,258 163,652 Total 4,229 287,555 1,777,483 40,878 1,573,094 435,561 2,819 45,107 556,785
Table 5-8 Distribution area for biofuel development for scenario LUC alternative (ha)
Administrative area Barren land Grass land Savannah Shrub
Lampung 36,971 36,971 73,942 591,534 West Kalimantan 32,447 32,447 64,894 519,148 South Kalimantan 32,447 32,447 64,894 519,148 Central Kalimantan 32,447 32,447 64,894 519,148 East Kalimantan 32,447 32,447 64,894 519,148 Papua 69,418 69,418 138,835 1,110,682 Total 236,176 236,176 472,351 3,778,808 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 125
Table 5-9 Indonesia Land Conversion GHG Emission Factors over 30 Years (MtCO2-eq/ha)
Conversion From Barren Crop Forest Grass Mixed Savannah Shrub Wetland Peat Lampung (128) (110) 498 (98) 56 (75) (26) (62) 2,850 West Kalimantan (128) (110) 390 (98) 29 (75) (26) (62) 2,850 South Kalimantan (128) (110) 461 (98) 47 (75) (26) (62) 2,850 Central Kalimantan (128) (110) 401 (98) 32 (75) (26) (62) 2,850 East Kalimantan (128) (110) 603 (98) 82 (75) (26) (62) 2,850 Papua (128) (110) 659 (98) 96 (75) (26) (62) 2,850 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 126
5.2.2 Land use and GHG emissions in meeting the biofuel target
The calculation of GHG emissions due to land use change to new biofuel plantations was based on the Winrock database of land use conversion factors over 30 years (Harris, Grimland & Brown 2010). To estimate the land conversion from peat to palm oil or sugar cane, the peat GHG emission factors of 95 Mg CO2eq /ha/yr. were taken from the average figure from Page (2011) and Hooijer et al. (2012). Details are presented in Table 5-9.
Using these figures and the land requirements presented in Table 5-7 and Table 5- 8 produces an average GHG emission of 12.1 t CO2eq /ha/yr. for land use change with business as usual. In contrast, a negative GHG emission figure of -0.94 t CO2eq /ha/yr. is indicated for the alternative, when the biofuel crops expansion is directed to areas that are less environmentally sensitive. The average GHG emission for each biofuel due to land use change may refer to the average yield of the biofuel crops in ton/ha/yr., and normalised using the functional unit of 1GJ useful energy. Detailed results are presented in Table 5-10.
Table 5-10 GHG emission in kg of CO2eq for functional unit of 1 GJ energy used
Biofuel Land use change Alternative land use change Scenario LUC BAU Scenario LUC ALT
(kg of CO2eq/GJ) (kg of CO2eq/GJ) Bioethanol (E100) as petrol substitute 87.8 -6.8 Biodiesel (B100) as ADO substitute 69.1 -5.4 Pure Plant Oil as IDO substitute 68.1 -5.3
It is important to note that the GHG emissions of the pure plant oil per GJ of functional unit useful energy (68.1 kg of CO2eq/GJ) is less than that for biodiesel (69.1 kg of CO2eq/GJ) for the scenario LUC BAU. Consequently, the GHG saving from the use of pure plant oil (5.3 kg of CO2eq/GJ) is less than the one for biodiesel (5.4 kg of CO2eq/GJ) for the alternative scenario LUC ALT. As the lower heating value of biodiesel is less than the one of pure plant for every litre of the fuels, the amount of palm oil component in the combusted pure plant oil is accordingly slightly less than the one contributed by biodiesel. It is therefore not surprising that the pure plant oil would release less GHG emissions than biodiesel and less saving when the expansion of biofuel crops is from the areas that are less environmentally sensitive. The relatively smaller low heating value of bioethanol compared to biodiesel and pure plant oil has made both GHG emissions from LUC for business as usual Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 127 scenario and saving from alternative LUC scenario relatively larger than those of biodiesel and pure plant oil have. Another reason of larger GHG emission found in biodiesel compared to ethanol, is due to practices of open pond in the palm oil production.
However, one cannot claim that it is beneficial to develop more ethanol than other biofuel. This is due to other reason such as the difference in yields of the feedstock crops (oil palm versus sugarcane/molasses) that would also matter. Moreover, without considering the large uncertainties the IPCC factors used for the calculations, it is not even possible to say whether two-digit difference would matter.
With 4.82 million ha required for biofuel crops to meet the biofuel target in 2025 and an average figure GHG emissions of 12.08 t CO2eq/ha/yr., it is likely to produce an annual
GHG release up to 58.3 Mt CO2eq/yr. On the other hand, implementing biofuel crops expansion according to the alternative scenario would potentially save an annual GHG figure of 4.5 Mt CO2eq /yr. This means implementing the scenario of LUC alternative will serve as
CO2 sequestering action. Hence, developing biofuel to meet the government biofuel target in 2025 through planting biofuel crops such as oil palm and sugar cane would be a positive action for climate change mitigation.
5.3 LCA OF BIOETHANOL
Although the life cycle database for bioethanol refers to European conditions, it has adopted parameters to suit Indonesia particularly in the aspects of intermediate energy data, such as electricity and fossil fuels. To minimise the effect of the difference between European and Indonesian driving cycles, the final inventory results are normalised to the functional unit of 1GJ useful energy. Further data editing was carried out in estimating the tailpipe emission, to calculate the use of 100% ethanol as a substitute for unleaded petrol. Appropriate linear regression was carried out to estimate the exhaust emission of the full application of E100 based on the exhaust emission data of E15 application in the Ecoinvent database and the GREET model vehicle emission data from a light vehicle under flexi fuel E85. It assumes the tailpipe pollutant emissions, including the GHG from the passenger vehicle, are in linear proportion with the blend ratio of ethanol petrol. Moreover, the tailpipe emission of SO2 due to the use of unleaded petrol in the Ecoinvent database was also edited to account for the fact that fuel in Indonesia has sulphur content up to 500 ppm (Pertamina 2007). Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 128
The production stage of bioethanol comprised of cultivating sugar cane, sugar and molasses milling, hydrous ethanol production, anhydrous ethanol processing, transporting the biofuel and distribution. The land is solely for biofuel production as assumed in this thesis, which means majority of bioethanol produced will use sugar cane juice. For commercial reason however, alcohol production in Indonesia will also likely come from molasses, a by-product of sugar (Gopal & Kammen 2009). Therefore, the Indonesian bioethanol production structure would be similar to the one in Brazil where 83% of bioethanol is from sugar cane juice and 17% is from molasses (Jungbluth et al. 2007). Though it may be similar to Brazil, the share of cane juice and molasses for bioethanol raw material differ as the economies are different and the size of sugar cane plantation for producing raw sugar in Indonesia is much less than the one in Brazil.
Assuming all molasses from the current 457 thousand hectares of sugar cane plantation in Indonesia (Pusdatin Kementan 2013) is used for bioethanol production and with average yield of 68.7 tons cane per hectare (Jungbluth et al. 2007), that would equal to about 0.36 GL bioethanol production. This molasses-based bioethanol would only contribute to about 3.7% of the total bioethanol required for meeting the target in 2025, while the rest would be sourced from new sugar cane plantation dedicated for bioethanol production. To explore the implications of having different sources of raw material, the life cycle analysis of bioethanol in this chapter will also accommodate the one solely from sugar cane juice, molasses and a combined cane juice and cane molasses.
As the production of bioethanol from molasses is the type of multi-output process, a co-product allocation based on market price is required to provide fair assessment for molasses. A higher value of ethanol in the market would make molasses to be no longer a waste product as it is regarded a valuable product for the fuel purposes. Using the values of typical sugar and molasses conversion factors per ton of sugar cane obtained from Gopal and Kammen (2009) and projected price of sugar and ethanol derived from Baffes and Ćosić (2013), the market allocation factors for bioethanol from molasses could be calculated as input in the SimaPro model. Table 5-11 details those factors. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 129
Table 5-11 Allocation factors in the combined production of sugar and bioethanol Output components of sugar and Yield per ton of Price (US$) Market allocation ethanol plant cane (%) Sugar (100% dry matter) 112 kga 368/tc 68.0 Bioethanol (99.7%) 14.28 kga 0.90/Lc 26.8 Electricity 30.3 kWhb 9.0/MWhd 4.55 Excess Bagasse 19.1 kgb 17.75/tonb 0.56 Vinasse 93.8 kgb 0e 0
Source: a. Calculated using Gopal and Kammen (2009), b. Obtained from Jungbluth et al. (2007, p. 380), c. Evaluated using the World Bank commodity projection data from Baffes and Ćosić (2013), d. Owned estimates the current Indonesian electricity tariff is heavily subsidized. e. The price is assumed to be zero as it was returned to farmers as fertilizer.
5.3.1 GHG analysis of Bioethanol
The GHG analysis of bioethanol carried out in this section has functional unit of 1 GJ fuel used for running a spark ignition light duty passenger car that has specific energy requirement of 2.66 MJ fuel energy per km (Jungbluth et al. 2007, p. 585). The LCA data adopted the Ecoinvent Report No.17: Life Cycle Inventories of Bioenergy produced by the Swiss Centres for Life Cycle Inventories. The tailpipe emissions data were taken from the New European Driving Cycle (NEDC) carried out on a chassis dynamometer relevant to Switzerland and the European Community. Table 5-12 presents details of this impact assessment of these biofuels’ life cycle.
Table 5-12 Comparison of GHG emission from bioethanol and unleaded petrol under the
scenario of LUC in Kg CO2eq
Life cycle stages Bioethanol* Unleaded petrol LUC BAU (Business LUC ALT as Usual) (Alternative) LUC 87.8 -6.8 0 Upstream 15.4 15.4 4.9 Tailpipe 0 0 76.6 Total 103.2 8.6 81.5
* Note: The bioethanol in this context is the one from sugar cane juice sourced from the dedicated biofuel plantation
The results of GHG emissions during the bioethanol life cycle from plantation to the utilisation in the vehicles for every GJ energy content depicted at Table 5-12 has shown that it emits about 15.4 kgCO2eq of GHG during its production. It also shows no GHG in the Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 130
exhaust emission as CO2 gas produced during the operation of the vehicle is carbon neutral.
In contrast to bioethanol, petrol produced GHG emissions of 14.9 kg CO2eq in the upstream stages and 76.6 kg CO2eq in the tail pipe. However, the inclusion of LUC from dedicated bioethanol plantation has made its overall GHG emissions to be significant, i.e.
GHG emissions of 87.8 kg CO2eq/GJ for LUC with Business as Usual scenario and a GHG saving of 6.8 kg CO2eq/GJ for LUC Alternative. The total GHG emissions in the LUC
Business as Usual scenario produced a figure of 103.2 kg CO2eq/GJ. Such a figure was found to be larger than the total GHG emissions emitted due to the use of unleaded petrol.
As a comparison, a study by Khatiwada et al. (2012) on the Brazilian ethanol from sugar cane for CARB (California Air Resources Board) has provided a GHG emissions figure of 46 kgCO2eq /GJ with land use change. Wang et al. (2012) presented a lower figure of 16 kg CO2eq/GJ for sugar cane ethanol with LUC. The relatively higher GHG figure for Indonesian bioethanol was due to the types of land cover prior to the development of the sugar cane plantation. If the land developed is from forest and peat, the GHG generated by the plantation would be significantly higher2. In contrast, other studies based their calculations on the assumption that majority of the land available for growing the sugar cane were formerly pasture and crop lands. Conversely, if the land is formerly from less sensitive areas (barren land, shrub, and grassland) as modelled in the LUC alternative, an average
GHG saving of 6.8 kg CO2eq may be expected.
The GHG emission in the upstream stages (fertilizer, farming, alcohol production and transportation/distribution) of developing Indonesian bioethanol based on the sugar cane is less than the one produced in the study by Wang et al. (2012) at 29 kg CO2eq /GJ. The ethanol in Wang et al. study however, was imported from Brazil, and intended for the US market. Discounting the GHG emissions contribution from long distance transportation and distribution from Brazil to the US (about 11 kg CO2eq /GJ.) and accounting for the local transportation and distribution of about 1.6 kg CO2eq/GJ, it would end up about 19.6 kg
CO2eq, which is closer to the one found in this study if LUC is excluded.
Factoring the land use change with the two scenarios of Business as Usual and the Alternative scenario, Indonesian bioethanol appears either much better or slightly worse than
2 See US EPA (2010), Macedo, Seabra and Silva (2008) Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 131 its fossil substitute depending on what type of land prior to be used for biofuel development. For the Business as Usual scenario, the overall GHG emissions per GJ fuel used appeared slightly more than it would be for petrol. If less sensitive land is used, much less GHG could be emitted from bioethanol than from petrol. It is therefore important to note that the appropriateness of bioethanol for Indonesia in terms of GHG emissions largely depends on the prior land use factor.
5.3.2 Assessing impact category on priority pollutants emission
The LCA simulation results based on the emission of four priority pollutants using SimaPro 7.3 are presented in Table 5-13. They are classified into upstream and tailpipe stages. To properly evaluate the bioethanol environmental impact assessment, the results of unleaded petrol simulation are also presented in the same table to provide a fair comparison.
Table 5-13 Life cycle emissions of bioethanol and unleaded petrol on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used
Priority pollutants Life cycle stage Bioethanol* Unleaded Petrol NOx(gram) Upstream 158 42 Tailpipe 22 19 NMVOC (gram) Upstream 14 16 Tailpipe 42 45 Particulate as PM10 Upstream 48 6 (gram) Tailpipe 8 8 Sulphur content (gram) Upstream 70 85 Tailpipe 3 23
* Note: The bioethanol in this context is the one from sugar cane juice sourced from the dedicated biofuel plantation
This inventory analysis did not account for the priority pollutants NOX, NMVOC, particulate matter and sulphur dioxide during the process of land use change. The reason for excluding this important stage in the life cycle assessment is that there is insufficient research on these priority pollutants during the process. Carbon is the only pollutant so far that has been sufficiently researched and included in the life cycle assessment discussion. Nevertheless, it is worth noting that the impact of emissions from these priority pollutants can never be completely dismissed, given that incidents around haze and smog do occur from time to time. However, as these emissions during the land use change may occur due to Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 132 various causes, largely incompliance with government regulations, therefore counting these emissions as part of the steady state emission per functional unit would be difficult and may not reflect the actual conditions.
Despite incomplete data, Table 5-10 managed to show that bioethanol in total produces more emissions than unleaded petrol in some pollutants’ category (NOx and particulate matter). However, separating the overall emissions for the life cycle into upstream (pre-combustion) and tailpipe (combustion) suggested that, except for NOx emissions, the amount of pollutants in the bioethanol tailpipe is less than the amount emitted from unleaded petrol, notably in SO2, emissions. The reason is that the fuel is essentially free of Sulphur and thus its present in the tailpipe emissions is zero. This shows that typical upstream process of biofuel such ethanol produces more emissions that it’s corresponding fossil fuel.
In terms of particulate emissions, the tailpipe emissions from bioethanol is relatively close to that of unleaded petrol. Conversely, bioethanol pollutant emissions in the upstream stages are much higher than the one from unleaded petrol. The particulate matter emitted in the upstream stages (plantation, biofuel process) is mostly from combusting the bagasse (sugar cane waste) in the boilers. Bioethanol has slightly less NMVOC in both the upstream and tailpipe stages. The conflicting results of NOx and NMVOC confirm the uncertainties in relation to the ozone-forming potential. The NRC (1999) was unable to provide a definitive statement as to whether the use of bioethanol could actually decrease potential ozone formation.
This local uncertainty of environmental benefit exemplifies one of limitations of the full fuel-cycle analysis, which does not consider geographic variations in its concept. While it is appropriate to examine environmental performance using greenhouse gases as the global pollution issue, it is less certain to interpret the results in the case of local pollutants (Beer & Grant 2007). The reason is that the effect of emissions may differ depending on the location as well as the nature of the biofuel. It is therefore cautiously concluded that bioethanol does not perform any better in terms of four priority pollutants than its fossil substitute. This is despite the fact that unleaded petrol in Indonesia contains around 500 ppm of sulphur (Pertamina 2007), which is relatively high compared to one in other countries. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 133
5.3.3 Impact assessment based on Eco-indicator 99
The environmental impact of both fuels, bioethanol, and unleaded petrol, during the life cycle was also assessed using the Eco-indicator 99. The results are shown in Table 5-14 in which the impact category within the indicators are presented in terms of their both nominal value and single unit score. As a comparison, the total single unit score of bioethanol using molasses only is also presented.
Table 5-14 Life cycle impact assessment using Eco-indicator 99 with functional unit of 1GJ
Impact category Damage Assessment indicator Eco-indicator 99 score (pt) Unit Bioethanol Unleaded Bioethanol Unleaded Petrol Petrol Fossil fuels MJ surplus 16.25 167.12 0.43 4.43 Minerals MJ surplus 0.59 0.09 0.02 0.00 Land use PDF*m2yr 104.99 0.29 7.34 0.02 Acidification/Eutr PDF*m2yr 1.74 0.62 0.12 0.04 ophication Eco-toxicity PAF*m2yr 14.46 14.25 0.10 0.10 Ozone layer DALY 0.00 1.76E-08 9.40E-05 8.02 E-03 Radiation DALY 3.01E-08 1.43E-08 0.00 0.00 Climate change DALY 3.16E-06 1.82E-05 0.14 0.83 Resp. inorganic DALY 6.03E-05 1.99E-05 2.75 0.91 Resp. organics DALY 5.42E-07 1.14E-07 0.02 0.01 Carcinogens DALY 4.11E-04 1.22E-06 18.74 0.06 Total Eco-indicator 99 score 29.67 6.39
Bioethanol scored 29.67 points using the Eco-indicator 99 method while unleaded petrol scored much lower at 6.39 points. This means that bioethanol, despite being a renewable fuel, has heavier environmental burden and potentially affects human health. The high Eco-indicator 99 score of bioethanol is largely due to the carcinogenic and land use impact categories. Most bioethanol production is from sugar cane plantations, which need large areas to produce one GJ of useful energy. Operating large areas of sugar cane plantation is likely to adversely affect human health in the form of carcinogenic emissions of aldrin (organochlorine insecticide) and arsenic released into the soil. In contrast, unleaded petrol does not require large areas for its production. The largest contribution of unleaded petrol is from the high consumption of fossil fuel per 1GJ of energy used. This Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 134 demonstrates that it provides more energy than is contained in the fossil fuels used to produce it, which is the main advantage of bioethanol. It is therefore important to improve environmental impact of sugar cane plantation operation by implementing the use of biological pesticide called the spittlebug (Mahanarva fembriolata) such as the one in Brazil as well as avoiding the use of burning sugar cane fields before harvesting to avoid not only killing the pest but also their predators.
5.3.4 The effects on variation of raw materials
The variation of raw materials for bioethanol production has provided alternative for improving the impact assessment of the biofuel in terms of GHG emissions, priority pollutants and Eco-indicator 99. Table 5-15 and Table 5-16 summarise the results of SimaPro model of bioethanol from sugar cane juice only (dedicated biofuel plantation), molasses only and a combine sugar cane juice and molasses.
Table 5-15 GHG emissions from bioethanol in kg CO2eq
Life cycle stages Bioethanol Sugar cane juice Molasses Sugar cane juice &molasses LUC BAU LUC ALT LUC BAU LUC ALT LUC 87.8 -6.8 0 84.5 -6.5 Upstream 15.4 15.4 26.2 17.5 17.5 Tailpipe 0 0 0 0 0 Total 103.2 8.6 26.2 101.6 10.8 Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 135
Table 5-16 Life cycle impact assessment using priority pollutants and Eco-indicator 99 with functional unit of 1GJ
Priority Life cycle stage Sugar cane Molasses Combined sugar cane juice pollutants juice & molasses NOx(gram) Upstream 138 189 151 Tailpipe 22 22 22 NMVOC Upstream 10 18 12 (gram) Tailpipe 42 42 42 Particulate as Upstream 52 54 53 PM10 (gram) Tailpipe 8 8 8 Sulphur Upstream 29 82 36 content (gram) Tailpipe 3 3 3 Eco-indicator 99 nominal value Sugar cane Molasses Combined sugar cane juice score (pt) juice & molasses Fossil fuels 0.43 0.90 0.53 Minerals 0.02 0.03 0.02 Land use 7.34 9.86 7.44 Acidification/Eutrophication 0.12 0.17 0.13 Eco-toxicity 1.01E-01 1.27E-01 1.06E-01 Ozone layer 9.40E-05 1.66E-04 1.07E-04 Radiation 0.00 0.00 0.00 Climate change 0.14 0.25 0.16 Resp. inorganic 2.75 3.19 2.85 Resp. organics 0.02 0.03 0.03 Carcinogens 18.74 24.50 18.97 Total 29.67 39.05 30.24
The results of the life cycle model show that, exclusive of land use change effect, bioethanol from sugar cane juice only emits GHG about 15.4 kg CO2eq and about 26.2 kg
CO2eq for the one from molasses only. The GHG emissions of bioethanol from the combination of sugar cane juice and molasses consequently is about 17.5 kg CO2eq. The higher GHG emissions of bioethanol from molasses implies that increasing price of bioethanol in the market has made the molasses become more valuable than the sugar, and the notion of molasses being co-product of sugar mill may be accurate. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 136
Including the LUC effect with the scenario of business as usual has made the overall GHG emissions for the bioethanol obtained from dedicated biofuel plantation become much higher than the one obtained from molasses, as the latter is from the existing sugar cane plantation. Combination of sugar cane juice and molasses as the raw material of bioethanol for Indonesia does not improve the GHG emissions very much as the current capacity of sugar cane plantations could only contribute to less than 4% of the bioethanol target in 2025.
The assessment in terms of priority pollutants and using the Eco-indicator 99 has demonstrated that the bioethanol produced directly from sugar cane juice have less emissions and better ecological score per GJ energy spent. This is due to more land area required for molasses-based ethanol to produce one unit of GJ energy. This implies that, if the LUC effect is excluded, an increasing value of molasses as the raw material for bioethanol would cause the life cycle of molasses-based bioethanol became worse that the sugar cane juice bioethanol from the standpoint of either of GHG emissions, priority pollutants and Eco- indicator 99.
However, the projection of bioethanol future in Indonesia will likely to follow the structure of ethanol production in Brazil, by which ethanol will be produced from both molasses and sugar cane juice depending on the ratio between the price of sugar and the price of molasses. Should the price ratio of the sugar to molasses price drops below a given breakeven value (which lies between 2 and 2.5), it is not attractive from either lifecycle GHG standpoint or commercial aspect to produce ethanol from molasses. It is therefore as a comparison, a future projection of Indonesian bioethanol; an alternative route of its production would likely to follow an 83% from cane juice and 17% from cane molasses.
5.4 LCA OF BIODIESEL
5.4.1 GHG analysis of Biodiesel
The life cycle inventory model based its assessment on a functional unit of one GJ of fuel used in a 28t lorry powered by a diesel engine, in which a 10.2 MJ of fuel energy is consumed per kilometre of travel. Table 5-17 summarizes their GHG emissions profiles for both biodiesel and automotive diesel oil. The inventories of the fuel application were based on Ecoinvent database while the upstream data inventories of upstream processes were based on palm oil operations, fuel distribution system, electricity production and Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 137 transmission in Indonesia. The figures show that about 50% of the total GHG emitted is from the palm oil mill effluent (POME) process facility. This is attributed to the anaerobic digestion of high organic content of palm oil mill effluent in the open pond, that lets methane escape into the atmosphere. The potential methane production in this analysis was calculated using the clean development mechanism (CDM) guidelines AMS III.H set by UNFCC (2010).
Table 5-17 Comparison of GHG emissions between biodiesel and ADO in kg CO2eq/GJ useful energy
Life cycle stage Biodiesel (B100) Automotive Diesel LUC Business as LUC Alternative Oil (ADO) Usual (BAU) LUC 69.2 -5.4 0 Upstream without LUC (No 47.7(42.8) 47.7(42.8) 16.4 irrigationa) Tailpipe 4.4 4.4 76.8 Total (No irrigationa) 121.3(116.4) 46.7(41.8) 93.2 a. GHG emissions due to intensive irrigation is excluded in the oil palm cultivation practice due to well-distributed rainfall.
These results confirms the work of Patel (2009), who compared the life cycle of several vegetable oils, including palm oil, for energy and surfactant purposes. Relatively large amount of CH4 was produced during the digestion of POME in the so-called open lagoon system. The high organic content of this effluent (about 50,000 ppm in COD-Chemical Oxygen Demand) found in the field work at Bekri plantation in South Sumatra is roughly within the range of those reported by others(Chaisri et al. 2007; Liwang 2003; Yacob et al. 2005). This was also confirmed by Ratunanda (2000) in which the COD loading of a typical 30 tonnes of Fresh Fruit Bunch (FFB) per hour in a palm oil mill was found to be equivalent to the COD loading of waste produced by 75,000 people. Although the finding in this LCA study on palm biodiesel does not propose a solution this problem, it does suggest that this large COD in POME needs immediate attention, as it produces a large GHG effect. Such a technology for capturing methane emissions from anaerobic ponds is available and common. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 138
Although the Indonesian government has been campaigning since 2002 for getting palm oil mill operators to capture methane gas, as well as providing the incentive of the potential income derived from the CDM project, less than 6% of palm oil mills in Indonesia have been adopting methane capture technology (US EPA 2012). Moreover, there is currently no mandatory regulation compelling palm oil mill companies to install the technology. The only regulation set by the Indonesian EPA office is a maximum allowable effluent quality that can be discharged into the environment from the oil palm industry (Ministry of Environment Indonesia 1995). Therefore, the assumption of a limited instalment of methane capture technology up to 2025 for treating palm oil mill effluent is a convincing argument in the Indonesian biodiesel life cycle inventory.
The next largest GHG emissions during the biofuel life cycle is from the use of liquid fossil fuel in the trucks and tractors for transporting the fruit in the plantation. The next largest one is the use of electricity for irrigation, in which a high proportion of coal- and petroleum-based fuel power plant exist in the Indonesian electricity generation system. However, this may not reflect the actual conditions in Indonesia, as rainfall is generally well distributed over the year. Thus, irrigation is not common in oil palm plantations (Comte et al. 2012).
The field trip to Bekri plantation in Lampung province in this thesis has confirmed the statement that irrigation is from surface water delivered by gravity flow and therefore use little electricity. Drainage systems are common to remove excess water and promote the proliferation of oil palm root in deeper soil. This practice was also common during the field trip at the Bekri plantation where there is an installation of controlled drainage systems in the form of lagoons, which retain both surface and subsurface water in the drains before the dry season. There is usually an interconnected drains network, which depends on the hydrological characteristics of the area (Othman 2010).
Unfortunately, detailed research on water management in the Indonesian oil palm plantations, particularly small-scale plantations, is almost non-existent. Therefore the Ecoinvent database used here cited the work by Corley (2003), which based on Malaysian practices, in which 2,100 m3 of irrigated water is required per hectare of oil palm. This implies that GHG emissions in the upstream stages in the absence of land use change could be around 12% less than the result assuming irrigation, of 47.2 kg CO2eq. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 139
The life cycle of automotive diesel oil (ADO) on the other hand resulted in a relatively low GHG emissions (1.8 kg CO2eq for every GJ fuel energy used) in the upstream stages. This result is widely accepted, as the diesel oil life cycle does not take so much land as required to produce palm biodiesel. In the combustion stage, the inventory of ADO presented in Figure 5-6 and summarized in Table 5-14 shows a significant GHG emissions of 85.2 kg CO2eq for every GJ fuel energy used.
Most of the GHG emissions in the ADO life cycle occurs in the tailpipe stage while the emissions during production is very low at 1.82 kg CO2eq/GJ. Although biodiesel does release GHG in exhaust emission, the figure is relatively modest at 4.4 kg CO2eq/GJ useful energy. This GHG release in the tailpipe emissions is due to the presence of methanol as a fossil fuel component in the biodiesel, although the term biodiesel B100 here indicates that the fuel is a pure biodiesel blend. The methanol component in the GHG emissions can be traced back to its origin as a product of the synthesis of natural gas with steam.
As it has been shown, biodiesel can be ecologically better or worse than its fossil fuel equivalent depending on what land is used for the biofuel development: whether business as usual and the alternative scenario. The total GHG emitted from the biodiesel development in the scenario LUC BAU is between 116.4.1 to 121.3 kg CO2eq/GJ. This figure is much larger than the one released by the US EPA (2012) at about 77 kg CO2eq/GJ with the LUC contributes around 44 kg CO2eq /GJ. The higher value of GHG from LUC is because the selected areas for the biofuel crops are in provinces with a higher biomass cover, such as Kalimantan and Papua provinces, while the US EPA calculations were drawn from lower biomass cover areas such as Sumatra. The US EPA analysis also assumes that the palm oil is not all sourced from the new plantation but a significant amount from existing plantations, based on the FAPRI CARD model (US EPA 2012).
This results nevertheless indicated that if new oil palm plantations for biofuel are from forest and other environmentally sensitive areas, like the current palm oil development trajectory, the biodiesel use would release more GHG emissions than fuel diesel does. On the other hand, the total GHG emitted from biodiesel with the alternative LUC scenario is about
41.83 to 46.7 kg CO2eq/GJ, in which LUC helps to sequester about 5.4 kg CO2eq/GJ. This total GHG emissions from biodiesel is around half of the total emissions of diesel fuel at Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 140
93.2 CO2eq/GJ, which make the alternative scenario of the biodiesel development directed toward land covers that are less sensitive would potentially emit less GHG than the diesel oil.
5.4.2 Assessing impact category on priority pollutants emission
The LCA simulation results based on the emission of four priority pollutants using SimaPro 7.3 with Ecoinvent database are presented in Table 5-18. They are classified into upstream and tailpipe stages. To properly evaluate the biodiesel environmental impact assessment, the results of automotive diesel oil are also presented in the same table to provide a fair comparison.
Table 5-18 Life cycle emissions on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used.
Priority pollutants Life cycle stage1 Biodiesel (B100) Automotive Diesel Oil (ADO) NOx (gram) Upstream 71 59 Tailpipe 686 796 NMVOC (gram) Upstream 75 81 Tailpipe 16 43 Particulate as PM10 Upstream 19 4 (gram) Tailpipe 21 31 Sulphur Upstream 31 22 content(gram) Tailpipe 0 120
Note: 1. Tailpipe emissions results for biodiesel, pure plant oil and ADO were obtained from their application in the 28-ton trailer taken from the biofuel report presented in the Ecoinvent database. The basis of calculation is 10.2 MJ fuel energy per km.
As confirmed by many studies that biodiesel emits less particulate matter, NMVOC, and sulphur dioxide in the tailpipe emissions than automotive diesel oil does, but generate more during the biofuel production. The results of particulate matter emissions for example, confirms the finding by the US EPA (2002) that biodiesel emits less particulate matter and soot in their emission tails. The sources of particulate matter in the upstream stages (plantation, biofuel process) are mostly from the combustion process of palm fruit fibre in the boilers, and coal fired boilers in the biodiesel plants. These facilities classified as upstream stages in the life cycle of biodiesel, are often situated in the much less populated areas while the tailpipe emissions occur in the more populated urban fringe. The health impact due to Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 141 particulate emission during the upstream stages may therefore not be as severe as that from the exhaust emission that occurs during the use of the fuel in the vehicles.
The NMVOC and SO2, emissions from biodiesel are expected to be lower in both the upstream stages and in the combustion stage. The reason is that the fuel is essentially free of sulphur. The NOx the emission in the tailpipe from biodiesel usage was found being more than emitted from ADO. These results represent the common finding that the use biodiesel generally emit more oxides of nitrogen (NOx) than ADO. However, Hoekman and Robbins (2012) argued that the use of biodiesel usually, but not always, increases NOx exhaust emissions. Several factors suggest that effects on ignition delay, injection timing, radiative heat loss, adiabatic flame temperature, and other combustion phenomena have contributed to this. It is thus reasonable to conclude that while biodiesel often does have more NOx exhaust emission, effective measures are available to mitigate this problem.
Though the results of tailpipe emissions of priority pollutants are not from any study in Indonesia or under conditions in Indonesia, but from the Ecoinvent database, the tailpipe emissions may not represent the actual performance of both fuels in terms of priority emissions. This is however has been confirmed by Wirawan (2009) on the study of biodiesel utilization in transportation sector in Jakarta, Indonesia. Similarly, this was also confirmed by the study of Mofijur et al. (2013) and Atabani et al (2013) but the latter was carried in the Malaysian context.
5.4.3 Impact assessment based on Eco-indicator 99
The results of environmental impacts assessment of both biodiesel and automotive diesel oil during their life cycle using the Eco-indicator 99 are shown in Table 5-19. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 142
Table 5-19 Life cycle impact assessment using Eco-indicator 99 with functional unit of 1GJ
Impact category Damage Assessment indicator Eco-indicators 99 Score (pt) Unit Biodiesel Automotive Biodiesel Automotive diesel oil diesel oil Fossil fuels MJ surplus 35.07 170.57 1.39 6.78 Minerals MJ surplus 0.72 0.10 2.88E-02 4.08E-03 Land use PDF*m2yr 0.40 0.33 2.77E-02 2.30E-02 Acidification/ PDF*m2yr Eutrophication 5.10 5.04 0.36 0.35 Eco toxicity PAF*m2yr 4.39 2.04 0.31 0.14 Ozone layer DALY 1.62E-09 1.82E-08 5.55E-05 0.000624 Radiation DALY 3.24E-08 2.87E-08 1.11E-03 9.83E-04 Climate change DALY 1.01E-05 1.95E-05 0.35 0.67 Resp. inorganics DALY 9.79E-05 1.06E-04 3.35 3.63 Resp. organics DALY 9.93E-08 1.56E-07 3.40E-03 5.33E-03 Carcinogens DALY 6.66E-06 1.22E-06 0.23 0.04 Total Eco-indicator 99 score 6.04 11.64
The results shown damage assessment values indicate that palm biodiesel scores better only in climate change and fossil energy resources usage. This confirms an earlier study by De Nocker, Spirinckx and Torfs (1998) in which rapeseed based biodiesel had less impact in only two of the nine categories considered, i.e. fossil fuel use and the greenhouse gas effect. In addition, palm biodiesel performance in the fossil fuels impact category presented its advantage in energy balance. After being normalised and weighted, the final score of palm biodiesel calculated using the Eco-indicator 99 impact assessment indicator comes out to be 10.69 points, which is slightly higher than for automotive diesel oil. This means, unlike bioethanol, biodiesel has relatively the same environmental burden as that of Automotive Diesel Oil.
As observed in the ethanol assessment, land use change in biodiesel also contributed significantly to the final Eco-indicator 99 score, as it requires large land space for oil palm plantations. In contrast to biodiesel, the automotive diesel oil does not require large areas to produce, thus avoiding the large potential ecological and health impacts of land use change. However, automotive diesel oil does score highly in fossil fuel consumption. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 143
This requirement for large areas of oil palm plantation means that biodiesel represents a significant physical presence, and potential risk to human health. The high score in the impact category of respiratory inorganic emissions indicated that these activities would likely release inorganic particles into the air and water, which represents the cause of respiratory health risks. Such an emission of respiratory inorganic chemicals is dominated by particulate matter. Interestingly, automotive diesel oil also has a significant potential health impact due to the emission respiratory inorganic compound. Such an emission does not occur in the upstream stages of its life cycle but in the combustion process and in the stage where the fuel is utilised. Therefore, substituting biodiesel would reduce the particulate matter concentration in the tailpipe exhaust gas.
While the threat of respiratory inorganic pollutant is a valid factor in determining the overall environmental burden of biodiesel and automotive diesel oil, such a claim can be misleading, as this LCA method does not recognise the geography where the emission takes place. Most of the respiratory inorganic emission in the biodiesel life cycle occurs in the oil palm plantation process. For diesel oil meanwhile, most of these emissions occur in urban areas where most diesel engines are used.
It is also interesting to note that the acidification/eutrophication impact is about the same for both fuels. For biodiesel, this is due to the ammonia emission during to the intensive use of this chemical for fertilizer, and to the high NOx content in the tailpipe emission. For automotive diesel oil, this is due to the high sulphur content in the fuel itself passed on in the tailpipe emission. Palm biodiesel also produces more heavy metals than ADO, and emits more pesticide as the result of intensive pesticide usage during seeding, gestation, and plantation.
Although solid waste is not included in the Eco-indicator 99, the waste produced from the palm biodiesel life cycle is significant. These solid wastes are in the form of empty fruit bunches (EFB) and unproductive palm oil trees that need to be replanted at the end of their life cycle. The practice in the palm oil mill generally discards the EFB waste in the nearby plantation mill. Several studies have been carried out to utilise this waste for several purposes, including as fuel in the boilers of the palm oil mill, fertilizer, substrate media in mushroom cultivation (Kittikun et al. 2000) and as raw material in paper pulp mills (MTC - Malaysian Timber Council 2003). Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 144
These findings suggest that several ideas are useful to improve the biodiesel performance in various environmental impact categories. For example, utilizing Palm Oil Mill Effluent (POME) or empty fruit bunches may reduce the use of fertilizer as the effluent and the solid waste are rich in nutrients of N, K, and P. Intensive research is currently aimed at reducing the high NOx emission during the combustion stage of palm biodiesel. Various efforts to treat POME by implementing water treatment best practices may reduce the potential GHG emissions. These include reducing the formation of methane from anaerobic decomposition of POME. An example is a Clean Development Mechanism (CDM) project by the Sinar Mas Group to capture methane from their palm oil mill effluent (Liwang 2003).
5.5 LCA OF PURE PLANT OIL
5.5.1 GHG analysis of pure plant oil
This type of biofuel intended to substitute industrial diesel oil and could be projected for low speed diesel engine fuel such as marine fuel oil. The pure plant oil recommended for this application should meet the standard set by the Indonesian government as a fuel for medium speed diesel engine (Director General Renewable Energy - MEMR Indonesia, 2013). Any refined vegetable oil is therefore suitable for this purpose. However, the viable alternative is crude palm derived oil product such as the refined bleached deodorised oil. Normally produced via physical refining that involves degumming using citric acid, bleached, and filtered with bleaching earth and finally undergone steam stripping to remove the FFA. This product is relatively free from gum and free fatty acid (FFA). It has bland flavour and odour, contain less than 0.1 % FFA and moisture. Normally used for cooking oil and oils formulation for shortening, margarine, vanaspati and other uses.
Like biodiesel, the proses of producing RBD palm oil as pure plant oil is a multiple output process. It has products of RBD palm oil and Fatty acid. The allocation factor and mass balance for this production process are followed.
RBD palm oil is produced at the rate of 950 kg per 1000 kg palm oil with allocation factor of 95% Free fatty acid is produced at the rate 50 kg per 1000 kg of palm oil with allocation factor of 5%
For this analysis, it is compared to industrial diesel oil (IDO), which is often applied in industrial furnace, boiler as well as low and medium speed engine. The IDO is a kind of Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 145 distillate fuel containing heavy fractions or a mixture of light distillate fractions and a heavy fraction (residual fuel oil) and dark black, but remain liquid at low temperatures (Pertamina 2018).
The life cycle assessment of pure plant oil was therefore carried out using a common functional unit of 1 GJ fuel used for combustion in a 1-MW industrial furnace. The basis for the calculation is a fuel energy expended of 1.05 MJ required to produce one MJ heat. This size is equal to the consumption of 0.02342 kg of IDO (light fuel oil) to produce one MJ of fuel energy. The GHG emissions of pure plant oil and industrial diesel oil during their life cycle are compiled in Table 5-20.
Table 5-20 Comparison of GHG emissions between pure plant oil and IDO in kg CO2eq/GJ useful energy
Life cycle stage Pure plant oil (PPO100) Industrial Diesel LUC BAU LUC Alt. Oil (IDO) LUC 68.3 -5.3 0 Upstream without LUC (No 47.5(41.3) 47.5(41.3) 9.6 irrigationa) Tailpipe 0.8 0.8 77.9 Total (No irrigationa) 116.4(110.4) 43.0(36.8) 87.5 a. GHG emissions due to intensive irrigation is excluded in the oil palm cultivation practice due to well-distributed rainfall in most part of Indonesia.
Like the life cycle of biodiesel, the largest GHG emissions at palm oil production occurs during effluent process using open lagoons. The next largest GHG emissions arises from the use of fossil fuel for transporting the fruit to the plantation mill, followed by the use of electricity in irrigation process. However, most oil palm plantations in Indonesia do not practice intensive irrigation due to relatively sufficient rainfall (Comte et al. 2012). Therefore, Table 5-20 also presents GHG emissions without irrigation process to provide another perspective. This implies GHG emissions in the upstream stages in the absence of land use change could be around 14% less than the result with irrigation of 50.6 kg CO2eq.
The results for industrial diesel oil on the other hand, revealed a relatively low GHG emissions (9.6 kg CO2eq for every GJ) in the upstream stages. In the combustion stage, the use of IDO produces 77.9 kg CO2eq /GJ, which makes the total GHG emissions 87.5 kg
CO2eq for every GJ energy used. In contrast to IDO, pure plant oil use does not release Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 146
GHG in the tailpipe emission, because the CO2 gas resulting from the combustion process is carbon neutral. Exclusive of land use change, this makes the GHG emissions of the biofuel use much are less than those from industrial diesel fuel.
The results also indicated that including the LUC would make the GHG emissions of this biofuel becomes significant. The inclusion of land use change in the scenario of Business as Usual and in the alternative scenario however, have indicated that pure plant oil could be better or worse than industrial diesel oil depending on what kind of land is sought for biofuel development. The total GHG emitted from the pure plant oil using the scenario land use change with business as usual (LUC-BAU) varies from 110.4 to 116.6 kg CO2eq/GJ, which turns out to be more than the IDO’s GHG emission. On the other hand; contribution of GHG emissions from land use change due to alternative LUC scenario, is -5.3 kg CO2eq /GJ, which means the conversion to biofuel crops plantation, could instead sequester GHG emission. This made the total GHG emitted from the pure plant oil 36.8 to 45.3 kg CO2eq /GJ or approximately half of the one emitted from the industrial diesel oil.
5.5.2 Assessing impact category on priority pollutants emission
The following LCA simulation results are based on the emission of four priority pollutants for pure plant oil, presented Table 5-21. The results for industrial diesel oil are included in the same table.
Table 5-21 life cycle emissions of the pure plant oil and industrial diesel oil on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used
Priority pollutants Life cycle stage Pure plant oil Industrial Diesel Oil (IDO) NOx (gram) Upstream 102 46 Tailpipe 63 53 NMVOC (gram) Upstream 84 25 Tailpipe 1 2 Particulate as PM10 Upstream 22 4 (gram) Tailpipe 0.06 0.1 Sulphur content Upstream 64 31 (gram) Tailpipe 0 757
Note: Tailpipe emissions results for the pure plant oil and IDO were obtained from their application in the heating application in the industrial furnace 1 MW. The basis figure of 1.05 MJ fuel energy is required to produce 1 MJ heat and 0.02342 kg of IDO required to produce 1 MJ fuel energy. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 147
Table 5-21 shows that pure plant oil in general performs reasonably well in terms of particulate matter and sulphur dioxide in the tailpipe emissions compared to industrial diesel oil but produces more GHG during its production. This significant sulphur dioxide emission in the tail pipe emission from the use of IDO was caused by the high content of sulphur in the fuel, approximately at 15,000 ppm. This result also confirms a common finding in which the use of vegetable oil in an industrial furnace tends to increase oxides of nitrogen- NOx emissions (Janarthanam & Narayanan ; Vanlaningham, Gibson & Kaufman 2004). A study by Daho, Vaitilingom and Sanogo (2009) however, noted that there is not much difference between pure plant oil and fuel oil in term of NOx emission in the exhaust pipe when used in a non-modified domestic boiler. Like biodiesel, pure plant oil performed less than industrial diesel oil in sulphur emission, particulate as PM10 and NOx category in the upstream stages of the life cycle. However, these upstream stages are often located in less densely populated areas and may not have the same health effect as combustion engines or furnaces in urban areas.
5.5.3 Impact assessment based on Eco-99
The results of impact assessment using the Eco-indicator 99 method for pure plant oil and industrial diesel oil are presented in Table 5-22.
Evaluating the life cycle of the fuels using Eco-indicator 99 impact assessment method produced a score of 3.25 for pure plant oil point while automotive diesel oil scored higher at 9.63. The impact of land use change has largely contributed to the higher score for pure plant oil, followed by the emission of respiratory inorganic compound, in this case primarily comprised of particulate matter. In contrast to pure plant oil, the industrial diesel oil in its production life cycle does not require large areas, thus it avoids large potential ecological impact as well as potential threat to the human health. The high consumption of fossil fuel per 1GJ energy used and the potential health impact of respiratory inorganic compound have contributed to the overall industrial diesel oil score. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 148
Table 5-22 Life cycle impact assessment of pure plant oil and industrial diesel oil using Eco- indicator 99 with functional unit of 1GJ
Impact category Emission in their nominal value1 Eco-indicator 99 Score (pt) Unit Pure plant Industrial diesel Pure plant Industrial diesel oil oil oil oil Fossil fuels MJ surplus 27.11 169.42 1.08 6.73 Minerals MJ surplus 0.86 0.14 0.03 0.01 Land use PDF*m2yr 0.45 0.21 0.03 0.01 Acidification/ PDF*m2yr Eutrophication 1.84 1.39 0.13 0.10 Eco toxicity PAF*m2yr 1.01 3.43 0.07 0.24 Ozone layer DALY 1.73E-09 1.92E-08 5.93E-05 6.59E-04 Radiation DALY 3.95E-08 1.27E-08 1.35E-03 4.36E-04 Climate change DALY 1.03E-05 1.84E-05 0.35 0.63 Resp. inorganic DALY 3.81E-05 5.48E-05 1.31 1.88 Resp. organics DALY 9.14E-08 3.06E-08 3.13E-03 1.05E-03 Carcinogens DALY 7.04E-06 9.02E-07 0.24 0.03 Total Eco-indicator 99 Score 3.25 9.63
Note: Explanation of nominal value as expressed in the damage assessment according to its category and the factor of normalisation and weighting have been shown in Table 5-4
5.6 CONCLUSIONS
In terms of GHG emissions, the life cycle assessment of the Indonesian liquid biofuel and their corresponding liquid fossil fuels has indicated that if the current palm oil expansion trajectory is pursued, more GHG emissions is expected than it was previously thought. An average GHG figure of 12.11 tCO2eq/ha/yr. is expected, and this brings a total annual emission of 57.2 Mt CO2eq/yr. This development would not only discount the advantage of biofuel but would emit more GHG than liquid fossil fuels. However, implementing an alternative land expansion scenario by targeting land covers that are environmentally less sensitive such as degraded land, grass and shrub lands would potentially serve as CO2 sequestering action. This can be achieved by adding more biomass in the form of biofuel plants such as oil palm and sugar cane at an estimated average rate of 0.95 tCO2eq/ha/yr. and this brings a total annual emission saving of 4.5 Mt CO2eq/yr. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 149
GHG emissions for each biofuel and corresponding liquid fossil fuel, depicted in Table 5-23, show the overall GHG rating for each biofuel depending on the land sought for its development. Biodiesel for example has an average emission from 46.4 to 121 kgCO2eq/GJ depending on land use. Bioethanol’s GHG rating also varies from 12.2 to 92.3 kgCO2eq/GJ while for pure plant oil it ranges from 45.3to 118.9 kgCO2eq/GJ.
Table 5-23 GHG emissions in kg for Functional Unit of 1 GJ energy used
Life cycle stage Bioethanol Petrol Biodiesel Automotive PPO IDO unleaded Diesel Oil BAU Alt. BAU Alt. BAU Alt.
LUC 87.8 -6.8 0 69.1 -5.4 0 68.1 -5.3 0.0 Upstream 15.4 15.4 4.9 47.7 47.7 16.4 47.5 47.5 9.6 (without LUC) Tailpipe 0 0 76.6 4.4 4.4 76.8 0.8 0.8 77.9 Total 103.2 8.6 81.5 121.3 46.7 93.2 116.4 43.0 87.5
This analysis, using SimaPro 7.3 with the adjusted Ecoinvent database using the Swiss data on road transport has shown that the liquid biofuels in general emit less particulate matter, NMVOC and sulphur dioxide in the tailpipe emission but produce more during the biofuel upstream stages (Table 5-24). The NOx emission however, tends to increase both in the upstream stage and in the exhaust emissions for all biofuels except biodiesel. The studies by (Argonne National Laboratory (2013); Beer and Grant (2007); US EPA (2002)) have also observed a NOx increase in the tailpipe emissions. However, Hoekman and Robbins (2012) for example, argued that the use of biofuel and in particular biodiesel as a substitute for automotive diesel oil, usually but not always increases NOx exhaust emissions. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 150
Table 5-24 Life cycle emissions on several priority pollutants for upstream and tailpipe stages with a functional unit of 1GJ fuel used
Priority Life cycle Bioethanol Petrol Biodiesel Automotive Pure Industrial pollutants stage unleaded Diesel Oil plant Diesel Oil oil NOX Upstream 158 42 71 59 102 46 (grams) Tailpipe 22 19 686 796 63 53 NMVOC Upstream 14 16 75 81 84 25 (grams) Tailpipe 42 45 16 43 1 2 Particulate Upstream 48 6 19 4 22 4 as PM10 Tailpipe 8 8 21 31 0.06 0.1 (grams) Sulphur Upstream 70 85 31 22 64 31 content Tailpipe 3 23 0 120 0 757 (grams) Eco-indicator99 score 29.67 6.39 10.69 10.40 8.31 8.25
Further assessment based on the emission of four priority pollutants reveals that although in general the biofuels score worse than the liquid fossil fuels, majority of those emissions occur in the upstream stages of the biofuels’ life cycle. This is particularly relevant as Eco-indicator 99 scores for biodiesel and pure plant oil differ by a slim margin with their liquid fossil fuel substitutes. Therefore, the notion of the biofuel as environmentally worse than their liquid fossil fuel counterparts could be misleading.
Despite being able to measure and distinguish environmental burden of biofuels and their respective fossil fuels, having Eco-indicator 99 as the selected LCA impact assessment in this analysis may have some drawbacks. It may not be appropriate as Indonesian environmental situation is different from the one in Europe. The impact category of carcinogens for example, may not be relevant as cancer is not the main disease suffered by most Indonesians. In fact, more people in Indonesia die from heart attack because of high cholesterol, occasional dengue fever, and accidents, either in the transportation sector or in the work place. In short, the causes of mortality among the people are typical diseases and accidents occurring in developing countries. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 151
Another impact category that may be inappropriate for Indonesia is acidification. It is reported as the cause of acid precipitation occurs in the larger continents such as in the US, and Europe, and in China (due to its high coal consumption). In contrast, a study by (Arndt et al. 1997) has shown that the present sulphur deposition due to anthropogenic activities in most areas of Indonesia was categorised as medium or less at around 0.5g of S m-2yr-1. The total sulphur deposition, however, is sometimes relatively high as it occurs mostly due to the existence of volcanic activity. Moreover, as most Indonesian territory is water, the effect of acidification would fall on the sea. Thus, its impact category is not as severe as in the continental countries.
5.7 POLICY IMPLICATIONS
The Indonesian government’s policy to meet its biofuel target of 5% of the country’s energy mix by 2025 could be realised and if so, will reduce the consumption of related liquid fossil fuels such as automotive diesel oil, petrol, fuel oil, industrial diesel oil and marine fuel oil as well as potentially lower GHG emissions in doing so. This can be accomplished by careful expansion of biofuel plantation using non-environmentally sensitive land cover classification.
To attain such a goal, several suggestions are proposed. The first is mitigating GHG emissions caused by producing biofuels by mandating that "the approved biofuel project should produce a GHG saving compared to the related baseline GHG emissions of the liquid fossil fuel". It is therefore necessary to strictly implement the guidelines on developing plantations on peat land (Ministry of Agriculture Indonesia 2009) and the moratorium on forest and peat soil conversion since May 2011, which has been extended to a further 2 year (Presidential Instruction of the Republic of Indonesia 2013). This suggestion is to assure the mitigation of the impacts of biofuel plantation expansion, as shown in the planting biofuel feedstock on peat, primary and secondary forest, resulted in higher GHG emissions than those from liquid fossil fuel use. These measures might be successful as Indonesia’s overall performance on integrity is considered strong (Global Integrity 2011) when it comes to institutional and legal issues, but evidence could be stronger when it comes to actual implementation.
Secondly, there is an opportunity to reduce GHG emissions from the current treatment of POME in the life cycles of biodiesel and pure plant oil during palm oil mill Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 152 extraction. Mandating the use of methane capture technology and adjusting the financial incentives electricity use such as raising tariffs for the electricity produced from methane capture technology in areas with oil palm plantations could serve as a solution.
Moreover, despite being imperfect to provide a metric for environmental decision- making, the LCA could still be useful in mapping the environmental problems of a product. The next chapter of costs and benefit analysis (CBA) will add another consideration to determine the appropriateness of this biofuel programme so that the government could designed relevant policy measures. Such measures that ensure a path forward to reduce the country’s GHG emissions while exploiting its biofuel resources to reduce fossil fuel consumption. Chapter 5 Life Cycle Analysis of the Indonesian Liquid Biofuel: Biodiesel, Bioethanol, and Pure Plant Oil 153
5.8 REFERENCES
Agus, F, Henson, IE, Sahardjo, BH, Harris, N, Noordwijk, Mv & Killeen, TJ 2013, Review of emission factors for assessment of CO2 emission from land use change to oil palm in Southeast Asia, RSPO. Arndt, RL, Carmichael, GR, Streets, DG & Bhatti, N 1997, 'Sulfur dioxide emissions and sectorial contributions to sulphur deposition in Asia', Atmospheric Environment, vol. 31, no. 10, pp. 1553-72. Atabani, A. E., Silitonga, A. S., Ong, H. C., Mahlia, T. M. I., Masjuki, H. H., Badruddin, I. A., & Fayaz, H. (2013). Non-edible vegetable oils: a critical evaluation of oil extraction, fatty acid compositions, biodiesel production, characteristics, engine performance and emissions production. Renewable and sustainable energy reviews, 18, 211-245. Argonne National Laboratory 2013, GREET Model,
and Water Quality in Indonesia: A Review, vol. 116, Advances in Agronomy, Burlington: Academic Press. Contreras, AM, Rosa, E, Pérez, M, Van Langenhove, H & Dewulf, J 2009, 'Comparative Life Cycle Assessment of four alternatives for using by-products of cane sugar production', Journal of Cleaner Production, vol. 17, no. 8, pp. 772-9. Corley, R 2003, Care and maintenance of oil palms, vol. 4, The Oil Palm World Agriculture series. Daho, T, Vaitilingom, G & Sanogo, O 2009, 'Optimization of the combustion of blends of domestic fuel oil and cottonseed oil in a non-modified domestic boiler', Fuel, vol. 88, no. 7, pp. 1261-8. De Nocker, L, Spirinckx, C & Torfs, R 1998, Comparison of LCA and external-cost analysis for biodiesel and diesel, Brussels, 3-4 December 1998,
Hunt, C 2010, 'The Costs of Reducing Deforestation in Indonesia', Bulletin of Indonesian Economic Studies, vol. 2, p. 87. IAE 2008, Energy Policy Review of Indonesia, IEA Publications 9, rue de la Fédération 75739 Paris Cedex 15, France, 1 April 2011, ISBN 978-92-64-04828-7, pdf,
Page, SE, Morrison, R., Malins, C., Hooijer, A., Rieley, J. O. & Jauhiainen, J. 2011, Review of peat surface greenhouse gas emissions from oil palm plantations in Southeast Asia (ICCT White Paper 15), International Council on Clean Transportation., Washington. Panaka, P & Yudiarto, A 2007, New Development of Ethanol Industry in Indonesia, Jakarta, March 7, 2007,
UNFCC 2010, AMS III H. Methane recovery in wastewater treatment
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Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan
In this chapter, the Cost-Benefit Analysis (CBA) was carried out by monetizing the impact of the long-term Indonesian biofuel plan based on Presidential Regulation No. 5, 2006 on the Indonesian society. Specifically, this analysis is intended to find out whether the benefits of introducing biofuel over the long term up to 2025 would outweigh the cost by estimating the benefit to cost ratio as well identifying the major contributors of the cost and benefit components so that a policy recommendation on the appropriateness of biofuel plan could be made.
The biofuels are assumed to be produced locally within the national boundaries and the analysis was observed from the perspective of Indonesian society. The wide impact of such a biofuel plan on parties that may be directly and indirectly involved were analysed from the perspective of Indonesian society. The effect of the biofuel plan will be compared to that of the corresponding fossil fuels. The analysis however is limited in the sense that the cost is only defined in terms of components that can be measured in direct or indirect monetary terms. It is also limited chronologically until the year 2025, as it is difficult to estimate the future value of an energy product such as liquid fossil fuel beyond a short period.
6.1 SHORT REVIEW OF CBA
This section outlines who has authority or who has a standing in this issue, the discount rate used and how to assign value to the aspects classified as benefits and costs. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 160
6.1.1 Authority
Although such a policy in this thesis is initiated by the government, it is not appropriate to assess its CBA solely on the government perspective or, as Boardman (2011) called it, the bureaucratic style of CBA. Depending on the bureaucrat’s position in the government and the type agency they represent, implementing CBA through government lenses may either result in under estimate benefits or overestimate cost, thus ignoring non- social benefit and concentrate on the impact of the policy on the government budget. Carrying out CBA through government perspective may also result in treating expenditure in the project as benefit rather than cost. This may apparent in a project that potentially employs many labours, in which spending on labour cost often treated as benefits to the society. Some even multiplied by a multiplier factor, as they believe the project will create indirect benefit of creating other project expenditures. Others often put favourable weight on their preferred impact category to serve certain groups and sometimes spread the cost to the entire society. As a result, the analysis often produces a conclusion that government project yields more benefits than its cost.
It is important in this analysis to determine who has standing on this issue of biofuel given this would have multi-faceted impacts and affect physical landscape in a large scale. The Indonesian society is therefore selected as the one who has standing on this cost and benefit. This implies that the impact category will fall to individual or institutions within Indonesia’s authority with a target to improve the net social benefit of Indonesian society. Although some of the environmental impact may be derived from categories that can be viewed as global perspective such as greenhouse gas effects, this impact has become an issue that gains considerable attention in the Indonesian society, thus should be included in the calculation of CBA.
6.1.2 Discount rate
To compute the NPV of this analysis, it is necessary to discount future benefits and costs. It is critical parameter when the values of cost and benefits differ in their distribution over time and they occur over a long period. The selection of discount rate normally utilizes the real discount rate. This value, however, is not universally agreed. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 161
A report by Harrison (2010) from the Productivity Commission of Australia describes that the selection of discount rate falls in to two categories of prescriptive and descriptive approach. The first approach described as prescriptive based on ethical views about intergenerational equity. It mixes efficiency and equity considerations. Notable projects such as climate change adaptation or radioactive and nuclear material depository, can be considered to have intergenerational value.
Although this approach looks very convincing for a long-term project and is suited to projects that have intergenerational values, it suffers on the agreement over defining its numerical value. This due to difficulties in specifying the rate itself at which society is willing to trade present for future consumption. Some experts may argue that the generation should be valued equally. Boardman (2011) suggested time declining discount rate when dealing with projects or policies spanning more than 50 years or in other words, projects that might have significant intergenerational value. Hence, the discount rate in this approach is a matter of opinion.
The second approach provides a more deterministic rule, in that its premise is based on the fact that opportunity cost realized in any projects is reflected in the market rates. Thus, it makes more sense to embrace higher return project investments rather than to commit to having low return ones. In addition, discount rates should contain an appropriate compensation for risk. Even though market may be imperfect, people will pay for the market price risk in return for accepting the project risk (Harrison 2010). Therefore, the selected rate is expected to be equal to the rate of return on private projects with similar levels of risk
This view suggests a numerical value of the discount rate may equal to the marginal rate of return on private investment and it can be best approached using real before tax rate of return on corporate bonds. It believes that ”...before the government takes resources out of private sector, it should be able to demonstrate that society will receive a greater return in the public sector than it would have received had the resources remained in the private sector.”(Boardman 2011). Another numerical value may also come from some government treasury notes or bonds. The US government Office of Management and Budget (OMB) suggests the discount rate is based on the real US Treasury Notes and Bond rates over the appropriate maturity period (US OMB 1992a). West (1988) noted that Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 162 many different discount rates have been used in energy studies ranging from 0 to 13%. Productivity Commission Australia (2012) supports a base rate of 8% with a sensitivity range between 3 to 10%. Department of Finance and Administration - Commonwealth of Australia suggests a rate of 6% based on the Treasury long-term bond rate.(Department of Finance and Administration - Commonwealth of Australia 2006)
The drawback of this descriptive approach lies in the rate that we infer. Using the marginal rate from private sector may not be suitable as it is affected by market distortions and it still has default risk because it is private entities rate. The use of this rate may lead to exceed social marginal rate (Boardman et al, 2010). Using the rate from the long-term government bonds may not be appropriate as many projects especially carried out by the government are often funded by taxes and not solely financed by government borrowings. Moreover, government’s projects are not in general free of risk (Harrison 2010). Many may have net positive benefit but some may have unintended consequences, which lead to excessive cost.
In the case of this biofuel policy, the envisaged investment in biofuel will largely be by private sectors, while the government through its departments and institutions will provides necessary instrument, measures, and regulations to achieve right condition for private sectors to thrive that the government can realise the biofuel target. The government will share the cost for enacting the policy, but as previously mentioned limited to providing necessary regulations. These range from putting additional biofuel infrastructure and other government expenditures such as biofuel promotions, biofuel research, creating biofuel standards and monitoring biofuel quality as well as the cost arising from activities in biofuel policy making.
As majority of this investment will be carried out by the private sectors, appropriate discount rate would be selected from descriptive approach using marginal interest rate of private bonds issued by Indonesian private institutions or long-term bonds issued by the Indonesian Central Bank.
6.1.3 Valuing method of environmental benefit and cost
Providing cleaner burning fuels reduces air pollution. The use of biofuel is expected to reduce GHG emission provided the expansion of biofuel minimised the acquisition of Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 163 the environmentally sensitive areas, including forest type land cover, crop land, mixed land cover, wet land, and peat. The biofuel also produces less particulate and sulphur dioxide emission than the liquid fossil fuels. The problem is how to determine the price of those pollutants, which in theory is equal to marginal damage cost per unit emission. Many economists have discussed this problem, but in principle, it should be the balance between the marginal damage cost and the marginal cost of stopping the emission or abatement cost of the pollutants. The marginal damage cost here could be the cost climate change for GHG emission while the abatement cost is the cost of deploying the technology to prevent such an emission or the cost to use the lower carbon products.
Faced with the uncertainty of valuing those emissions, a pragmatic approach is needed. Hence, two methods were employed in this research to value the environmental benefit and cost in dealing with the emission resulted in the use of biofuel. One uses pollutant market price, which is often based on the principle of capping and trading emission. Other methods use the amounts society is willing to pay to enjoy the benefit and to bear the cost of pollutants. The following section outlines those two selected methods.
6.1.3.1 Estimating emission cost using pollutant market price
To calculate the cost and benefit of having biofuel, the emissions reduction or addition should be monetized and this is ideally carried out by putting price on the pollutants using market-based mechanism or pollution trading. Although the emission trading does not exist in Indonesia, the current prices of emission trading of certain pollutants from other countries such as USA and European countries can be used for this purpose. Sulphur emission as SO2 for example has market value between USD 128 to USD
272 per ton (US EPA 2002) while CO2 fluctuates between USD 4 to USD 35 per ton for the past 5 years in the European Union ETS (The Economist 2013).
Although market price of sulphur as SO2 emission is available, this could not be viewed as a global emission. Therefore, its price does not reflect the actual cost of having sulphur emission in Indonesia. The only available pollutant emission trading that can be used as a reference in this case is carbon price for greenhouse gas emission. As forward guidance of GHG emission price for Indonesia is not yet available, therefore the benefit of less GHG emission was estimated from the long-term projected price of carbon from the closest country that has set its carbon policy reduction such as Australia, which Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 164
specifies a value of about AUD 26/CO2eq or roughly equals to USD 22 /t CO2eq. (Garnaut 2011).
In the case of sulphur emission, referring to SO2 emission price in the US however may not represent the Indonesian case although such a trading scheme does not yet exist in this country. The US EPA (2014) has reported the price of SO2 allowance has plummeted since 2006 from USD 886.1 per tonnes SO2 to the figure of less than a dollar per tonne
SO2 for the past 3 years. The free fall of SO2 emission trading price has largely been caused by several factors including the unfavourable regulatory changes (Schmalensee & Stavins
2013), completion of SO2 reduction control devices and conversion from coal to natural gas by the US power generators, which contributed to the surplus of SO2 allowances. The latest figure of merely USD0.45 per tonne SO2 from the 2014 annual SO2 allowance auction may not reflect marginal abatement cost of SO2 emission. On the other hand, the Indonesian government has added 10 GW new electricity generation since 2010, which mostly are coal fired type (Ardiansyah 2011). Following this success, a second 10 GW programme incorporate was launched by Ministry of Energy and Mineral Resources Indonesia (2012). Though this programme is aimed to build 4,945 MW of geothermal, 1,753MW of hydro, the rest of the power plants are most likely from coal. Both programs did not specifically mandate the use of sulphur reduction emission devices, which may lead to the increase of SO2 deposition especially in the Java-Bali region where the installation of such power plants are mostly located. This implies that referring to the future US projected
SO2 price for this analysis may not be the right option. Therefore, other method in quantifying this benefit is discussed in the following section.
6.1.3.2 Benefit transfer in the form of adjusted willingness to pay (WTP)
For other emissions that do not have market prices yet, the selection of their prices could refer to “an individual’s willingness to pay (WTP) to secure a beneficial change in risk, or willingness to accept (WTA) to forgo an adverse change in risk” (Zhang 2002). The peoples WTP or WTA for avoiding the risk from environmental pollution is normally conducted by direct questionnaire (Makandya & Pavan 1999). This is often called the Contingent Valuation Method (CVM), which has been developed for evaluating various environmental impacts. Related to the use of biofuel as non-market environmental commodities, benefit in the form of adjusted mean of willingness to pay may be a method available to use. Such a method however, may require a large data gathering which involves Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 165 a survey of the Indonesian public to determine a monetary value of avoiding environmental impacts and high cost.
To overcome the difficulties of such a large task, Wilson and Hoehn (2006) alternatively suggested that economic information in the form of WTP of non-market environmental commodities from other place at certain time could be used as reference for estimating the value in another place. This has been applied in several studies in which the WTP values originally gathered from other countries are estimated and corrected using ratio of GDP per capita or for other economic indicators to be used in the developing countries, as in the study by the World Bank (1997) and ECON Center for Economic Analysis (2000). The study performed by Nguyen and Gheewala (2008) on evaluating the environmental impact of bioethanol utilization in Thailand and by Silalertruksa et al (2011) with similar study on palm biodiesel shows the usefulness of this method.
This approach however has several drawbacks as pointed out by Rosenberger and Stanley (2006). They include error as a result of generalizing the differences between the study and the policy sites, measurement error arises from the judgments and methods used in the original study as well as potential bias in the scientific publication. Therefore, it is suggested that evaluation on the quality of the study and the extents to which conditions at the study site are similar to those at the policy site should be carefully examined.
Considering the drawbacks of either estimating the values using market price or using WTP values derived from other studies, this research utilised several options.
Should there be a known market price for certain pollutant, the market price will be used to estimate the benefit or cost. Environmental pollution that has been universally accepted as global pollution or have nothing to do with differences in cultural background will be estimated using WTP transfer method. The environmental pollutions that related to the culture and education, life value sense, the level of the openness of the society among others will be treated carefully.
In this research, estimating WTP of environmental pollution from other countries will be done using the data collected by the Centre for the Environmental Assessment of Products and Material systems (CPM) of Sweden in their study on life cycle impact assessment method. They have developed various values of WTP of non-market Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 166 environmental commodities as part of its Environmental Priority Strategies in product design version 2000 (EPS, 2000). These values can be used as reference to adjust Indonesian WTP using an appropriate multiplier factor. Various researchers argued that the WTP to avoid damages due emission burden is proportional to the income per capita (Nguyen, T. L. T. & Gheewala, S. H. 2008).
By assuming that a 1% percentage change in WTP corresponds to one percent change in the income, an Indonesian WTP conversion factor can be presented as the ratio of Indonesian GDP (PPP) per capita and European Union GDP (PPP) per capita. The formula containing the conversion ratio is presented in the following equation 6-1, adopted from Silalertruksa, Bonnet and Gheewala (2011),
WTP xGDP(PPP) WTP Indonesia = EU PercapitaIndonesia (Eq. 6-1) GDP(PPP)PercapitaEU
Where GDP (PPP) per capita Indonesia is 4 USD,200 and GDP (PPP) per capita EU is USD 32,700. This produces ratio GDP (PPP) of 0.128. Table 6-1 presents the adjusted WTP Indonesia for sulphur and particulate matter (PM10) emission categories based on exchange rate of 1.34 USD/EU (FX Currency Exchange, 2014).
Table 6-1 Emission cost per units of impact
Air pollutants WTP European Adjusted WTP Notes Union1 Indonesia
Sulphur as kg SO2 4.38 0.56 Calculated from Silalertruksa et al PM10 kg PM10 48.33 6.21 (2011)
The emission rate of pollutants from both fossil fuels and liquid biofuel fuels were obtained from life cycle inventory (LCI) results and from the Ecoinvent Database (Jungbluth et al. 2007). If the LCA inventory of biofuel produces less emission compared to the one from the use of corresponding fossil fuel, these results will be treated as environmental benefit. If the biofuel produces more, it will be treated as an environmental cost. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 167
6.2 CBA MODEL
6.2.1 Basis of the analysis
Calculation of the cost and benefit of the biofuel plan requires long-term target of the biofuel and the substitute liquid fossil fuels, were obtained from Rahmadi, Aye and Moore (2013) in which the total biofuel needed in the year 2025 is up to 782 PJ, slightly over 5% of total primary national energy mix. The fossil fuels for which biofuels may be substituted include automotive diesel oil, petrol, kerosene, industrial diesel oil (IDO) and fuel oil. For IDO, it is defined as diesel oil used as fuel in low and medium speed industrial diesel engine and marine engine. This fuel often referenced as marine diesel oil in the bunker (shipping) terminology. The fuel oil (FO) in this case is defined as lower order refinery product, heavy distillate, and residue mixture for the use in the industrial furnace, marine engine, and power plant. Those include HSFO 380 and HSFO 180 as fuel oil in the bunker terminology.
The biofuels suggested will most likely be utilized via maximum blending with the corresponding liquid fossil fuels. The so-called maximum blending alternative is the relatively higher blending values that have been tried in the research experiments or applied progressively in other countries. The blending ratio for biodiesel with automotive diesel oil is B20; E15 is for bioethanol blend with petrol; E10 is for bioethanol in kerosene, PPO 50 is for pure plant oil (PPO) blend with industrial diesel oil and fuel oil, while PPO10 is for pure plant oil blend with kerosene. The amount of each biofuel required was calculated based on the equivalent theoretical energy content of the resulted blending. This means, for example; a car that consumed 100 L of petrol requires about 102 L of E5 for the same energy output. The following Table 6-2 presents the detail of the biofuel required, the fossil fuel that can be saved and the detail of their properties, which are obtained from the results of estimating the share of biofuel in the overall Indonesian energy mix presented in Chapter 3. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 168
Table 6-2 Projected annual biofuel substitute in 2025and the fossil fuel saved.
Fuel Type Biofuel required LHV Blending percentage or Fossil Fuel (MJ/kg)c replaced (GL)a Biodiesel 11.2 890 37.20 Automotive diesel oil in B20 Bioethanol 9.6 788 28.09 Petrol in E15, Kerosene in E10 Pure Plant Oil 5.8 920 37.30 Industrial diesel oil in PPO50, Fuel oil in PPO 50, Kerosene in PPO10 Automotive diesel oil (ADO) 10.3 843 42.82 Petrol 5.9 748 43.74 Industrial diesel oil (IDO)d 0.3 880 40.99 Fuel oil (FO)e 3.8 990 40.01 Kerosene 1.6 835 43.42
Source: a. Rahmadi et al. (2013), b. BSN Indonesia (2006a, 2006b), Pertamina (2007a, 2007b, 2007c, 2007d, 2007e, 2007f) c. Benjumae et al.(2008), Energy Research Centre of Netherlands (2012), Prateepchaikul & Apichato (2003). Table 6-3 Projected annual biofuel use in the year 2025 (GL).
Demand sector Biodiesel (GL) Bioethanol (GL) Pure Plant Oil (GL) Electricity 0.41 0.00 1.96 Industry 3.12 0.00 2.41 Household 0.00 0.90 0.87 Commercial 0.45 0.00 0.10 Transportation 5.61 8.42 0.05 Other sectors 1.59 0.25 0.45
In measuring the economic analysis, the parameters of benefit and cost ratio (BCR) as well as net cost of biofuel programme in 2025 will be calculated using the following expression.
Benefiti BCR i (Eq. 6-2) j Cost j
Net Cost = - (Eq. 6-3)
∑ ∑ Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 169
Where subscript i is the number of benefit components, and j is the number of cost components.
In addition to having traditional CBA parameters calculated, the secondary effects of the benefit components such as employment, economic impacts on the parties involved in the biofuel production processes, e.g. farmers, mills/refineries and biofuel industries, were also estimated. It used the data illustrated in the Table 6-4
Table 6-4 Biofuel data
Employmentb Yield Fuel Type Processing (kL/ha/y) Plantation (person/ha/y) (person/ML) Biodiesel 5.3a 0.64 6.00 Bioethanol 6.47c 0.64 1.04 Pure plant oil 5.2a 0.64 6.00
Source : a. calculated from the figures obtained from US EPA (2012) and FAO (2008) , b Jupesta(2010), c. Goldemberg and Guardabassi (2010)
The yield of the biofuel depends largely on the yield biofuel crops. The figures of biodiesel and pure plant oil in the first column were based on the projected CPO yield of 5 t/ha/year suggested in the report by US EPA (2012) and by FAO (2008). The current yield of Malaysian crude palm oil varies from 3.7 t/ha/y suggested by (Basiron 2007) and is aimed to meet 6.0 t/ha/year by 2020 (Choo 2012). In contrast, the Indonesian data of CPO yield for the small holders, which constitute about 40% of the total plantation was estimated at 3.04 tonnes/ha in 2008 (World Growth 2011), while the total average palm oil productivity in 2013 was reported at 3.7 t/ha/year (Director General of Estate crop Ministry of Agriculture Indonesia 2014). Goenardi (2008) However, suggested that palm oil yields may potentially be as high as 6-7 t/ha/yr. because of the growing climate in Indonesia. The Indonesian government has therefore launched a programme to improve the yield especially for the small scale plantation by replanting using better palm seeds as well as implementing sustainable management practices (Rangga Pandu Asmara Jingga 2014).
The yield of bioethanol in this study was taken from the Brazilian data (Goldemberg & Guardabassi 2010) by assuming the projected sugar cane yield up to 2025 would be Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 170 expected to follow the Brazilian model. The bioethanol production would likely be sourced from dedicated sugar cane plantation using sugar cane juice, while molasses as by product of the current sugar mills can be used to complement the alcohol production. The current Indonesian sugar cane yield varies depending on the climate at that time. In the typically favourable climate period, it yields around 80 t canes/ha. However, it suffers from low sugar recovery rate due to the combination of, poor harvest management, sugar cane transportation problems, and the inefficiency of the aging sugar mills. Hence, a sensitivity analysis will therefore be carried out to check the effect of the yield of CPO to the overall conclusion of this CBA analysis.
6.2.2 Objective, scope, and discount rate
A cost benefit analysis in this context is to evaluate the cost and benefit impacted to Indonesian society at large arising from long-term Indonesian biofuel plan based on the presidential regulation No. 5, 2006.
6.2.2.1 Objective
This analysis is intended to find out whether the benefits of introducing biofuel over the long term up to 2025 would outweigh its cost. The biofuels are assumed to be produced locally within the national boundaries and the analysis was observed from the perspective of Indonesian society. The project in this context is the Indonesian biofuel plan and the following Table 6-5 outlines the incidence matrix that presents benefit and costs as well as distributional effect. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 171
Table 6-5 Incidence matrix from the perspective of Indonesian Society
Standing: Indonesian society Distributional and secondary effect Benefit Avoided consumption of liquid fossil Additional employment gained in the fuel. biofuel sector (this effect has been Environmental Benefit captured in the cost to consume biofuel). Including this factor in the analysis Green House Gas reduction would contribute to a double counting. Air quality improvement due to less Additional economic activities in rural particulate emission areas (it is considered as multipliers Air quality improvement due to benefit, which does not contribute in the reduction in sulphur dioxide changes of the resources. Moreover, if emission this multiplier effect is considered in the Increased energy security analysis, its cost associated with this effect should also be considered as well. Cost Biofuel consumed Losses of employment in the liquid Environmental cost fossil fuel. Reduction in economic activities in the fossil oil production will Ground ozone formation in major be compensated in the gain of cities. employment in the biofuel sector, thus it Additional cost in biofuel should not be included in the analysis. infrastructure. Other government expenditure. Increased cost of biofuel raw material for edible purposes. Engine adjustment cost. Compensation cost arises due to displacing indigenous people especially during the opening of plantation. Biodiversity loss
6.2.2.2 Scope of the analysis
The scope covers the stages of the biofuel raw material plantation and production, biofuel production process, fuel blending and delivery, and final use in various demand sectors. The assessment was carried out in three parts:
Direct financial impacts on the parties involved in the biofuel production processes, e.g. farmers, mills/refineries, and biofuel industries. Direct financial impacts on the parties involved in the fossil oil production process The assessment of the benefits and costs because of the biofuel targets by the year 2025. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 172
As the Indonesian government selected the blending method with associated liquid fossil fuels in order to gain market penetration in the Indonesian energy system, it is expected that the biofuel delivery to the end users use existing fuel chain. Therefore, financial impact on this chain is expected to be in the form of measures to build infrastructure accommodating the biofuel storage, blending station and extra cost in maintaining the biofuel quality.
6.2.2.3 Selection of discount rate
As it was mentioned previously, the discount rate was selected from descriptive approach using marginal interest rate of private bonds issued by Indonesian private institutions or long-term bonds issued by the Indonesian Central Bank. Bank of Indonesia (BI) has targeted that the medium-term inflation rate should be kept below 10%, or realistically about 9% per year (BI 2003a). The interest rate on medium term Government of Indonesia (GOI) bonds is about 15.4% (BI 2004). Taking market interest on the government bond as nominal discount rate as suggested by the US OMB (1992b), the real discount rate value might be obtained from the formulae by (Rocklife 2003)
in=id + r + id x r ….(Eq. 6-4)
Where in is nominal discount rate, r is the inflation rate and id is real discount rate.
This gives the value of real discount rate of about 5.9% or rounded to 6%. This value is higher than the rate suggested by the US Office of Management and Budget (OMB), as the rate of long-term US Treasury bond is about 3-4% per year. However, this value is lower compared to the rate of 10% used by Manurung(2001) when evaluating the feasibility of palm oil project. This value is similar to what has been prescribed by the Productivity commission of Australia. To find the effect of variation in the discount rates, the sensitivity of the total NPV of this cost and benefit analysis to various discount rates will also be presented. Chapter 6: Cost and Benefit Analyis of Indonesian Biofuel Plan 173
Transfer & Remark: Distributional Effects - (B) Benefit, (C) Cost - Benefits from Transfer and Distributional effects are excluded from estimating Net Cost of Indonesian Biofuel
Plantation/farmer (B) Mills (B) Biofuel Ind. (B) Labour (B) Labour (B) Labour (B) Boundary of Indonesian Biofuel system
Final Use in Demand Sectors: Energy Transformation Biodiesel, Bioethanol, Pure Plant Oil Industry Biofuel Biofuel to replace Transport Feedstock Biofuel Plantation Liquid Petroleum fuels (Petrol, ADO, Household Extraction Processing kerosene, IDO, Fuel Oil) Commercial Other sectors Non-Energy use
External Effects Internal Effects
Non-environmental cost Biofuel infrastructure (C), Other government expenditures. (C), Engine Environmental cost Internal Cost adjustment (C), Compensation for Ground level ozone formation (C) Cost of Biofuel consumed (C) displacing indigenous people (C), Biodiversity loss (C) Estimating Net Cost of Indonesian Biofuel Non-environmental benefit Environmental benefit Internal Benefit Energy Security (B) GHG Saving (B), Particulate matter Benefit of avoided consumption of reduction (B), Sulphur reduction (B) liquid fossil fuel (B)
Figure 6-1 Indonesian Biofuel System from the Perspective Indonesian Society Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 174
6.3 IDENTIFICATION OF BENEFITS AND COST
In identifying the cost and benefit aspects, it is important to remember that“... cost benefit analysis is always concerned with incremental costs and benefits, that is, with effects which would not have occurred in the absence of the project..” (Department of Finance and Administration - Commonwealth of Australia 2006, p. 43). To better clarify the purpose, Table 6-5 of the incidence analysis and Figure 6-1 described the Indonesian biofuel system from the perspective of Indonesian society. The following sub-sections therefore explained in detail on estimating the cost and benefits as a result of pursuing the biofuel programme.
6.3.1 Benefits
As shown in the incidence matrix depicted in Table 6-5, the benefits of implementing biofuel target in Indonesia will be in the form of is avoided consumption of liquid fossil fuel, environmental benefit from having less pollution and being more secured in energy. The following section describes the type of benefits of having the biofuel.
6.3.1.1 Avoided fossil fuels
The obvious benefit that potentially be accrued along the policy period is avoided consumption of liquid fossil fuel. Underlying assumption in this case is that the biofuel is the only goods substitute for liquid fossil fuel and a reality that consumers do not have preference to replace the reduction of liquid fossil fuel consumption other than with biofuel. This assumption is almost valid as the market penetration of biofuel is achieved through blending the biofuels with corresponding liquid fossil fuels. Biodiesel for example is sold as blending B5 (5% volume of biodiesel) with automotive diesel oil in the pump station. So is bioethanol, it will be blend with petrol and sold in the retailer as E5 or E10 (5% or 10% ethanol blend) depending on the agreeable consensus with the automotive industries. This is also the case for pure plant oil, which will be distributed as a blend with kerosene, fuel oil, or industrial diesel oil. This assumption will make the reduction in demand of liquid fossil does not cause substantial increase in the price of the liquid fossil fuel. Hence, it is expected benefit due to avoided consumption of liquid fossil fuel can be calculated using the volume of replace liquid fossil fuel and its price. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 175
Despite being an obvious benefit, the avoided liquid fossil fuel consumption may have critical aspect in which accounting the benefit will depend on how to estimate the future price of both fossil oil and biofuel. The World Bank long term forecast of commodities including energy, sugar and fat oils have indicated after 2010, they will grow nominally modest in the beginning years before decreasing to the previous level. In real term, the forecasted prices are projected to decrease. The real price indices (based on the year 2010 = 100) on crude oil, fat oils and food for year 2025 are decreasing to 97.2, 78.8 and 76.5 respectively. Thus, it is assumed that, in the absence of major macroeconomic event, the reduction in the demanded liquid fossil due to biofuel programme does not cause a substantial increase in the price. The benefit due to avoided consumption of liquid fossil fuel may then be estimated using the volume of substituted liquid fossil fuels and their prices.
Historical and projected price of Ethanol, Petrol and Kerosene (2000-2025) Price (US$/kL) 1,200 History Projection 1,000
800
600
400 Petrol 200 Ethanol Kerosene 0 2000 2005 2010 2015 2020 2025 Year
Figure 6-2 Historical and projected price petrol, bioethanol, and kerosene
Figure 6-2 and Figure 6-3 present the historical prices of those fuels and their projections up to the year 2025 using the World Bank price indices. The historical price of petrol ADO, kerosene and fuel oil were taken from IEA (2011). Historical prices of IDO meanwhile were taken from the 2011 Indonesian energy handbook and Bunker Index Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 176
(2014). The projected price for all fossil fuel products were estimated using the index from the world bank commodity outlook report by Baffes and Ćosić (2013).
Price Historical and projected price of ADO, FO, IDO, (USD/kL) Biodiesel and PPO (2000-2025)
1,200
1,000
800
600
400 History Projection ADO Biodiesel 200 IDO PPO 0 2000 2005 2010 2015 2020 2025 Year
Figure 6-3 Historical and projected price ADO, FO, IDO, biodiesel and PPO
6.3.1.2 Environmental benefit
The second benefit expected due to liquid biofuel policy is external benefits in the form environmental improvement. This is as a result of providing cleaner burning fuels and reduced air pollution. The use of biofuel is expected to reduce GHG emission if Land Use Change (LUC) is excluded. It also produced less particulate and sulphur dioxide emission than the ones resulted from the liquid fossil fuels. Therefore, to calculate its benefit of having the biofuel, the emissions reduction should be monetized. As it was mentioned before, the benefit of less GHG emission was estimated from the long-term projected price of carbon from the closest country that has set its carbon policy reduction such as Australia.
For the sulphur and particulate emission, this research therefore employed a calculation of benefit transfer. This transfer utilises economic information in the form of Willingness to Pay (WTP) figures of non-market environmental commodities from other place at certain time will be used as a reference for estimating the value in another place Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 177 and corrected by using the ratio of Gross Domestic Product -Purchasing Power Parity [GDP -PPP] per capita or other economic indicators.
The LCA calculation indicates that in the case of GHG emission, however, the biofuel in general performed well compared to the corresponding liquid fossil fuel if the GHG emission contribution land use change (LUC) is excluded. Including the LUC in the LCA calculation would result in emitting more GHG (Hassan, Jaramillo & Griffin 2011; US EPA 2012). The reason for emitting more GHG in the US EPA (2012) report for example has been attributed to the assumption that the land for the biofuel expansion would likely to follow the historical projected oil palm expansion development. They asserted that these projections are in line with recent historical data, USDA reports and peer-reviewed literature, which all indicate that much of the recent expansion in oil palm plantation has been at the expense of tropical forest and peat land.
Since the Indonesian biofuel development is aimed to minimise the acquisition of the environmentally sensitive areas, thus it is assumed that forest type land cover, crop land, mixed land cover, wet land and peat are excluded for the biofuel development. By further considering the availability of land and the land cover classification reported by (Gunarso et al. 2013), this LUC scenario of a total 4.8 million ha (3.3 million ha for oil palm plantation and 1.5 million ha for sugar cane plantation) would comprise of barren land 5%, grass land 5%, savannah 10% and shrub land at about 80%. Using the Winrock database of land use conversion factors over 30 years (Harris, Grimland & Brown 2010) and the peat GHG emission factors of 95 Mg CO2eq/ha/yr. taken from the average figure from Page (2011) and Hooijer et al. (2012), a negative GHG emission figure of -0.94 t
CO2eq/ha/yr. for has been obtained. Therefore, instead of emitting GHG, the LUC
Indonesian biofuel aimed at lands that have lower biomass would serve as CO2 sequestering action. This option of biofuel development would then bring the GHG emission saving of biodiesel to be 1.51 kg CO2eq/l, bioethanol 1.73 kg CO2eq/l and pure plant oil to be 1.63 kg CO2eq/l. These figures will be used in this analysis as the benefit of biofuel through GHG emission saving.
6.3.1.3 Energy Security
Another identified benefit is in the form of increased energy security. It is rather obvious that less fossil liquid fuel consumption will make the Indonesian position, as net Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 178 oil importers will be more secured. However, putting numerical value of this particular benefit is less certain. Energy security itself as a definition so far, has no universal agreement (Kruyt et al. 2009) despite many literatures and much discussion about it. From the perspective of government interests, several countries and international organizations have been trying to define the energy security according to their interest.
Countries such as Australia defined the term of energy security through its department of Resources Energy and Tourism as the “..ability to meet the energy needs of the Australian community and industry - both in the short and in the long term.”(Department of Resource Energy and Tourism Australia 2012). In the Australian context, the definition is further defined as being “...adequate, reliable and competitive supply of energy”. Each term has meaning as follows:
Adequacy is the provision of sufficient energy to support economic and social activity Reliability is the provision of energy with minimal disruptions to supply Competitiveness is the provision of energy at an affordable price which does not adversely affect the competitiveness of the economy and which supports continued investment in the energy sector.
The Australian government also identified various factors affecting the supply of energy, which include “issues such as short-term disruptions to supplies as a result of human and natural hazards, or longer-term impacts resulting from inadequate energy sector investment”. They also recognize the importance of “...building resilience against hazards and balancing reliable energy supplies and environmental impacts”.
Another definition proposed by international organizations such as the Asia Pacific Energy Research Centre –APERC (2007) relates to a condition that comprises of four elements security in energy supply: availability–or relating to geological existence, accessibility–or geopolitical aspects, affordability–or economical elements and acceptability–or environmental and societal elements. Similarly, the IEA (2010), which represents voices of many countries, defined it as ‘‘the uninterrupted physical availability at a price which is affordable, while respecting environment concerns’’
In the case of Indonesia, in the absence of official definition, several researchers including Atje and Hapsari (2008) defines energy security for Indonesia as a state of Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 179 sufficient energy supply necessary to keep the economy running at full employment”. This implies additional capital and the continuing growth of economy should result in increasing energy consumption. Indriyanto (2010) tried to define its meaning as “the availability of energy at all times in various forms, in sufficient quantities, that can be accessible by most people at affordable prices, and obtained in a way that is not environmentally destructive.”
The draft of Indonesian government regulation on energy security meanwhile defines it as a condition in which the supply of energy to sectors of households, public infrastructure, commercial, transportation and industry is adequate and evenly distributed in terms of quantity and quality at affordable price for both during a normal condition and energy crisis and emergency. This therefore has held several elements of energy security, which is being adequate, reliable, and affordable. Compared to other definitions, the notion of acceptability, which relates to the element of respecting environment, has not been sufficiently emphasized. This is not surprising as priority in meeting the energy need to sustain the economic activities and wellbeing of Indonesian in general is considered the ultimate objective despite Indonesian government commitment in various environmental measures including GHG emission reduction and renewable energy development.
Thus, in the absence of a universal definition on this issue, majority agrees that this energy security constitutes three elements of availability (‘‘the uninterrupted of supply), affordability (‘‘a price which is affordable’’), and acceptability (‘‘respecting environment concerns’’). The term affordability in this case is not relevant as biofuel is direct alternative substitute of liquid fossil fuel. It is argued that there is no difference in the affordability between biofuel and liquid fossil fuel as both types of fuels provide the same functional unit and, in fact, the biofuel delivery and distribution will use the existing liquid fossil fuels. If people could not afford to buy liquid fossil fuel, they would not be able to afford the biofuels either. The term of acceptability related to the environmental concern should not also be included in monetizing the energy security, as this should be considered in the environmental cost and benefit aspect. Otherwise, it would be double accounting in the overall cost and benefit analysis. Therefore, in this analysis, energy security would come down to the remaining element, which related to the security of oil supply (SOS). Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 180
The security of supply itself could be regarded as the amount of the society is willing to pay for having the fuel supply consumption to be secured (Bollen 2008) and could be inferred as the investment for a country to ensure the security of its supply. Such an investment could be the strategic fuel reserve as recommended by the EIA organization, which equals to 90-day consumption reserve. In practice, the amount of such a reserve varies from one country to another depending the practices or state mandate. The United States, for example, through the congress, has mandated at strategic oil reserve of 1 billion barrel of crude oil, which should be enough for 90 days of net petroleum oil imports (Andrews & Pirog 2012). Indonesia through Pertamina (a state-owned oil company) meanwhile has only allocated of 25-day stock of fuel products (Pertamina, 2012) should the supply of both domestic oil production and import stop.
Therefore, the benefit of having the biofuel for Indonesia may be calculated by the difference in WTP to avoid lack of security of oil supply for the scenario of having the biofuel and without biofuel in the Indonesian energy system. A formula by Bollen (2008) to estimate such a WTP that considers oil import, oil consumption and energy intensity as well as overall region-dependent scaling factor, which calibrated using the 25 day stock of fuel products, could be applied in this case. They are expressed as:
(Eq. 6-5) , , , , = , , , in which IMPt,r is the willingness-to-pay to avoid lack of security of oil supply, as a percentage of private consumption.
I is the import ratio that is defined as the imported oil products in PJ divided by the national fossil oil demand. Variable C is the consumption ratio that is defined as the consumption of a given energy commodity divided by the consumption of energy at large, again each in terms of their energy content in PJ. E is the energy intensity in PJ per unit of GDP. The subscripts t and r refer to these variables’ respective time- and region- dependencies while the exponents α, β and γ allow for flexible assumptions regarding the convexity or concavity of the dependency of IMP.
For the case of Indonesia where it is a net oil importing and a developing country, the value of α, β and γ should be more than 1 and they were set to be 1.1, 1.2 and 1.3 Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 181 respectively. This indicates that import dependency becomes more critical, if the relative commodity dependency or relative energy dependency increases. This is also appropriate as majority of countries (and, hence, nearly all regions) do not possess domestic oil or gas resources, thus is assumed to be non-zero and it should be more than 1. The parameter A is an overall region-dependent scaling factor, which is calibrated using the 25-day stock of fuel products. The willingness-to-pay will be zero if the country is self-sufficient in oil or net oil import is zero. Further details on how the parameters and exponents have been calculated, one could refer to Bollen (2008).
In this analysis, for the year 2025, a projected net oil import if no biofuel in place is 5,092PJ, with national liquid fossil fuel demand of 7,098 PJ, national primary energy consumption of 15,530 PJ and energy intensity projected to be 6.9 PJ/USD billion. With a calibrated value of Ar using the 25-day oil reserve figures in 2013 as the based year would result in IMP2025 of 0.80%. Given the projected private GDP (PPP) may reach USD 1,919 billion, the willingness to pay to avoid lack of SOS would be USD 15,356 million. An alternative scenario of having biofuel production of 135 million barrel of oil equivalent in the same year would result in the IMP2025 of about 0.66 % or equals to the willingness to pay to avoid lack of SOS of USD 12,633 million. Hence, the benefit of having the biofuel would be calculated as the difference between the two WTP values or equals to USD 2,724 million. The same calculation would be carried out in each year within the CBA model period and discounted to the year 2014.
6.3.1.4 Benefits from Transfer and Distributional effects
Another positive aspect of this programme would be the creation of indirect jobs of liquid biofuel production and increased personal income in rural communities as well as additional investment in those areas. Hayes (1995) estimated that production activity in biodiesel, for example, would potentially generate about USD 1 to USD 2 in the service sector. A specific study on the biodiesel project in Georgia USA has resulted in an estimated of USD16 million in additional investment for a 57 ML plant (Shumaker et al. 2003). These activities might be processing plants or businesses located near the biofuel feedstock plantation and processing plants. Likely candidates would be plants that would use co-products as inputs into their production processes, catering businesses, mechanical engineering/supplies, and other local services biodiesel plant size. In term of job creation, biodiesel plant with a capacity of 5 ML per year for example, is estimated to employ Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 182 around 24 persons. If a similar ratio of USD 2 to USD 1 as the factor of added value is used to estimate additional jobs created as the result of biodiesel economic activities, a maximum of about 48 additional jobs can thus be created.
Despite promising significant direct employment opportunities and additional investment along the biofuel production chains, these transfer and distributional effects would not be counted as the benefits in this societal perspective analysis. Additional employment in the fuel distribution is also not expected, as the fuel will be distributed through existing fossil fuel distribution network and outlets. The reason is that these factors are included as part of the labour cost in the production of liquid biofuel. Moreover, including additional investment as a benefit will also include the cost associated with it. Nevertheless, specific discussion on these secondary aspects is carried out to highlight their significance in the section 6.5.1
6.3.2 Costs
The cost in this analysis can be outlined as follows.
6.3.2.1 Biofuel consumed.
The expected price of liquid biofuels would be the modelled price of the bioethanol, biodiesel, and pure plant oil. Such models were based on reasonable return of average business in Indonesia. The association of Indonesian biofuel producer has proposed to the government to revise biofuel price formula for qualifying the government subsidy as the current formula link with the international biofuel price was viewed as mislead and do not reflect the actual cost production of the domestic biofuel industry. The formula proposed for biodiesel and bioethanol are as follows:
Biodiesel price in USD/kL is CPO price x 870 x 1.2 with CPO price should refer to the CPO export price in USD/ton. For the fuel grade bioethanol, price in USD/kL is equal to (1.15 x (d x ((c x M)+ k )), where M is the price of molasses in USD/ton, k is processing cost of hydrous ethanol in USD/kL, c conversion constant of ethanol from molasses with the value of 3.75 ton/kL and d is the conversion constant fuel grade ethanol.
For PPO, the set price for this biofuel should refer to RBD (refined bleach palm oil) which roughly around 5% more expensive than crude oil or could be inferred as 1.05 x Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 183
CPO price (USD/ton) x 870. The price of the raw material for biofuel be either CPO or molasses is assumed to be the primary factors influencing the cost of biodiesel production, pure plant oil or ethanol and the only factor projected to fluctuate significantly in coming years. The projected price of those raw materials was estimated from the commodity indices set in the World Bank report.
In addition to relatively modest projection by the World Bank on commodities, this Indonesian biofuel feed stock is recommended to come from dedicated plantation. Thus, it will decouple its association with the food and its impact on the food price. Moreover, the land allocation for biofuel is expected from the land types that have relatively low carbon stock. They are including in general shrub land, abandoned logging concession and degraded land. Hence, GHG emissions as well as biodiversity threat could be minimised. Special conservation zone within plantation concession could be set up particularly in the areas that are not suited to plantation such as steep slope along the rivers,
6.3.2.2 Additional cost in building biofuel infrastructure and general government expenditure.
The implication having biofuel in this system is additional cost in building biofuel infrastructure. To achieve the biofuel target, a total of USD 1.3 billion in 2008 has been set aside for such a purpose. As this is nominal value, and disbursed contingent to the need, this cost will be annualised up to the year 2025 and it was found to be USD 124.08 million.
6.3.2.3 Engine Adjustment
Using the biofuel may require engine adjustment biofuel, especially if higher blend of biofuel policy is implemented. However, the motor fleet is continually replaced due to ageing, and the government has insisted that maximum tried biofuel blend should be able to be used in the vehicle or accelerated the pace of their engine compatibility. It assumed that original engine manufacturer during this analysis period guarantee that maximum blend could be used in their engines. That means B20, E15 should be compatible in the vehicles while PPO50 could be used in the boiler and industrial engines and power generation. This analysis also assumes that the decision for purchasing flexible fuel is up to the individuals and no incentive should be given by the taxpayer and the purchase should be part of the standard aging and replacement. For these reasons, engine adjustment cost will be set to zero in the CBA calculations Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 184
6.3.2.4 General government expenditure.
This cost is associated with government expenditure in the form of promotion biofuel program, as well as creation, implementation, and monitoring of biofuel standard. It is estimated the total budget spend on these items was about USD 15 million spread over three years from 2008 to 2011 and an annual expenditure of USD 1 million up to 2025. These amounts of expenditure are spread among ministries and institutions that have responsibility in the biofuel programme including ministry of energy, industry, agriculture, environment, science and technology & BPPT.
6.3.2.5 Increased cost of biofuel raw material for edible purposes.
There is a possibility that Indonesian society may pay extra increased price for vegetable oil and sugar, as they are raw materials for the biofuel. However, there is a tendency that the correlation between the domestic price of food and biofuel is no longer relevant as this Indonesian biofuel feed stock is recommended to come from dedicated biofuel plantation. Thus, it will decouple its association with the domestic food supply and its impact on the food price. Moreover, the land allocated for biofuel is expected from the lands that have relatively low carbon stock. They are including shrub, abandoned logging concession and degraded land. Hence, GHG emissions as well as biodiversity threat could be minimised. Special conservation zone within plantation concession could be set up particularly in the areas that are not suited to plantation such as steep slope along the rivers,
6.3.2.6 Environmental cost.
This can be attributed to the following implication on the use of biofuel to the environment.
Ground ozone formation
The biofuel use has been associated with the increased ozone formation. This effect has been reported by Milt et al. (2009) on their study on the impact of 10% biofuel substitution on ground level ozone formation in Bangkok, Thailand. The equation for estimating the ground level ozone formation is presented as follows:
COZ = (OZbiofuel - OZref) x POPmajor cities x (Eq. 6-6) , ( ) ( ) Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 185
where COZ is the environmental cost of increasing ground level ozone formation
(USD/yr), OZref: the estimated baseline value for average peak hour ozone level (ppb).
OZbiofuel is the estimated value for average peak hour ozone level (ppb) if biofuel used.
WTPOZ,US is the willingness to pay of US citizens for each 1 ppb increase in ozone concentration (USD per person), GDP(PPP)per capita Indonesia is USD 4,200 and GDP(PPP)per capita USA is USD 47,200 (CIA 2010), POPmajor cities is the population of major cities in Indonesia. The willingness to pay of US citizens for each 1 ppb increase in ozone concentration (USD per person) is found to be USD 20 (Levy et al. 2001). As there is not such a study on the impact of the use of biofuel on the ground level of ozone formation in the Indonesian major cities, a figure from studies by Milt et al.(2009) and Bell et al (2011) on the city of Bangkok can be inferred as condition of major cities in Indonesia are similar to Bangkok in terms of population, traffic and climate when they implement biofuel programme in which an average increase of 3.9 ppb in ground level ozone concentration is expected. As the biofuel consumption varies in each year, the Eq. 6-6 could be modified to become:
20x4,200 COZ in year i= 3.9 ppb x POPmajor cities x (Eq. 6-7) 47,200
COZ = 6.9 x POPmajor cities x (Eq. 6-8)
Other direct environmental cost
Calculation of other direct environmental cost is based on the results obtained from LCA inventory. As the LCA carried in this research did not include embodied aspects, the environmental cost due to construction cannot be estimated. The reason for using the results from LCA is that to date there is not much data on the environmental impact from construction or operation from such plants. The only serious risk identified for this plant operation would be the handling of methanol, as this chemical is classified as hazardous and flammable. To simplify the calculation, however, potential cost due to methanol is ignored.
6.3.2.7 Social cost
This potential cost arises due to the potential displacement of indigenous people particularly during the early development stage of the plantation. The cost for such Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 186 displacement is absorbed in the overall cost of biofuel production. There is always potential unrest, which could lead to substantial damage cost to the lives; infrastructure owned either by the government or private entities. However, if this biofuel plantation is expansion carried out according to the regulation and law recognized in the land, such potential damages incurred could be avoided.
Moreover, the current price of potential biofuel raw material including palm oil and molasses has already reflected the current condition, which occasionally social cost did incur. If this BCA calculation is based on the current price of and current long-term projection of fat oil and other food sector including molasses, then social cost in this instance could be minimal. Therefore a reasonable value is set for USD 3/ha quoted from Manurung (2001) .
6.3.2.8 Biodiversity loss
The need to expand the biofuel feedstock plantation indeed requires new space. Therefore, to limit the biodiversity loss, the land allocation for biofuel is expected from the lands that have relatively low carbon stock including shrub, abandoned logging concession and degraded land. Hence, GHG emission as well as biodiversity threat could be minimised. Special conservation zone within plantation concession could be set up particularly in the areas that are not suited to plantation such as steep slope along the rivers. This practice has been widely recommended and has often been considered in the document report of environmental impact assessments of biofuel plantation. It is therefore, the loss of biodiversity is considered minimal and assumed to be USD2/ha quoted from Manurung (2001) for the calculation of CBA.
Having identified all the benefits and costs from various aspects, the total net present value (NPV), benefit and cost ratio (BCR) and levelized cost of the fuel are then calculated using a discount rate of 6%. The detail of the calculation method of this analysis is widely known, for example Bjornstad (2004) and Rocklife (2003) works on economic project evaluation. Detailed cash flow calculation can be found in Appendix.
Sensitivity analysis for CBA method is carried out by varying the price biofuel feed stock price. The reason is that feedstock of biofuel is a major contributor to the biofuel price. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 187
6.4 ASSUMPTIONS AND LIMITATIONS OF THE METHOD
6.4.1 Assumptions
The following are the assumptions used in the calculation.
A constant discount rate over the lifetime of the project. Constant benefits and costs over the lifetime of the project. No intergenerational value included as the result of saving the fossil fuel.
6.4.2 Limitations
The effect of replanting, sometimes carried out early, is not included in the calculation.
As most values of benefits and costs are constant over the project’s lifetime, the calculation cannot show the effect of variation in feedstock prices, improvement in biofuel combustion technology and biofuel production technology on the NPV and BCR values. The method cannot estimate the distribution of benefit and cost to the society
6.5 RESULTS AND DISCUSSION
The discussion of the results obtained from the cost and benefit model would cover the important aspect of direct economic impact of the biofuel target and the cost and benefit of the program.
6.5.1 Direct economic impacts on the parties involved in the biofuel production
In analysing the economic impact of Indonesian biofuel, there are several primary areas of interest. The first is a direct impact on the Indonesia farmers or plantation companies. Despite being considered as a secondary and distributional benefit and thus excluded from the calculation of CBA, this particular impact is profound financially. The second positive economic impact in this category is the capital investment in mechanical goods during the milling stage of the biofuel production. It is by far the most capital- intensive stage of biofuel production and provides potential income to investors as well as jobs for both skilled and unskilled labours. Both impacts resulting from the growing biofuel industry could make a significant amount of money to enter the local economies. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 188
The production of biofuel raw material from oil palm and sugar cane plantation represents new opportunities for farmers or agricultural business, and it could potentially increase drastically in the coming years as Indonesian oil reserves run out rapidly while demand remains strong. A biofuel expansion of around 5 million hectares land would represent about 3.4 million jobs creation mostly in the agricultural sector. To highlight the importance of this biofuel plan on the agricultural sector, one can observe potential employment opportunities and pay rate of the workers that are involved in the sector. With average annual wage of USD1,693 (BPS 2013), an estimated total payment to the farm as well as biofuel industry workers in the year 2025 will be amounted to USD 5.78 billion. As shown in the Table 6-6, detail of potential domestic effect driven by the biofuel target is dominated by the biodiesel and pure plant oil, which will be sourced from palm oil.
Table 6-6 Summary annual domestic out of payment in 2025 and potential annual biofuel investment
2025 biofuel policy Annual payment to Average annual Average annual target domestic workers in investment in the investment in the biofuel 2025(USD) agriculture (USD) processing industry (USD) Biodiesel 2.84 billion 0.34 billion 0.32 billion Bioethanol 1.62 billion 0.09 billion 0.30 billion Pure plant oil 1.32 billion 0.16 billion 0.05 billion
In addition to the positive impact on employment creation, the 2025 biofuel target would generate annual investment in the raw material plantation of about USD0.58 billion during the life of the plants. The investment in the agricultural sector is concentrated on land acquisition, land preparation, seeding and farming machineries. The investment in the biofuel industry meanwhile would raise the demand in the mechanical and chemical machineries. This biofuel plan would require build about 93biodiesel plants with a capacity of 100,000 tonnes per year each, 132 bioethanol plants from sugar cane juice or molasses with capacity of 80,000 kL bioethanol and 17 CPO refineries with each has a capacity of 1000 tonnes per day for pure plant oil.
While investment beneficiaries in the agricultural sector primarily resides locally, the increasing demand in mechanical engineering sector driven by the biofuel target may not be confined domestically as many advanced chemical processing machineries as well as Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 189 chemical process licensing will have to be imported. However, assuming half of the biofuel processing investment is spent locally, such a number may contribute slightly less than 1% of Indonesian annual GDP in the construction sector for the year 2010. Following a study by Hayes (1995) in which USD 1 production activity in biodiesel would potentially generate about USD 1 to USD 2 in the service sector, the total biofuel plant of with capacity up to 26.15 GL in 2025 would create similar ratio of investment in other sectors. If the employment in the biofuel industry due to 2025 biofuel target is about 113 thousand people, similar number of total indirect employment opportunities can also be expected. In addition, similar investment size of USD 0.68 billion could be expected to stay locally and to reach about USD 0.26 per litre of biofuel or USD 5.1 per BOE in the year 2025.
As majority of the job opportunities would be in the agricultural sector, this would create significant economic contribution in the biofuel plantation centres, hence increase employment on the provinces of Sumatra, Kalimantan, Sulawesi and Papua. Meanwhile, mechanical engineering jobs would be concentrated in the heavily industrial areas of Java and Sumatra islands, particularly around greater Jakarta, Surabaya and Medan.
Since the feedstock for biodiesel and pure plant oil will likely come from oil palm plantations, maximum employment would not be realized until 2020 as it takes about 6 to 7 years to have the oil palm to reach its peak production. On the other hand, full employment in the bioethanol could be realised sooner as the sugar cane juice or molasses, the likely feedstock of bioethanol, is an annual crop thus there will not be a significant lag between planting and production.
In terms of wealth distribution, the biofuel policy target could implement cooperative scheme between small-scale plantation and large business entities, which has proved to be successful in the palm oil sector. The rapid growth of oil palm plantation in the 80's was partially due to the programme of Nucleus Estate and Smallholders (NES) (Siscawati 2001). Additional measures similar to Presidential Decree No. 1/1986, which integrated NES approach with transmigration programme could also be implemented to address potential labour shortage should biofuel rapid expansion occur in Sumatra, Kalimantan and Papua. Not only does it provide labour to the project, but also a solution Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 190 for high unemployment to those who lived in over populated island of Java. This time, however, bottom up approach involving voluntary transmigration is recommended.
Competition for land-use is a major concern when considering feedstock production. Although the current oil palm and sugar cane plantation are dedicated for food purposes, there is always a leakage of palm oil or sugar cane molasses or juice for biofuel production. This is partly due to the land-use returns from oil palm, for example, is more significant compared to other forms of land-uses. In 2007, a report prepared for the Stern Review estimated the return from oil palm plantation land-use as ranging from USD 960 to USD 3,340 per hectare. In contrast, smallholder of rubber, rice fallow, cassava, and one-off timber harvesting yielded around USD 72/ha, USD 28/ha, USD 19/ha and USD1,099/ha respectively. Majority (80%) of the current biodiesel plants are owned by companies that have traditional oil palm plantation for food purposes. It is their intention to have biodiesel plants to diversify their products to cushion themselves during low period price of CPO. This is also a trend for bioethanol production although so far, vertical ownership of sugar cane plantation, refineries and alcohol industries is somewhat limited in the Lampung province plantation (Gopal & Kammen 2009)
6.5.2 Cost and benefit of biofuel programme in Indonesia
6.5.2.1 Results of the analysis
Calculating the net present values of internal and external benefits and costs as shown in Eq. 6-3 has produced a snapshot of net cost of USD 4.75 billion in the year 2025 (CBA spread sheet can be found in Appendix C). With projected biofuel volume up to 26.42 GL in that year, it requires USD 22.97 billion to bring the biofuel domestic production to the Indonesian market, thus more expensive than importing petroleum products with the same equivalent amount of energy. The analysis was carried out over the period of 2013 to 2025 with a discount rate of 6%, and it has yielded in net present value of -USD24.40 billion and a benefit to cost ratio of 0.75. This net present value would make an equivalent annual net cost of USD 2.92 billion over the analysis period. The Figure 6-4 and Figure 6-5 show detail of each factor in the cost and benefit calculation. The main finding in this analysis is that the cost to meet the 2025 biofuel target exceeds the benefit that can be potentially gained. Similar finding was also suggested by Bell et al. (2011) that evaluated the net cost to meet the Thai's biofuel target. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 191
Finding from the environmental aspect has demonstrated that the biofuel in general performs better environmentally than its corresponding fossil fuel. This is largely due to reduced urban particulate emission as well as GHG emission saving derived from the selection of land cover type that has low carbon stock. However, contribution of environmental benefit is only USD1.17 per GJ or about 6% from the total benefit. Moreover, it is important to note that the ground ozone formation significantly reduced the environmental benefit gained from other emissions. The net environmental benefit result could also been reversed if the land expansion for the biofuel follows the pattern of oil palm plantation expansion for the past 20 years (US EPA 2012) which primarily come from tropical forest. The gain of GHG emission saving could not be realised as more GHG per litre of biofuel will be released during land use change in the early biofuel development project.
Figure 6-4 CBA Chart - NPV for each aspect over Figure 6-5 CBA chart in the year 2025 the analysis period and discount rate of 6% (million (million USD) USD)
Though smaller compared to the major benefit of having to avoid the use of liquid fossil fuel, the biofuel contribution in providing more secure of energy supply to the Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 192
Indonesian energy system is 14.6% of the total benefit or about USD3.43 per GJ. The trend of biofuel production to the net fossil fuel import ratio if no biofuel is in place over the analysis period is decreasing from the peak in 2020 of about 17.7% to 15.5%in 2020. This implies that the biofuel plan targeted to fulfil the 5% of the total primary energy mix in 2025 could not keep up with the trend of increasing fossil fuel import. Moreover, given the amount of land needed to be allocated for the biofuel plan is almost half of the combined oil palm and sugar cane plantation in 2011 or about 9.3 million hectares (Pusdatin Kementan 2013) and the trend of decreasing crude oil production, the notion of having the biofuel to secure the Indonesian oil supply seems to be getting more difficult to achieve. That is because more lands need to be allocated to keep up with the rising liquid fossil fuel import, which may compel the new biofuel development to impinge the more environmentally sensitive areas such as pristine forest and peat land.
Despite costing more to have this biofuel plan realized, the annual net cost figure of USD2.91 billion shown in the Figure 6-6 roughly equals to half of the potential annual payment to biofuel worker in 2025. This is slightly less than 15% of the Indonesian liquid fossil fuel subsidy in 2011, which was estimated to reach around USD20 billion. This could provide a strong reason for the Indonesian government to have domestic production of biofuels. The money and business activities would primarily reside within the Indonesian economy instead of being sent abroad. On the other hand, the continued increase of fossil oil import puts a strain on the foreign exchange reserve. In 2013 alone, with average crude oil price of USD 100 per barrel, USD 26.20 billion was needed to import crude oil and oil products. As a comparison, the annual discounted benefit of avoided fossil fuel is about USD7 billion per year. This means a potential saving of about 27% of the foreign exchange reserve required for importing the fossil fuel. These facts, combined with the price volatility of fossil oil, could help to influence Indonesian biofuel policy.
The overall analysis during that period indicates that the prices of liquid fossil fuels and their biofuel substitutes are determining factors in the analysis. The cost of biofuel consumption made up about 98% of the total cost while the avoided fossil fuel consumption contributed to about 80% of the total benefit. This has tremendous effects on the NPV of this assessment. Although the World Bank projected that fossil fuel and biofuel prices will be stable in the long term, the net cost projection of this analysis will be growing on the back of increasing domestic fuel consumption. Figure 6-6 below illustrates Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 193 the trend in which the gap between the cost of consuming biofuel and the benefit of avoided liquid fossil fuel will be growing beyond the analysis period.
Million USD 25,000 Cost of consuming biofuel Benefit of avoided liquid fossil fuel consumption 20,000 Net cost
15,000
10,000
5,000
0 2013 2015 2017 2019 2021 2023 2025 Year
Figure 6-6 Net cost projection of Indonesian biofuel plan up to 2025
The main contributor to the continued increase of projected net cost is the use of bioethanol. Of the total accumulated net cost of USD24.40 billion, bioethanol contributed about 75% while biodiesel and pure plant oil made up of 15% and 10% respectively. This means internal cost of providing biofuel obtained from the difference in the cost of petroleum consumption avoided and the cost of biofuel consumed is the major contributor in the total net cost. Hence, to reduce the net cost means the cost of producing biofuel needs to be improved. Given the price of fossil fuel will likely to stabilise at USD100 per barrel in the long term and in the absence of major crises, this would require the price of biofuel to be lower than the current ones in order to have a total cost and benefit to be equal. The individual cash flow analysis based on each biofuel type at that crude oil price corresponds to about USD750 to USD890 per tonne of CPO for pure plant oil and biodiesel and USD43 per tonne of molasses for the bioethanol.
6.5.2.2 Sensitivity analysis due the variation on the yield of biofuel crops
As the yield of the biofuel depends largely on the yield biofuel crops, the C/B analysis on the effect of the oil palm yield and bioethanol yield from sugar cane per ha was Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 194 also analysed. Varying the yield of biofuel crops would affect the amount of plantation area. When the yield of biofuel crops is higher, less plantation area is required, thus reducing the amount of GHG sequestered. This in turn reduces the environmental benefit of GHG emission saving. The reduction in the plantation area also reduces the cost of biodiversity loss and social cost. Conversely, if the yield of the biofuel crops is lower, more plantation area is required thus increases environmental benefit of GHG emission saving. However, the cost saving in biodiversity loss and social cost are slightly less than the benefit reduction in GHG emission.
In addition to the effect biofuel crops yield toward GHG release, improvement in the biofuel crops yield theoretically affects the profitability of both oil palm or sugar cane farmers and plantation companies hence increases the supply of CPO and sugar cane juice or molasses to the biofuel market, thus reduces the price both commodities. This has been confirmed by (Hameed & Arshad 2013) in which the price of palm oil has been influenced by its conventional agricultural supply and demand framework as well as the price of fossil oil. The relationship between price and supply of crude palm oil is reported being elastic in the long term with a coefficient of 1.4284 (Hameed & Arshad 2013) and being inelastic for sugar cane juice with a coefficient 0.859 (Rustam 2009). However, as the volumetric amount of biofuel has been set to meet the government target, the total land required has been predetermined hence the possibility of oversupply of biofuel crops, which causes the drop-in biofuel prices could also be avoided. Moreover, if the land allocated is initially based on the lowest yield combination of 3.7 t/ha of CPO and 5.170 kL of ethanol and during the course of the project the yields are improved, excess biofuel crops harvest in that particular year would only temporarily reduce the biofuel prices. The biofuel crops producers would rather reduce their production or store the feedstock and release them when the prices are reasonable.
This analysis suggests that variation in the price of the biofuel crops will not be significantly affected by the amount of their supply but largely influenced by the movement in the crude oil prices. By keeping the price of both biofuel and liquid fossil fuel the same as they are projected in this analysis, the variation of biofuel crops yield was then checked against the B/C ratios and the net present values. The results are presented in the Table 6-7. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 195
Table 6-7 Variations of annual biofuel crops yield on B/C ratio and net present value
CPO Ethanol Yield from sugar cane in 2014 Yield in 5.170 kL/ha 6.471 kL/ha 2014 B/C Ratio Net Present B/C Ratio Net Present Value Value (million (million USD) USD) 3.7 t/ha 0.751 -24,401 0.751 -24,425 4.0 t/ha 0.751 -24,424 0.750 -24,450 5.0 t/ha 0.750 -24,486 0.750 -24,512 6.0 t/ha 0.750 -24,528 0.740 -24,554
The Table 6-7 has demonstrated that as the yield is higher, the plantation area is reduced and the B/C ratios as well as the NPV of this cash flow are lower. The reduction in the plantation area also reduces the cost of biodiversity loss and social cost. However, the cost saving in biodiversity loss and social cost are slightly less than the benefit reduction in GHG emission. Therefore, 20% change in the CPO yield causes a less than 1% of B/C figure and net present value.
6.5.2.3 Sensitivity analysis due to variation of biofuel and fossil fuel prices
The most challenging aspect is whether the biofuel feedstock price could realistically stay at those levels so that government intervention could be directed to cover the external cost arising from this biofuel plan. The following Figure 6-7 provides graphical relations between the price of crude oil and the price of biofuel feed stock i.e. crude palm oil and molasses/cane juice when the individual B/C ratio of biodiesel, bioethanol and pure plant oil is equal to one. Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 196
Price of CPO (US$/t) Price of molasses (US$/t) 1600 140
1400 120
1200 CPO Price for Pure plant oil 100 1000 80 800 60 600 Area below the curves where the B/C ratio is 40 400 more than 1
200 20
0 0 20 40 60 80 100 120 140 160 Price of crude oil (US$/bbl)
Figure 6-7 Curves of B/C ratios equal to 1 for the biofuel feedstock's price against the crude oil price
Referring to the Figure 6-7, potential feedstock of palm oil for biodiesel and pure plant oil provided a rosy picture because this oil is the most competitive price among other vegetable oil commodities. Zimmer (2010) reported a palm oil production cost of USD300 per tonne. Similar figure was reported by the Sime Derby corporation in a report about their operations in both Malaysia and Indonesia in which their CPO cost operation in 2010 was about MR1,200 (approximately USD 300). Budidarsono, Rahmanulloh and Sofiyuddin (2012) have also reported the relatively competitive cost of CPO production compared to other vegetable oil at around USD 350 per tonne of palm oil in their survey to the 23 Indonesian oil palm plantations (including small scale and large-scale plantations). At this marginal cost of production of palm oil, that corresponds to crude fossil oil at about USD 31 to USD 34 per barrel but could be in the range of USD 47 to USD 58 per barrel if all externality's cost is excluded. These range of crude oil price could be used as lower bench mark of the competitiveness of palm oil based biofuel despite non two way correlation has Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 197 been found between the price of crude oil and the CPO as suggested by (Hameed & Arshad 2013) and Yu, Bessler and Fuller (2006).
Assuming USD 350 per tonne is the marginal cost of production of CPO, at the current CPO price of around USD 844 per tonne, the oil palm farmers and plantation companies are in a good position to embark in the biofuel processing business while providing an avenue for absorbing excess CPO production for biofuel. This marginal cost of CPO production should also provide Indonesian government an incentive to encourage new players in plantation business to open new oil palm plantation specifically for biofuel. The incentive is to provide a biofuel purchase guarantee for the new plantation at the price parity with the corresponding fossil fuel.
With the current crude oil of USD 97 per barrel, excluding all the externality cost, that would equate to the CPO price of USD 604 to USD 613 per tonne or final biodiesel price of USD 0.63 per litre and pure plant oil of about USD 0.58 per litre. The lower bound reference required for this biofuel purchase agreement is the equal corresponding price of crude oil when the price of CPO at marginal cost of production of USD 350 per tonne or equivalent to roughly USD 47 to USD 58 per barrel of crude oil. Such intervention may need to take into account for a potential leak of CPO from biofuel to food market considering the inelastic nature of palm oil price elasticity demand (PED) for short term and relatively elastic nature for the long term (Rifin 2010). Increasing quantity of CPO demanded in the short term could very much depress the price of CPO. Moreover, the rapid expansion of oil palm plantation, which almost double from the figure in 2005 to about 9.2 million hectares in 2013 (Director General of Estate crop Ministry of Agriculture Indonesia 2013), would make this biofuel scheme as an alternative to protect the palm oil commodity during a low price period. That amount of land could potentially produce around 40 to 48 million tonnes CPO per year. This figure would exceed the projected estimate of OECD-FAO (2012) at maximum 36.9 million tonnes per year in 2021. Thus, a potential glut of palm oil in the vegetable oil market could be prevented by absorbing the oil for energy purposes.
The implementation of the government measure by guaranteeing the purchase of biodiesel from palm oil may not applicable for bioethanol. The required price of USD 43 per tonnes of molasses for the bioethanol to make it feasible at the current crude oil price Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 198 was considered too low given molasses prices is about USD 112 per tonne and is expected to rise in 2015. Despite having strong experience of growing sugar cane since the Dutch colonialization in the 19th century, the agricultural industry has a structural weakness, which prevents them being efficient like the one in Brazil. The problem ranges from inefficiency in the sugar mill, low yield of sugar content and the sugar cane plantation deregulation, which farmers can choose the crops for the season, which led to the land competition for food crops (paddy). In addition, the fact that the current sugar plantation is still situated in Java has made land expansion is prohibitive and expensive. An expansion of 1.48 million hectares sugar cane, which is triple from the current cane area of less than 0.5 million hectares, is viewed to be hard to achieve as Indonesia is struggling to supply its own sugar consumption, let alone to make the cane production compete with other major producers. This sugar cane situation is different from oil palm, as the economy of scale in this oil palm business has been achieved due to combination of strong private investment and the fact that this is the most productive vegetable oil plant. This can be reflected by the rapid expansion for the past 10 years. The approach for developing the raw material plantation for bioethanol thus is to open new plantation in other islands such as Sumatra and Papua and build up the capacity. This expansion of sugar cane plantation for bioethanol crops in these areas could promise this business to become as efficient as the one in Brazil as restriction and land demand for residential purposes are much less than the one in Java Island.
6.6 CONCLUSIONS AND RECOMMENDATIONS
6.6.1 Conclusions
The main finding in this analysis is that the cost to meet the 2025 biofuel target exceeds the benefit that can be potentially gained. This long-term CBA of the Indonesian biofuel aspiration over the period of 2013 to 2025 with a discount rate of 6% has yielded a net cost of USD 24.40 billion and benefit to cost ratio of 0.75. Such an amount would yield to an equivalent annual net cost of USD 2.92 billion. A snapshot in the final year of the analysis period has resulted in a net cost of USD 4.75 billion, and it requires USD 22.97 billion to bring the biofuel domestic production to the Indonesian market, thus more expensive than importing the petroleum products. The main contributor to the projected net cost is bioethanol, which contributed about 75% while biodiesel and pure plant oil made up of 15% and 10% respectively. Although this biofuel plan is viewed as being costly, Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 199 the annual net cost figure of USD 3 billion roughly equals to half of the potential annual payment to biofuel worker in 2025 and slightly less than 15% of the Indonesian liquid fossil fuel subsidy in 2013 of around USD 20 billion. It also implies that having domestic production of biofuels, though more expensive than importing fossil fuels, would let this type of people spending to reside within Indonesian economy instead of being used to import the liquid fossil fuel.
Second finding in this CBA is that the prices of liquid fossil fuels and their biofuel substitutes are major determining factors in the overall assessment. This implies both long- term biofuel purchase agreement on parity corresponding fossil fuel as well as implementing a series of subsidy on the biofuel. As the long-term price of fossil fuel is assume to be at USD 100 per barrel in the absence of major crises, this would require the final price of biofuel to be lower. The individual cash flow analysis based on each biofuel type has shown that it takes to about USD 750 to USD 890 per tonne of CPO for biodiesel and pure plant oil production and maximum price of USD 43 per tonne of molasses for the bioethanol to compete with the current projected crude oil price. Palm oil as raw material for biodiesel may have the potential, but this may not work for bioethanol from sugar cane juice or molasses due to the persistently high price of molasses and inefficiency of the sugar cane industry.
6.6.2 Recommendations
The long-term economic viability of this biofuel policy largely depends on the input price of the biofuel raw materials, be they either palm oil or sugar cane molasses. Policy tools including purchasing guarantee and direct subsidy or levy could be the alternatives. These measures should be coupled with careful selection on the type of land to ensure maximum yields of corresponding biofuel feedstock. In addition, careful management of raw material allocation intended for biofuel should also be implemented to avoid leaking of raw material intended for food purpose to be used as biofuel feedstock.
The long term constraint (beyond 2025) faced by this biofuel plan is the availability of land despite there is about 20 million hectares of abandoned land (Dillon, Laan & Dillon 2008) which is sufficient to provide another three folds of biofuel supply. However, land allocated for food crops should be adequately identified to ensure sufficient supply of domestic food. Thus, the solution of providing energy security by domestic production of Chapter 6 Cost and Benefit Analysis of Indonesian Biofuel Plan 200 biofuel (via first generation technology) is only applicable for the medium term. Long-term solution would be converting this biomass to liquid biofuel. This will provide a useful avenue for three quarter of palm fruit biomass that currently either be incinerated or returned to the field as mulch. Similarly, bagasse as a by-product of sugar cane process would be better utilised as feedstock of biofuel rather than being combusted in the power plant.
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Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy
Achieving the 2025 liquid biofuel of minimum 5% of the country energy mix would require massive effort. Such an effort has potential social, environmental, and wide range economic impacts during its production, construction, and distribution. This thesis has confirmed such a statement and evaluated the viability of the programme in the previous three chapters. They are chapters on the EIS related to biofuel projects, Life Cycle Assessment (LCA) to quantify the programme for global impact and Cost and Benefit Analysis that was intended to evaluate the programme from wider economic perspective.
Despite having three presented conclusions drawn from those methods, a policy considered being appropriate for Indonesia would require more than metric measurements as presented in the LCA, CBA and to some extent the EIA report. As any other public policy problems that generally categorized as wicked problems (Australian Public Service Commission, 2007), Indonesian biofuel programme may be socially complex due to a range of stakeholders who involve in the coordinated action. They also have multitude view in which identifying “what is sustainable” may prove to be difficult because sustainability as a social value by nature, is controversial. For instance, some people value social, economic, and ecological factors of sustainability equally, while others support the view of a nested components of sustainability, stressing that sustainability can only be achieved when its social and economic factors do not violate ecological limits. Hence, it was appropriate to ask the experts from various institutions to provide their opinions about the program.
This chapter presents detail of the experts’ opinion by conducting a survey from four groups of Indonesian stakeholders about the biofuel program. They are from government, business, academic institutions, and non-governmental organisations. The main aim of the survey is to obtain opinions about the findings presented in the previous chapters, to identify detail implementation challenges in the Indonesian biofuel policies. In addition, the Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 208 suggested survey intended to find which policy instrument needs arise from these challenges. The next section introduces the method, and followed with the section that analyses the responses given and is designed into five subsections according to thematic sets of questions. The last section concludes by presenting the key issues raised.
7.1 SURVEY METHOD
Experts’ opinions method is not new and has become increasingly common when it comes to particular policy that potentially has wide impact and lack of data to assess the risk and to support decision making process (Cooke 1991; Morgan, Henrion & Small 1992). In fact such a method has been widely used in the EIA assessment (Thompson 1990) and also applied for decision making in the climate issues (Morgan & Keith 1995). Carefully structured expert opinion could provide insight on uncertainties on the issues that involves conflicting aspects related to environment, social and economics. After obtaining the answer for a set of questions from the experts’ opinions, there are three alternatives in reviewing the results. The first is by applying a scoring card for each problem, which defines using unweighted score, and taking average value or conducting statistical analysis. The second is by applying a Delphi method, which involves in defining the problem, giving everyone the problem, collating the responses, and giving everyone the collection, repeating as necessary. The third is that after obtaining experts’ opinions from the sets of questions, the results are evaluated using simple statistic and explain them qualitatively and conclude the results. Given the time constraint and difficulties to conduct such experiments as well as the diversity of the experts that likely to produce diverse and conflicting opinions among them on this matter, the third method of evaluating the expert’s opinions was selected. Participating experts were given a set of questions in the absence of political, economic and social pressure.
Though genuine public consultations involving common people and non- governmental organization (NGO) in formulating public policy making are rare in this country, sourcing a three groups of experts in carrying out decision making consultation process as suggested by the “triple-helix” metaphor (Etzkowitz & Dzisah 2008; Sunitiyoso et al. 2012) is already common. The Indonesian Minister of Research and Technology even has consulted the triple helix group in driving the innovation among Small Medium Enterprises (SME) in Java region-Indonesia (Irawati 2006). Utilising the importance of the triple helix interaction has also been proposed to public policy making process in the governance of Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 209 biofuel and hybrid electric vehicles (Nilsson, Hillman & Magnusson 2012). However, to accommodate various views, this thesis included experts from NGO to form “triple-helix plus”. The list of experts is presented in the Table 7-1. As majority of the experts wished to remain anonymous due to sensitivity issue of biofuel in Indonesia, their names are not presented in the thesis but could be available if the readers require them.
Table 7-1 List of experts
No Identifier Position 1 Academician 1 Senior Lecturer at Chemical Engineering Department, Faculty of Industry, State University in Indonesia, an expert on Environmental Science, 2 Academician 2 Senior Lecturer at a private University in Jakarta Indonesia Expert on Transportation and Logistics. 3 Academician 3 Professor at Department of Agriculture Processing Product, Faculty of Agriculture, State University in Indonesia. An expert on Waste Processing from Agriculture Industry. 4 Business 1 CEO of private energy company, a leading Indonesian Oil and Gas Exploration company 5 Business 2 A major Indonesian Automotive company, Representative of Indonesian Automotive Industry (GAIKINDO) 6 Business 3 Director of Biofuel producing company 7 Government 1 The Agency of Assessment and Application of Technology, Ministry of Research Technology Indonesia 8 Government 2 Sub Division in Directorate of Bio-energy, Ministry of Energy and Mineral Resources 9 Government 3 Senior Officer at Directorate for Plantation, Ministry of Agriculture 10 NGO 1 Senior members of NGO representing Palm Oil Watch organization (Sawit Watch) 11 NGO 2 Local chapter of Environmental organisation in Sulawesi Region (WALHI) 12 NGO 2 Local chapter of Environmental organisation in Sulawesi Region (WALHI)
To provide diverse view on this biofuel public policy making, the three experts from business category were intentionally selected from an oil and gas exploration company, Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 210 automotive industry and biofuel producer. The three experts from academic institutes were selected from chemical engineering department that has expertise in biofuel and environmental science research, agriculture and transportation and logistics field. The government experts were selected from ministry of research and technology, ministry of energy and mineral resources and ministry of agriculture. The representation of government experts may not reflect the actual related ministries involved in the biofuel program, but those selected ministries are the main stakeholders of the program. The experts from non- governmental organization (NGO) were selected from prominent Indonesian environmental NGO and specific NGO that watches oil palm plantation activities.
Table 7-2 details the list of questions provided to the experts. The questionnaire was set up around five main areas, which were identified as of interest for this research. The rationale underlying each set of questions follow:
The first set of questions introduced the issue and familiarise interviewer and interviewee, a broad and generic question about biofuel and the current state of the biofuel program.
The second set investigated the national response to the current biofuel directive, which aims to meet the target of 5% of the national energy mix in the 2025. These questions are included to shed light on how the central government prepared such a program. This includes the identification of policy instruments or mechanisms deemed crucial for successful implementation.
The third set of questions was intended to confirm the results and assumption in the estimating biofuel demand to meet the government target in 2025, implications as well as the results from the EIS review, LCA of biofuel and CBA of the overall Indonesian biofuel Program.
The fourth set enquired about the cooperation among the stakeholders. It is particularly important for meeting the biofuel target as the biofuel involves many stakeholders that reflect the long supply chain. Started the chain of downstream, which is the end use in the transportation sector, up all the way from the biofuel sales, distribution, blending with fossil fuel, production, and plantation. Thus at least involves the transportation, energy, trade, industry, and agriculture. It also Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 211
includes a question on whether each institution represented by the experts strategically plan biofuel development according to the role that the institution has. This expected result of this question is to identify whether such a coordination among stakeholders has worked according to its planned.
The Fifth set of questions is about the outlook of biofuel from the perspective of different biofuel technologies and how could move forward. This aims at revealing the motivations given by the experts for choosing one biofuel technology/pathway over another. It also identifies on the one hand immediate needs in terms of implementation and on the other hand the future importance of biofuel as a renewable energy source. Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 212
Table 7-2 Survey questionnaires
1. General perception of the biofuel. a. What are the key benefits and risks associated with biofuel? b. How is the current state of biofuel programme in Indonesia? 2. Respond to the national biofuel target. a. Has the national biofuel policy been formulated correctly to reach the biofuel target of 5% energy mix in 2025 and considered all aspect of environment, social and economy? b. Which policy instruments do you think being the most important to reach the biofuel target in 2025. 3. Biofuel appropriateness a. When we consider the aspect of environment, social and economy, which one do you think is the most important aspect? b. Indonesia has implemented Environmental Impact Assessment (EIA) as part of the standard procedure of issuing project license. Given the size of land required for this biofuel crop may reach 6 million ha. Do you think EIA be used as the safe guard to such a project proposal? c. Life cycle analysis has shown that in general biofuel perform better in term of GHG in the final use but fail during the early chain production. Do you think it is a crucial factor? d. Given the cost of biofuel is in general more expensive than its corresponding fossil fuel, is it reasonable economically to fulfil the biofuel target in 2025? 4. Cooperation among stakeholders. a. Are you aware of strategic planning from other biofuel stakeholders outside your institutions? b. Among the stakeholders, which one do you think is the well-prepared stakeholder to execute its task? 5. Outlook and moving forward a. How can identified challenges in biofuel development best be overcome using policy tools? b. What kind of technology that can overcome the biofuel risks? Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 213
RESULTS, ANALYSIS AND RESPONSES PER SET QUESTIONS
The answers from questionnaires given to the experts were tabulated and presented in Appendix D.
7.2.1 General perception on biofuel
The experts were given a few broad questions about assessing biofuel’s importance, main benefits and risks associated with the biofuel development and the current state of the Indonesian biofuel Program. In general, majority viewed positively the importance of biofuel. This is not surprising as biodiesel has been marketed continuously and enjoyed wide support from major stakeholders. All experts mentioned that biofuel is and will be of high importance for reaching the Indonesian renewable energy target by the year 2025. All agree that biofuel will be important in reducing dependence on other fossil energy sources thereby increasing energy security and reducing carbon emissions. This tends particularly important as Indonesia’s liquid fossil fuels has been decreasing and it is now a net oil importer country.
In relation to benefits and risks, majority of the experts prominently mentioned the fact that biofuel is a renewable energy source mitigating GHG emission, but only the experts from the NGOs recognise the relatively high GHG emission due to unsustainable practices in the oil palm and sugar cane plantation. Most experts discussed to the widely environmental sustainability risks of the biofuel policy, such as increased use of land, increased competition for both land and biomass resources etc. Though majority experts viewed that environmental issues are manageable, experts from the NGOs insisted that raw material biofuel companies particularly oil palm plantation often caused environmental destruction such as deforestation, resulting in significant secondary external impacts such as water pollution, soil erosion, and air pollution.
In term of economic aspect, Majority of the experts admitted the importance of economic benefits. One expert with oil and gas exploration background emphasized economic benefit of biofuel may increase, as fossil oil is getting harder to get. If Indonesia does not develop biofuel now and diversify its energy, Indonesia will be vulnerable and highly exposed to oil price increase in the future.
Majority of the experts also concerned about the biofuel price, biofuel raw material availability and local employment issues. Five experts including from NGOs on the other Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 214 hand clearly insisted that social aspects of biofuel production needed to be resolved. They argued that such a positive economic impact of this biofuel policy was not evenly distributed. Stakeholder groups such as plantation companies, employees, out-growers, and investing households, report significant gains. Traditional landowners however particularly experienced restrictions on traditional land use rights and land losses.
7.2.2 National biofuel policy response
The response from the experts regarding the national biofuel policy were collected as well as the main implementation challenges in relation to biofuel. In addition, the response on how or whether strategic planning and policy instruments addresses biofuel supply, demand, and technical issues, were also identified. On the national biofuel policy, half of the experts believe that the policy launched in 2006 was poorly drafted and it was a sudden response to price rise of crude oil. As the policy was designed on the run, the policy makers at that time thought that biofuel is the answer to all the problems caused by the rising of crude oil price. Thus, they considered lightly the aspects of environment, social and wider economic. As a result, the government did not anticipate early the implications on the biofuel target of 5% from the total country energy mix. Those are implications related to the total consumption of biofuel, the amount of raw material required to produce the corresponding biofuel, land required and technical aspects related to distribution and retails.
The problems related to social and financial aspects in were often unaddressed properly. One expert specifically mentioned social impacts arise from palm oil production. Those include a lack of local employments and influx of migrant workers from other areas. Another indication is the inability to market bio-ethanol, as the price is more expensive than petrol due to lack of raw material supply including molasses and cassava. Another expert with automotive sector specifically addressed lack of effective regulatory framework in monitoring biofuel standard. Others experts added that although we have the regulations in place, we did not execute them effectively.
Consideration on the policy instruments that deemed important and necessary to reach the biofuel target of 2025, the experts mentioned a range of instruments that could be useful to address the current problems. The instruments proposed by the experts were grouped by stages of biofuel value chain (see Table 7-3). Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 215
Table 7-3 Suggested biofuel policy instruments
Raw material plantation Biofuel Production Blending, Distribution and Sales Proper Land acquisition EIA Process Biofuel quality monitoring Ample monitoring of monitoring mechanism EIA process Biofuel quality Biofuel Subsidy Tax exemption for biofuel monitoring Incentives for promoting plantation mechanism ‘green cars. Oil palm expansion moratorium Majority though suggested that instead of adding more regulatory framework do not solve the problems. The weakness is how effectively the government along with other stakeholders to execute the policy. One expert mentioned that environmental impact assessment as part of our usual process in commencing a project has been in place more than 20 years. Yet, Indonesia is still struggling to safeguard the environment, to minimise social impact while optimizing its economic benefit.
7.2.3 Biofuel appropriateness
This section collated the responses on the biofuel appropriateness. In dealing with the set of questions on the biofuel appropriateness, majority experts voiced their opinions that environmental and social aspects are manageable except those experts from NGOs. It is the economic aspects on the other hand are difficult to deal with. They highlighted the difficulty of ethanol to get into the market despite government decision to issue monthly bioethanol reference price since 2013. This has been confirmed in 2014 that Pertamina has struggled its E1 requirement for non-subsidized fuel to Jakarta and Bandung despite the completion of its petrol ethanol blending facilities (Ng 2014). Pertamina has invited few Indonesian ethanol fuel-grade producers to supply at around Rupiah 9,200/litre. The quantity was so small and the ethanol would not have been competitive from Sumatra to Surabaya. The wide spread of price fluctuations of molasses or cassava as ethanol raw material pointed by one expert has exacerbated the ethanol biofuel program. Such a fluctuation is mainly due to low supply of molasses and cassava in the market.
The next two questions related to how effective EIA and LCA to safeguard the environment from the potential impacts of biofuel development, majority experts again Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 216 reiterated that Indonesian government weakness is not so much about creating regulatory framework. Inability to enforce the regulation properly in Indonesia hinder from reaping the benefit of biofuel development. They argued that various measures including utilising palm oil mill effluent for biogas productions, allocating dedicated land for plantation and the current moratorium of opening new palm oil plantation could mitigate negative environmental impacts of the biofuel program.
With respect to the question of conducting cost and benefit analysis as part of regulatory policy formulation, majority of the experts agree that it should account intangible benefit from biofuel development such as employment opportunities, energy security and creation of new industry, as well as cost associated with environmental and social impacts. However, when they were asked about their opinions on other sectors such as manufacturing that could also provide about the same and even much more benefit than the one from biofuel development with much less land, many argued that Indonesia is still agricultural country and not all Indonesian are skilled manufacturing workers. In addition, many people still live far from the major manufacturing area. The experts also pointed that unemployment in the rural areas are also significant and the Indonesian official statistics often does not clearly report this. This biofuel development therefore offers opportunities in the rural areas so that it prevents them to migrate to the city that offer better employment opportunities.
Given majority of the experts remained positive about the Indonesian biofuel policy despite being unjustified according to the metric calculation from EIS, LCA and CBA, this indicates that there are significant uncertainties in valuing wider components in the environment, social and economic. Probable reason may also be that the experts feel something (partly reflecting their own bias). In the case of GHG emissions, majority of the experts except the ones from NGOs seems under-valued its significance. This is not surprising as valuing GHG emissions in the government policy making is rare despite clear directive from the law 32/2009, which clearly states that the public could recognise the effect of global warming to protect and manage our environment. Moreover, the depressing of carbon price lately has made the discussion on valuing GHG emissions less appealing. In addition, main controversies around additionality, efficiency and effectiveness of the Clean Development Mechanism instruments on Carbon Credit has made it even less appealing. This reaffirmed the concern that Indonesia is notoriously good in formulating Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 217 environmental policy and legislations, but not so good in the implementation stages and little evidence of post project compliance or a culture of valuing the environment.
Another difference is that majority of the experts putting high value on the biofuel benefit in term of energy security. Such a response is understandable as Security of supply of liquid fossil fuel currently defined as strategic reserve for 25 days. This amount equals roughly about 25 million barrels of crude oil. Such a plan to build Strategic Petroleum Reserve (SPR) is still in the planning stage between Pertamina, and Ministry of Energy and Mineral Resources. India, a country with similar position in term of annual energy per capita, has built a SPR with a capacity of 5 million barrel (ISPRL 2016). Thailand has increased its SPR to 90 days of supply and Singapore has an estimated storage capacity of 31.8 million barrels of crude oil and 64.5 million barrels of oil products (Sakhuja 2006). The US, Japan and China meanwhile have about 700, 900 and 800 million barrels respectively. The fear of being vulnerable from various adverse events such political fall out in the oil exporting countries, disruption of oil delivery due to non-state actors such as pirates or terrorists, and the sudden price increase of crude oil, all have made the benefit of having biofuel inflated.
7.2.4 Cooperation among biofuel stakeholders
On the question of whether the experts aware of other biofuel stakeholders strategic planning to address the biofuel target, responses were received and the results can be divided into two categories:
1. A group of nine experts said that they are not aware other stakeholders strategic planning in the biofuel development. Among them are the experts from academics and NGOs categories. This does not come as a surprise as the government often left them out during the creation and initiation of the policy formulation. 2. Another group of three experts confirmed that they are involved in formulating and creating the strategic planning, which involves different departments/ministries. However, they realized that more the government should do more to involve additional biofuel stakeholders particularly in the non-government organizations and academic institutions.
The next question related to which stakeholders that were thought to be the one capable to execute its task, majority experts suggest MEMR thought to be the leading institute to execute the realization of this biofuel target. However, two experts from the Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 218
Ministry Agriculture and academia suggest that since biofuel involves many sectors, not only energy but also areas such as trade, agriculture, industry, forestry, and environment, one ministry could not possible handle all the tasks. The behaviour of self-importance or ‘sectoral ego’ is high and does exist in each institution, which caused ineffective policy executions. Therefore, the expert suggested that such a responsibility should not rest on a mere directorate in the MEMR. It should be the responsibility of either coordinating ministry or even under the president itself via a nation biofuel task instead.
7.2.5 Outlook and moving forward
When the experts were asked about the outlook and how we can move forward, the raw material supply constraints were listed as a major challenge by most of them with different strategies to increase domestic supply were mentioned: These strategies are
1. Improving the agricultural sector to deliver fuels by improving palm oil and sugar cane yield through deployment of good agricultural practices 2. Putting a moratorium on oil palm plantation expansion. 3. Energy crop development. One expert mentioned that farmers are reluctant to commit to growing energy crop commodity that has less potential thus choose biomass sources with higher energy yields/hectare instead. 4. Enacting a firm law enforcement.
Another aspect is how sustainability challenges can be overcome. Majority of experts perceive balancing of biofuel raw material needs and various sustainability concerns as a major challenge. One expert argued that Indonesia should encourage more palm oil companies to join Roundtable Sustainable Palm Oil (RSPO) scheme as well as additional formation of similar scheme called Indonesian Sustainable Palm Oil (ISPO). These schemes have improved environmental impact of oil palm operation, which is likely related to the biofuel productions. The implementation of a top down measure of sustainability scheme is challenging, as the government’s focus is to create a more employment opportunities.
Other major challenges are economic, technical and market. Some experts argued that implementation of biofuel quality certification would likely to cost small biofuel producers as they are expected to face economic challenges from additional costs associated with such certification process. Moreover, relatively lower crude oil price is discouraging investment in Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 219 the biofuel industry. At the same time, economic growth leading to increased energy demand poses a challenge to meet the biofuel target.
When they were asked about technological drive for the biofuel in the future, majority suggested that second generation of biofuel could be the major solution to overcome the concern of environment as well as social problems. The key however, is to produce enough biofuel at the reasonable price. Therefore, half of the experts suggested that the Indonesian government should invest more in research of the advanced biofuel production.
Some experts however also reminded that the advanced biofuels would not act as a silver bullet to overcome risks associated with conventional biofuels. Many uncertainties surrounding the performance and viability of advanced biofuels. These include whether enough waste materials would be available for second-generation biofuels to make a significant contribution towards the renewable energy targets; uncertainty about ultimate environmental impact, fuel-engine compatibility. Therefore, Indonesian biofuel programme could still use the first-generation biofuels and should encourage the use of a wider range of raw materials for biofuel production.
CONCLUSIONS AND KEY ISSUES RAISED
According to the Indonesian Energy Policy issued in 2006, biofuel will be the most important renewable energy source to meet the targets of set in the 2025. The participated experts confirmed this. The experts furthermore attributed the biofuel programme has a long-term importance particularly in the transportation sector where majority transportation vehicles still rely on liquid fossil fuels. When asked about the national biofuel target, half of the expert admitted that the policy was designed to answer the rising crude oil price and saw the biofuel as the answer for the fossil fuel substitution, employment creation and economic development in rural areas. Subsequent issues such as environmental risks, potential social impacts and the persistently higher price of biofuel compared to fossil fuel did not come into realise in the beginning of the program. They emerged several years after enacted the policy and the government has proposed adjusted policy measures to amend them.
Three experts compliment biodiesel development as a success story in which it enjoys wide support not only from the palm oil producers but also from automotive and industrial sector. Such a case is particularly unique for Indonesia as this country is the largest palm oil producer in the world and the necessity to diversify its use beyond food purposes is widely Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 220 embraced. Not only will it help maintain acceptable level of palm oil stock but also as a cushion when the price of palm oil drops below its normal average. Having a stable market of palm oil is beneficial to Indonesia as whole country. Other experts from NGOs on the other hand argued that we might pay a higher price for the biodiesel success as it causes environmental and social impacts particularly in the oil palm plantation.
Bioethanol on the contrary, continues to struggle, as Indonesia does not have strong sugar cane plantation, which molasses is normally available as sugar by products. One experts interestingly suggest utilising sago, a starch obtained from the sago palm (Metroxylon sagu) grown in Moluccas, Papua and Sumatra. The expert argued that the utilisation of sago starch to produce bioethanol is sustainable and many generations has traditionally preserved the cultivation of this plant in some parts of Indonesia.
When the experts were asked about the biofuel sustainability, the main risks and benefit associated with biofuel, the 7 out of 12 experts surprisingly ranked economic aspect as the main important issue above social and environment. Five experts have concern about environmental sustainability and social issues due to his connection with the agriculture ministry, oil palm activities and their expertise in the environmental science. The fact that economic considerations stood out significantly in the survey are hardly a surprise as the environmental costs were unlikely to be monetised and reflected in cost-benefit analyses during the biofuel development decisions making process. The environment and social impacts due to biofuel policy is a legitimate concern. Further research and efforts on monetising these impacts could provide significant contribution to the biofuel policy debate and to be considered in the decision-making process.
Majority of experts also have indicated that the lack of coordinated efforts in the implementation stage among the stakeholders were apparent. This often surfaced when issues involved multi stakeholders such as land allocation, biofuel subsidy, biofuel quality programme and standard come into light. Decisive and strong government directives are therefore necessary to ensure the biofuel target is achievable. The mentioned of National Biofuel Team under direct supervision of the president is a successful example in the past.
Finally, and as a guide to policy makers, the experts raised a few issues that needs to be addressed and evaluated further for successful and sustainable biofuel program. They are: Chapter 7 Experts’ Opinions on Indonesian Biofuel Policy 221
1. Greater emphasize on monitoring of government policies. Those include post monitoring of EIA compliance of biofuel projects, monitoring biofuel quality; 2. Putting moratorium on oil palm expansion, 3. Commercialisation research such as pilot projects and demonstration plants for bringing forward advanced bioenergy solutions; and 4. Strategic long-term energy planning and energy efficiency at a system level.
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Chapter 8 Discussion, Conclusions and Recommendations
This chapter presents major findings and discusses the contribution of the study on what it means to have the biofuel target of 5% of primary energy consumption in 2025 based on the Presidential Regulation No. 5, 2006. It summarises the findings of each chapter, followed by the findings of each step of the research and discussion of the responses to the research aim and objectives. The final section discusses the potential of applying the methods of EIA, LCA, CBA as well as experts’ opinion in evaluating the appropriateness of any kind of program related to energy, which likely affect the environment, people, and economic life.
8.1 SUMMARY OF THE FINDINGS AND DISCUSSION
The reasons of the Indonesian government biofuel target, which includes among others creating opportunities in promoting rural development, enhancing energy security through reduction of liquid fossil fuel import and a way to improve the environmental condition were tested using the three methods mentioned need an estimation of the amount of biofuel consumed. Therefore, the first effort in this thesis is to estimate the biofuel consumption up to the year 2025.
8.1.1 Estimating biofuel consumption in 2025
Chapter 3 investigated whether the current target of 5% can be realistically achieved, given the existing (and/or) projected constraints on available land and technology to produce biofuel. The LEAP model of Indonesian energy system was designed and assumed a constant energy demand growth of 6%. Such a target requires a total of biofuel about 8.0 to 26.6 GL in 2025. In energy terms, these are equivalent to 232 to 782 PJ or about 40 to 135 million barrels of crude oil. The results imply that it may have detrimental environmental impact, as it requires around 5 million ha palm oil and sugar cane plantations. On the positive Chapter 8: Discussion, Conclusions and Recommendations 224 side, achieving the target offers potential new employment opportunities of about 3.4 million people, particularly in the agricultural sector relevant to liquid biofuel production.
This target however requires maximum blending ratio of biofuel and corresponding liquid fossil fuel. For biodiesel, it should be no less than B20. Bioethanol should be no less than E15 and 50% blend of pure plant oil with fuel oil and Industrial diesel oil is expected to achieve the target. Small percentage of bioethanol and pure plant oil of less than 10% were also recommended. The Table 8-1 and Table 8-2 show projected biofuel consumption in 2025 and how much the liquid fossil fuel that can be saved in that year as well as which sector the biofuel will potentially be consumed. Details and results on this analysis have been published in the Energy Policy Volume 61, October 2013, Pages 12–21.
Table 8-1 Projected consumption of biofuel plan
Fossil Fuel Equivalent Units Biofuel Required Substituted Blending percentage Min Max Min Max - Biodiesel (GL) 2.76 11.17 2.53 10.25 GL Diesel oil equivalent - Bioethanol (GL) 3.23 9.57 2.19 6.48 GL Petrol equivalent - Pure Plant Oil (GL) 2.01 5.83 1.75 5.06 GL Fuel oil equivalent Biofuel energy contribution (PJ) 232 782 40 135 Million barrel crude oil equivalent
Table 8-2 Projected annual biofuel use in the year 2025 (GL).
Biodiesel (GL) Bioethanol (GL) Pure Plant Oil (GL) Min blend Max blend Min blend Max blend Min blend Max blend Electricity 0.10 0.41 0.00 0.00 0.39 1.96 Industry 0.77 3.12 0.00 0.00 0.94 2.41 Household 0.00 0.00 0.44 0.90 0.43 0.87 Commercial 0.11 0.45 0.00 0.00 0.05 0.10 Transportation 1.39 5.61 2.71 8.42 0.02 0.05 Other sectors 0.39 1.59 0.08 0.25 0.18 0.45
The implication of about 5 million ha required for the biofuel crops was based on the crude palm oil yield of 5 t/ha and bioethanol yield of 6.147 kL/ha sugar cane crop. This necessitates acquiring land classified as having low biomass contents such as shrub, degraded land, and grassland. The alternative to follow the past expansion of oil palm plantation is not an option as detailed in the LCA as this would result in more GHG emissions than the liquid fossil fuel itself. The results necessitate evaluating the program based on the environmental, Chapter 8: Discussion, Conclusions and Recommendations 225 social and economic aspects. Chapters 4, 5, 6 and 7, were therefore designed to ascertain whether biofuel is environmentally sound with regard to local and global impacts, and if the biofuel is economically justifiable.
8.1.2 Evaluating local impact by using Environmental Impact Statements (EIS) of biofuel related projects
Chapter 4 investigated local impact of the Indonesian biofuel target on the environment by evaluating EIS of projects that are related to biofuel value chain. This evaluation premised if the EIS meet Indonesian EIA reporting standard then the overall biofuel plan in this country would have the prospect to meet the environmental and social appropriateness at least in the local scale or within the national authority. The EIA projects were selected from potential sites where biofuel productions are likely to take place i.e. Sumatra, Java, Kalimantan, and Sulawesi. The total 22 EIS reports; comprise four EIS related to the plantation and production of ethanol and 19 reports related to the production of vegetable oil seeds, methanol production and biodiesel process; were collected.
It was found that majority of the reports consider impacts only relevant to their operation. The EIS's that cover solely on “plantation projects” fail to consider features related to feedstock-to-biofuel processing, and the reports that focus on biofuel processing plant projects often fail to consider aspects related to the biofuel raw material production. This implies that assessing the appropriateness of biofuel project from the perspective of local impacts is difficult to ascertain. The analysis also found that majority of the EIA reports has satisfied the current Indonesian EIA legislation in which the assessment in general contains major items of account biological, geo-physical/chemical, socio-economic- cultural, and public health aspects. Evaluation on these reports also revealed that the biofuel related projects in Indonesia has partially satisfied sustainability criteria particularly on the issue of social, economic, and local environmental impact. They often fail to address global impacts such as GHG emissions and carbon stock accounting as well as land use and land use change.
The take away of this chapter is, in the absence of credible monitoring on actual implementation of the EIS, justifying the appropriateness of biofuel program become problematic. The actual implementation using secondary report by 2013 PROPER program (Ministry of Environment Indonesia 2013) has revealed that 8 out of 22 selected projects Chapter 8: Discussion, Conclusions and Recommendations 226
(about 36%) has met compliance rating. The rest are either below compliance rating or they do not report their operation and thus their compliance toward post EIA process cannot be verified. Thus, despite a reasonable regulatory framework which obliged the biofuel related project to fully comply the EIA standard, a proxy verification using the latest PROPER report suggest that the Indonesian biofuel target is probably not appropriate as it cannot be expected to be achieved without significant harm to the environment.
8.1.3 Life Cycle Assessment of Indonesian biofuel
Having identified the local impact, Chapter 5 tested the environment impact of biofuel in global term to justify that the development of the biofuel in Indonesia is appropriate. Using LCA Simapro 7.3 software, with functional unit of 1 GJ the biofuel serves; detail of the biofuel and corresponding fossil fuel life cycle inventory is presented in the Table 5-23 and Table 5-24 of Chapter 5 for accounting the GHG and air quality emissions.
As confirmed by many, it was found that majority of the biofuel alternatives perform well in terms of GHG emissions and particulates in the tail pipe emission compared to the one from diesel oil and unleaded petrol but produce more during the biofuel production. Sources of GHG emissions during the biofuel production varies according to the type of biofuel. The practice of treating palm oil mill effluent using open pond lead to majority of GHG emissions followed by the use of electricity during the biofuel life cycle. The reason is that majority of Indonesian electricity mix comes from coal and liquid petroleum.
Accounting on the GHG emissions due to prior land use was carried out by adopting the Winrock database of land use conversion factors over 30 years (Harris, Grimland &
Brown 2010) and the peat GHG emission factors of 95 Mg CO2eq/ha/yr. as the average figure from (Page 2011) and (Hooijer et al. 2012). Table 5-23 in the Chapter 5 detailed the GHG emission for every 1 GJ energy used with two scenario of LUC BAU and LUC alternative. The first scenario designated a plantation expansion following the current trajectory of palm oil expansion for the past 20 years(US EPA 2012) while the latter proposed an expansion of this biofuel aspiration that is aimed at marginal and shrub land. If a scenario of current palm oil expansion trajectory is pursued, it would release an average
GHG figure of 12.11 t CO2eq/ha/yr. and bring a total annual emission of 57.2 Mt CO2eq /yr. On the other hand, if the land for biofuel plantation is obtained from marginal and shrub land, an estimated average GHG saving of 0.95 tCO2eq/ha/yr. could be expected. Chapter 8: Discussion, Conclusions and Recommendations 227
This would bring a total saving of 4.5 Mt CO2eq /yr. The result of this calculation has shown that implementing the alternative LUC scenario for the land expansion to develop biofuel in order to meet the government biofuel target will serve as CO2 sequestering action through oil palm and sugar cane.
Assessment based on the emission of four priority pollutants (NOx, particulate matter, NMVOC and sulphur dioxide) reveals that the liquid biofuels in general emit less particulate matter, NMVOC and sulphur dioxide in the tailpipe emission but produce more during the biofuel upstream stages. The NOx emission however, tends to increase both in the upstream stage and in the exhaust emission for all biofuels except biodiesel. This is particularly relevant as Eco-indicator 99 scores for biodiesel and pure plant oil differ by a slim margin with their liquid fossil fuel substitutes. These indicate that a clear cut statement whether biofuel perform less environmentally than their corresponding liquid fossil fuels is not conclusive. It is clear however, including prior land use change would put the biofuel at disadvantage if the biofuel plan pursues the current palm oil expansion trajectory. Hence, an alternative of land for biofuel expansion should come from the land type covers that have less carbon stock such as marginal and shrub land.
8.1.4 Cost and Benefit Analysis of Indonesian biofuel
Failing to perform in the previous evaluations using EIA and LCA on its appropriateness, Chapter 6 was then necessary to evaluate the economic viability of the Indonesian biofuel program. This was carried out by conducting the CBA to find overall cost and benefit ratio as well as the net cost of the program. The CBA covers all stages from biofuel raw material plantation and production, biofuel production process, fuel blending and delivery, and final use in various demand sectors. Such benefits comprise avoided consumption of liquid fossil fuel, environmental benefit including GHG emissions reduction and air quality improvement due to less particulate and sulphur dioxide emission. Additional benefit in the form of increased energy security was also included. The cost on the other hand consist of the biofuel consumed, environmental cost such as ground ozone formation in major cities, additional cost in biofuel infrastructure. Other government expenditure such as increased cost of biofuel raw material for food purposes, engine adjustment cost as well as compensation cost arises due to displacing indigenous people especially during the opening of plantation. The potential biodiversity loss was also included. Chapter 8: Discussion, Conclusions and Recommendations 228
The main finding in this analysis is that the cost to meet the 2025 biofuel target exceeds the benefit that can be potentially gained. The analysis produced a net cost of US$ 24.40 billion and benefit to cost ratio of 0.75 at the real discount rate of 6%. Such an amount would yield to an equivalent annual net cost of US$2.92 billion or equal. Separate calculation suggest this biofuel program could offer potential employment to 3.4 million people with an annual payment in the year 2025 alone reach the figure of US$6 billion. This is roughly twice of the annual net cost of having biofuel program and slightly less than 30% of the Indonesian liquid fossil fuel subsidy in 2013 of around US$20 billion. Though it is secondary effect, such payments to the people employed in the biofuel sector would virtually stays within the Indonesian economy instead of importing the fossil fuels.
The results also highlighted the significant contribution of biofuel cost and avoided fossil fuel benefit in the overall NPV calculation. This indicates that the prices of liquid fossil fuels and their biofuel substitutes are the major determining factors in this overall assessment. Such benefits in terms of environmental benefits and energy security are not significant compare to the amount of the biofuel cost that the Indonesian society needs to pay. The findings from the CBA thus suggest unless the prices of biofuels are lowered, the biofuel program could be considered unjustified economically.
8.1.5 Experts’ opinions
Having evaluated the biofuel programme using the three methods, such results were consulted with the experts. They were selected from four groups of stakeholders of government, business, academic institutions as well as non-government organisations (NGO). Though many public consultation processes in decision making related to important matters in Indonesia determined mostly by government agencies, after consultation with prominent academics and discussion with business organization, this thesis included those from NGOs to provide different views on this matter.
Majority of the experts interviewed in the Chapter 7 considered this biofuel program positively despite the test on local and global environmental impact as well as cost benefit analysis suggested otherwise. However, improvement should be made during the production of biofuel raw material particularly in the oil palm plantation. Government monitoring as well as strict law enforcement are prerequisite for successful biofuel policy. Though majority of the experts admitted that this program was poorly designed, they were optimistic that the Chapter 8: Discussion, Conclusions and Recommendations 229 government could amend it along the way as the pressure of being net oil importers from Indonesian perspective has apparently be a major concern for the experts.
In term of biofuel sustainability, the main risks and benefit associated with biofuel has been recognised. However, 7 out of 12 experts surprisingly ranked economic aspect as the main important issue above social and environment. Five experts have concern about environmental sustainability and social issues due to his connection with the agriculture ministry, oil palm activities and their expertise in the environmental science. The environment and social impacts due to biofuel policy is a legitimate concern. Further research and efforts on monetising these impacts could provide significant contribution to the biofuel policy debate and to be considered in the decision making process.
8.2 RESPONSE TO RESEARCH AIM AND OBJECTIVES
8.2.1 Response to research aim
As stated in Chapter 1, the research aim of this thesis is to assess the appropriateness of the Indonesian biofuel target for the input of policymaking. In other words, this is to answer the question whether the cost of such a program would be justified financially and environmentally and to find out alternative solutions to improve the sustainability of the policy. The thesis has identified methodologies framework in assessing the appropriateness of a biofuel program and has tested it for the case of Indonesia.
8.2.2 Response to research objectives
This research has achieved the research objectives set in Chapter 1. The research objectives were: i. To identify the type of fossil fuels that can be replaced by biofuels and to determine the amount of biofuel required to satisfy 5% of the total Indonesian energy mix up to 2025.
This thesis identified the types and amounts of each liquid biofuel required. It also sets the type of potential fossil fuels that can be replaced by biofuels, together with their annual quantities within the period of analysis, as well as the sectors in which those fuels are utilised within the Indonesian energy system. Using Long-range Energy Alternatives Planning (LEAP) and a 6% energy growth, which is approximately the same as Indonesia's economy growth projection (McKibbin 2005), The results showed that Chapter 8: Discussion, Conclusions and Recommendations 230
biofuel target of 5% from energy mix is possible, able to create additional rural employment particularly in the agriculture sector but requires significant land area. ii. To identify the potential local environmental impact of biofuels by reviewing the environmental impact assessment (EIA) reports of biofuel related projects.
This thesis has therefore shown that using a collection of the total 22 EIS has revealed the biofuel related projects in Indonesia has partially satisfied sustainability criteria particularly on the issue of social, economy and local environmental impact. They are however often fail to address global impacts such as GHG emissions and carbon stock accounting as well as land use and land use change. Lack of credible monitoring by the local government on the actual implementation of the items recommended in the EIS after the completion of the project construction, has exacerbates the already low compliance attitude. iii. To estimate the global environmental impact of biofuel production in order to meet the specified 5% target using life cycle assessment (LCA).
In Chapter 5, this thesis has attempted to evaluate the LCA (life cycle assessment) and it showed that the liquid biofuels in general emit less particulate matter, NMVOC and sulphur dioxide in the tailpipe emission but produce more during the biofuel upstream stages. In terms of GHG emissions, the results suggested that if the current palm oil expansion trajectory is pursued to meet the biofuel raw material supply, more GHG emissions is expected than was previously thought. iv. To evaluate the economic impact of this program along the biofuels production chains using the cost and benefit analysis (CBA). Chapter 8: Discussion, Conclusions and Recommendations 231
Chapter 6 has successfully identified and calculated the benefit and cost of the biofuel program. The main finding in this analysis is that the cost to meet the 2025 biofuel target exceeds the benefit that can be potentially gained. The second finding in this CBA is that the prices of liquid fossil fuels and their biofuel substitutes are major determining factors in the overall assessment. This implies both long-term biofuel purchase agreement and implementing a series of subsidy on the biofuel or levy on biofuel raw material export are required. Palm oil for biodiesel may have the potential, but this may not work for bioethanol from sugar cane due to the persistently high price of molasses and inefficiency in the sugar cane sector. v. To evaluate the biofuel appropriateness through experts survey. Despite being unable to justify the biofuel appropriateness, this thesis has attempted to conduct an expert’s survey to ascertain the finding from previous methods. It was found that majority of the experts support the program despite provided various drawbacks environment, social and economic impacts are address properly. Such a response has shed a light on the complexity of a society when an issues involving various interests and multi sector in nature. The best attempts to amend the program is to minimise negative impacts that have been identified. The take away of this biofuel issues are that it is better to be able to identify the problems or potential problems early and adjust them along the way rather than blindly move forward without knowing what lies ahead.
8.3 CONCLUSIONS
Several conclusions can be drawn from this research. The first is a key message that, despite performing poorly in term of actual implementation in environmental impact management and monitoring performance of biofuel related projects, turning the Indonesia's performance in the effort to realize the biofuel target of 5% in 2025 is not an impossible task. With appropriate policy and increased capacity of institutional settings, it should be possible to achieve the biofuel target. This is not to suggest however, the task will be simple or straightforward. Indeed, discussion of such biofuel implication in Chapter 3 required significant land area. Additional of slightly less than 5 million ha. land dedicated for biofuel plantation would pose environmental challenges as well as social impacts.
The second, though a review of 22 EIS related to biofuel projects has so far indicated that the biofuel project proponents have conducted their activities in a responsible manner Chapter 8: Discussion, Conclusions and Recommendations 232 within Indonesian environmental law. However, lack of credible monitoring of actual implementation of the EIS in post project activities exacerbates the already low compliance attitude. Third, similar argument may also relevant regarding dedicated land for biofuel plantation. Although biofuel generally scored better than its respective fossil fuels when it comes to the LCA on the end pipe emission, the trend of the past experience in the palm oil plantation expansion has indicated that preventing land use change from the forest to mono culture type industrial crops is unavoidable. Hence, LCA analysis has shown that the liquid biofuels perform better compared to their fossil fuels substitute provided that biofuel expansion should be aimed at land that has low carbon stock cover. Again, such a firm and strong law enforcement in the part of the government is the key to have this program being appropriate.
The CBA additionally indicated that the cost of undertaking this biofuel plan outweighs its intended benefit. That is due to persistently higher price of biofuel compared to the fossil fuel for the same energy used. Another reason is that the environmental benefit due to biofuel use is less than previously thought due to depressed carbon price and insignificant air pollution improvement of biofuel. The benefit of improvement in energy security and potential employment creation could provide an input that is worthy of consideration in light of increasing fossil fuel import, international biofuel trade restriction and low job opportunities.
Although metric evaluations on the appropriateness of Indonesian biofuel program suggests it could have significant impact on the environment and people; and cannot be justified economically, the experts still view this program positively. Majority believe such potential impacts are manageable. Therefore, the best that anyone can do is to provide all quantified values so that policy makers would act rationally. The Indonesian government could improve the appropriateness of its biofuel programme if they are more transparent in the EIA process and willing to reduce GHG emissions as well as implementing life cycle thinking in its decision making.
8.4 RECOMMENDATIONS AND FURTHER RESEARCH
The conclusions implies that several recommendations below may improve the appropriateness of Indonesian biofuel program. The first is improving the transparency of the government institutions. The finding in the EIS analysis hinted that the recent relatively Chapter 8: Discussion, Conclusions and Recommendations 233 strong transparency index of this country from Global Integrity organisation does not automatically make efforts in obtaining EIA documents any easier. This is despite being clearly stated as public document according the relevant legislation. Moreover, obtaining evidence of regular monitoring of post project compliances is equally difficult. As the transparency idea for a developing country like Indonesia is a work in progress, it is important to continue canvassing the idea of centrally documented EIA reports so that everyone could access them online. Project proponents, local EIMA offices and related government institutions should therefore be required by law to upload their documents in their web portal.
Secondly, it is recommended to enforce the Law 32/2009 regarding environmental protection and management that recognised the effect of global warming to be included in EIA analysis. Biofuel related projects in particular should increase its coverage on the features that address global impacts such as GHG emissions and carbon stock accounting as well as land use and land use change. Expansion of biofuel plantation using environmentally sensitive land cover classification is therefore prohibited. Strict implementation guidelines on developing plantations on peat land (Ministry of Agriculture Indonesia 2009) should be enforced. In addition the moratorium on forest and peat soil conversion since May 2011, which has been extended to a further two years (Presidential Instruction of the Republic of Indonesia 2013) should be preserved. Related to the LCA finding, there is an opportunity to reduce GHG emissions in the biofuel plantation sector by mandating the use of methane capture technology and adjusting financial incentives for electricity generation.
Third recommendation is suggested to have a LCA be implemented in the metric evaluation of to address the global impact of a project. This is a significant feature to improve the usefulness of EIA reports as sources for sustainability assessments. It implies Life Cycle Inventory (LCI) data for the Indonesian case should be available freely as a public domain data. This also means collaboration to populate the LCI data is prerequisite to have successful mission for the Indonesian LCI data bank. Such a collaboration could be initiated from the ‘Triple Helix plus’ stakeholders (i.e. academics, business and government as well as NGOs) led by a firm government institution.
The evaluation using experts’ opinions also revealed that there was a gap in valuing the energy security and this needs further research and investigation. Valuing this correctly would Chapter 8: Discussion, Conclusions and Recommendations 234 lead the government to make decision more rationally. The issue of having strategic petroleum reserve for example could be executed better. Instead of racing to build Strategic Petroleum Reserve individually, a more regional approach could be the alternative. The CBA analysis also revealed a gap in recognising the inter-relationship between the price of biofuel and the price of fossil fuels. Being able to understand the relationship of these commodities would make the policy makers analyse more rationally on the aspects of energy related problems and biofuel in particular.
8.5 REFERENCES
Harris, NL, Grimland, S & Brown, S 2010, Winrock Emission Factor Database,
Hooijer, A, Page, S, Jauhiainen, J, Lee, WA, Lu, XX, Idris, A & Anshari, G 2012, 'Subsidence and carbon loss in drained tropical peatlands', Biogeosciences, vol. 9, no. 3, pp. 1053-71.
McKibbin, W 2005, 'Indonesia in changing global environment', in BP Resosudarmo (ed.), The politics and economics of Indonesia’s natural resources, ISEAS Publication, Singapore.
Ministry of Agriculture Indonesia 2009, Ministry of Agriculture Regulation no.14/PL.110/2/2009 on the Guidelines for Utilization of Peatland for Oil Palm Cultivation, Jakarta.
Ministry of Environment Indonesia 2013, Ministry of Environment Indonesia decision No. 349/2013 regarding the PROPER program results of 2012-2013, Jakarta,
Page, SE, Morrison, R., Malins, C., Hooijer, A., Rieley, J. O. & Jauhiainen, J. 2011, Review of peat surface greenhouse gas emissions from oil palm plantations in Southeast Asia (ICCT White Paper 15), International Council on Clean Transportation., Washington.
Presidential Instruction of the Republic of Indonesia 2013, Inpres No. 6/2013 - Suspension new licences and improving forest governance of primary forestand peatland, Jakarta,
US EPA 2012, Notice of Data Availability Concerning Renewable Fuels Produced From Palm Oil Under the RFS Program, United States of Environmental Protection Agency. Appendix A 235
Appendix A Detail Environmental Impact Assessment reports
Annex A1 EIA Reports related to bioethanol project Annex A.1.1 Pemuka Sakti Sugar cane plantations - Province of Lampung
Project type: Sugarcane plantations
Type of report: Environmental Impact Assessment (EIA)
Completed: 2001
Project description
The Project involves the construction and operation of a sugar mill located in the Municipality of Pakuan Ratu and Bahuga, Regency of Way Kanan, Province of Lampung. The total area of sugarcane plantations is approximately 18.643 ha, with a sugar mill crushing capacity of 6,000-ton cane per day (TCD). Situated in the tropical climate, the project has sufficient water supply from the ground water as well as from two rivers of Way Kanan and Way Mesuji. In addition to the supply of water resources, this project area has relatively sufficient rain fall of 2500-3500 mm per year and relative humidity of more than 75%. The study identified a significant impact in the quality of water in the river Way Kanan due to operation of sugar mill. Therefore sufficient and effective wastewater treatment will ensure the quality of sugar mill effluent can meet the specified standard. The study also noted significant impact on the fauna in the acquired land from the local farmers, in which some protected animals died out. Therefore, about 3,730 ha or about 20% of the total concession area are designated for forest conservation region. The study also noted potential fire occurs during land clearing. In the aspect of social and economy, the study noted negative perception from the local community regarding the land compensation, which they think, is too low, and negative perception toward outside workers. To overcome this negative perception, the project proponents will hold more intense community consultation regularly. Despite having this adverse impact, the study also noted encouraging impact on the economic aspect of the plantation in terms of job Appendix A 236 creation and its positive impact on the local economy as well as improving income of the local people particularly during harvesting, processing and transporting the harvest to the sugar mill.
Project proponent
Private company called PT. Pemuka Sakti Manis Indah
Project Location
The sugar plantation project is located in two adjacent municipalities of Pakuan Ratu and Bahuga, regency of Way Kanan, Lampung province in the island of Sumatra.
Annex A.1.2 Indo Lampung Sugar cane plantations - Province of Lampung
Project type: Sugarcane plantations
Type of report: Environmental Impact Assessment (EIA)
Completed: 1999
Project description
The Project involves the construction and operation of a sugar mill located in the Municipality of Menggala, Regency of Tulang Bawang, and Province of Lampung. The sugar mill has crushing capacity of 8,000-ton cane per day (TCD) and is able to produce up to 84,000-ton sugar per year and molasses of 36,000 ton per year. The total area of sugar cane plantations amounts to a total of approximately 21,401 hectares with 8,410 ha comes from shrub land and 2,257 ha is land covered with Imperata Cylindrica plant. Situated in the tropical climate, the project has sufficient water supply from the ground water as well as from river Way Terusan and relatively sufficient rainfall of 2005-3254 mm per year and relative humidity between 71-83%. The study identified a significant impact in the quality of water in the river Way Terusan to operation of sugar mill. Therefore sufficient wastewater treatment will be built so that the quality of sugar mill effluent can meet the specified standard. The study also noted significant impact due to noise generated from the operation of sugar mill. In the aspect of social and economy, the study noted negative perception from the community regarding the land compensation that they think is too low. Despite having this adverse impact, the study also noted encouraging impact on the economic aspect of the plantation in terms of job creation and its positive impact on the Appendix A 237 local economy as well as improving income of the local people particularly during harvesting, processing and transporting the harvest to the sugar mill.
Project proponent
Private company called PT. Indo Lampung Perkasa
Project Location
The sugar plantation project is located wholly in municipality of Menggala, regency of Tulang Bawang, Lampung province. Situated slightly less than 100 km from Bandar Lampung the capital city of Lampung province, the site can be reached using national main road of Trans Sumatra and provincial road. The land is generally flat with majority (around 96%) have gradient varying from 0-8%.
Annex A.1.3 Gunung Madu Sugar cane plantations - Province of Lampung
Project type: Sugarcane plantations
Type of report: Environmental Impact Assessment (EIA)
Completed: 2000
Project description
PT. Gunung Madu has actually established the sugar plantation in 1975 and managed the first sugar production three year later. The plantation and sugar mill are located at the two municipalities of Terbanggi Besar and Seputih Mataram, with a sugar cane crushing capacity of 12,000 ton cane per day (TCD). The total area of sugar cane plantations amounts to a total of approximately 35,657 hectares with 16.9 thousand ha of them is located in the municipality of Terbanggi Besar and 12.7 thousand ha is located in the municipality of Seputih Mataram. With the amount of acreage, the plantation was able to produce 172,000 ton sugar in 1997 before decreasing in 1998 to only 114,619 ton due to long draught. The document identified
The study identified a significant impact in the quality of water in the river Putak, Lempuyang and Pengubuan due to operation of sugar mill. Since 1995 however, the company has successfully meet the effluent standard set by the governor of Lampung by implementing good in-house keeping and effective end of pipe treatment in the water treatment facility. Appendix A 238
Despite having this adverse impact, the study also noted encouraging impact on the economic aspect of the plantation in terms of job creation and its positive impact on the local economy as well as improving income of the local people particularly during harvesting, processing and transporting the harvest to the sugar mill.
Project proponent
PT. Gunung Madu Plantation
Project Location
The sugar plantation project is located in both municipalities of Terbanggi Besar and Seputih Mataram, regency of Lampung Tengah, Lampung Province. Situated more than 120 km from Bandar Lampung the capital city of Lampung Province, the site can be reached using main provincial road about 90 minutes. It is situated between longitudes 105o12'9" and 105o21'29" East and latitudes 4o39'37" and 4o48'17" South. The land is generally flat with majority (around 95%) have gradient varying from 0-8%.
Annex A.1.4 Glenmore sugar cane mill and bioethanol plant
Project type: Integrated Sugarcane plantations and bioethanol plant
Type of report: Term of Reference Environmental Impact Assessment (EIA)
Completed: 2012
Project description
The Project involves the construction and operation of a sugar mill located in the existing sugar cane plantation of Kalirejo, municipality of Glenmore, with a sugarcane crushing capacity of 5,000-ton cane per day (TCD) and it is upgradeable up to 8,000 TCD. Such figures are equivalent to a production capacity of approximately 90 thousand tons of raw sugar per year and about 50 kL per day of anhydrous alcohol. The project also involves construction of a 20 MW cogeneration power plant that will supply the electricity to the sugar mill and sell the excess of about 10 MW to the PLN's electricity grid. The solid waste from the plant will undergoes special process to produce fertilizer and apply it to the sugar cane field. The raw sugar cane material will be supplied from various plantations adjacent to the sugar and ethanol plant within the concession area of PT Perkebunan Nusantara XII (Persero). Appendix A 239
Project proponent
State owned company called PT Perkebunan Nusantara XII (Persero)
Project Location
The sugar mill and anhydrous bioethanol project is located in an area of 57 ha in the municipality of Glenmore, Regency of Banyuwangi, East Java province. The site can be reached using 260 km land transport from Surabaya, the capital city of East Java Province in the island of Java. The project is accessible through North Coast Java main road from Surabaya. The land itself is flat with gradient varying from 1/500 to 1/1700. The altitude varies from 6 m to 20 m above sea level. Appendix A 240
Annex A2 EIA Report related to biodiesel plants projects Annex A.2.1 Indobiofuel Biodiesel project
Project type: Biodiesel plant
Type of report: Environmental Impact Assessment (EIA)
Completed: 2011
Project description
The Project involves the construction and operation of a biodiesel plant located in Lebak Gede Cilegon with a capacity of biodiesel 47,297.25 ton per year, glycerine 5,148 ton per year, Biodiesel derived from FFA 3,682.8 ton per year. The raw material of Crude palm oil will be from the oil mill or tank farm to the bio-diesel refinery to undergo a transesterification. A process whereby vegetable oil triglycerides and fatty esters of glycerine are replaced by methanol and the resulting compound is known as Palm Methyl Esters (PME) or palm biodiesel. Approximately 98% of the crude oil will be transformed into biodiesel.
Project proponent
Private company called PT. Indobiofuel Energy
Project Location
The biodiesel plant project is located in Yos Sudarso Street, village Lebak Gede, municipality of Pulo Merak, Cilegon City, Province of Banten Java Island. The plant site is around 100 km to the west of Jakarta and it is accessible via a toll way. The land is generally flat at the altitude of 20 m above sea level.
Annex A.2.1 PPTMGB "Lemigas" Biodiesel project
Project type: Biodiesel plant
Type of report: Environmental Report (EIA)
Completed: 2006
Project description
The Project involves the construction and operation of a biodiesel plant located in Cipulir, South Jakarta with a capacity of biodiesel 10 ton per day. The raw material, mainly crude palm oil, sourced from local traders is transferred to the bio-diesel refinery to undergo a Appendix A 241 transesterification - a process whereby vegetable oil triglycerides and fatty esters of glycerine are replaced by methanol and the resulting compound is known as Palm Methyl Esters (PME) or palm biodiesel. Approximately 98% of the crude oil will be transformed into biodiesel.
Project proponent
Government agency: PPTMGB - Lemigas (Oil and Gas Research Centre)
Project Location
The biodiesel plant project is located in Ciledug Raya Street Kav. 109, village Cipulir Municipality of Kebayoran Lama, the city of South Jakarta. The plant itself is situated within a research facility with a total plant area of 1.825 m2. Although it is intended as research plant, the biodiesel facility has all necessary equipment similar to a complete commercial plant. It has wastewater treatment facility as well as laboratory building and workshop room. Appendix A 242
Annex A.2.3 Ogan Komering Ulu Timur (OKUT) Biodiesel project
Project type: Jatropha plantation, Mill and biodiesel plant
Type of report: Environmental Report (EIA)
Completed: 2010
Project description
The project consisted of construction and operation of jatropha plantation and a biodiesel plant located in the Regency of Ogan Komering Ulu Timur, South Sumatra province. The jatropha plantation estate covers an area of 500 ha with the jatropha mill capacity of 3 x 5 ton jatropha fruit per day. The biodiesel plant has a capacity to produce 3-ton biodiesel per day using the feedstock of jatropha oil as well as other vegetable oils such as palm oil and used cooking oil. The document identified potential impact on the water quality in the river Sasah where effluent from biodiesel plant will likely be discharged safely after mandatory treatment. Other potential impact such as erosion and impact on the flora and fauna will be minimal as the area is relatively flat and domestic plants and animals dominate the flora and fauna in this area. The document however, suggested a clear and consistent guideline on the land acquisition and compensation is required to minimise negative perception from the community about the project.
Project proponent
Local government Regency of Ogan Komering Ulu Timur
Project Location
The jatropha plantation, its mill and biodiesel plant are located in the Regency of Ogan Komering Ulu Timur, situated 200 km south of Palembang, the capital of South Sumatra Province. Access to the site is through road transportation for approximately 12 hours. The site has sufficient rainfall rate of 2587 mm per year with average relative humidity of around 85% and more than 53% solar exposure. Majority of the land itself is of flat plain with gradient varies from zero to 3% and situated outside protected forest area. The prior land cover type of this plantation is primarily converted area of rubber plantation. This plant is intended to be teaching industry of integrated biofuel plantation in the western part of Indonesia. Being a teaching industry complex, the project has all necessary equipment similar to a complete commercial plant. It has wastewater treatment facility as well as laboratory building and workshop room. Appendix A 243
Annex A.2.4 Medco Methanol Bunyu
Project type: Methanol plant
Type of report: Information on the performance of environmental management
Completed: 2006-2007
Project description
The plant has capacity of 330.000 MT per year with Lurgi process using the natural gas feed stock supplied by Pertamina Tarakan and Pertamina Bunyu. It also requires seawater of about 40,000 m3 per day and fresh water of about 4,000 m3 per day. The report has identified the source of environmental impact on the seawater due to wastewater from boiler blowdown and the resin washing. Adequate wastewater treatment facility has been installed in order to meet the local wastewater discharge quality. Regular report on this discharged water has been sent to the local environmental impact management agency (IMEA or Bapedalda in the local language) of East Kalimantan province and regency of Bulungan. The report however noted the inadequate measures in dealing with hazardous waste in the form of used reformer tubes, raschig rings and used lubricant as well as chemical laboratory waste. The company however, has performed reasonably well in carrying out its Corporate Social Responsibility (CSR) activities by providing clean water, hospital facility, school and scholarship, mosques, electricity and port facilities to the surrounding communities.
Project proponent
PT. Medco Methanol Bunyu
Project Location
The plant is situated at the municipality of Bunyu, Bulungan East Kalimantan and has been operated since 1997. Appendix A 244
Annex A3 EIA Report on Oil Palm plantation related to biodiesel project Annex A3.1 Tolan Tiga Indonesia palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Monitoring Plan
Completed: 1994
Project description
This report is the environmental monitoring plan required by law for the project that has been established prior to EIA legislation in 1990. The oil palm plantation itself has been established since 1980 with a total area of 2,547 ha. The project involves the construction and operation of palm oil plantation with a total area of 5,399 ha. The study identified a relatively light impact on the soil quality, pest intrusion as well erosion due to opening new plantation within the company area concession. The report suggested mitigation plan might overcome the soil erosion by planting trees to cover land prone erosion. In terms of social and economic impact, potential negative impact has not been foreseen as the land ownership and compensation dispute in this project has long been settled. The project even highlighted significant benefit that could be accrued in the next fifteen years due to additional employment generation and other economic benefits due to increasing demand of goods and services.
Project proponent
PT. Tolan Tiga Aceh Timur
Project Location
The plantation of Simpang Kiri is situated at municipality of Kejuruan Muda, in the regency of Aceh Timur, Autonomous region of Aceh province. The site is about 200 km from Medan the capital of North Sumatra province and it can be accessed by Trans- Sumatra road. Situated in the wet tropical areas, the plantation has sufficient water supply from rivers of Tenggulan and Ranggas. The land itself is a combination of flat plain with occasional hill sites with gradient varies from zero to 25% and situated outside protected forest area. Appendix A 245
Annex A.3.2 Tolan Tiga Indonesia Simalungun palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 1993
Project description
The Project involves the construction and operation of palm oil plantation, rubber and cocoa plantation as well as palm oil and rubber crumb mill with a total area of 5,399 ha. The capacity of rubber mill is 250 kg rubber crumb per day while the capacity of palm oil is 40 ton FFB per hour. The plantation itself has been established since 1979, but the EIA study has not been carried out until 1993 and the reason of having the study seems due to the conversion of rubber to palm oil and subsequent plan to build palm oil mill necessitates carrying out environmental impact analysis. The study identified a relatively light impact on the soil quality due to single type of crop especially the balance on soil minerals of Ca, Mg and K. The report suggested mitigation measures to carry out effluent discharge rotation. The report also highlighted insignificant impact on the surface water quality as the effluent from palm oil mill, rubber sheets plant and coco plant is treated in the water treatment facility before it is returned to the plantation using land application method. Therefore, potential contamination to the nearby rivers due to effluent leakage could be minimised. The report also added that potential soil erosion is also minimised as the existing rubber plantation is situated in relatively flat land. In terms of social and economic impact, potential negative impact has not been foreseen as the land ownership and compensation dispute in this project has been long settled during the rubber plantation era. The project even highlighted significant benefit that could be accrued in the next fifteen years due to additional employment generation and other economic benefits due to increasing demand of goods and services.
Project proponent: PT. Tolan Tiga Simalungun
Project Location
The plantation of Bukit Maraja and Kerasaan is situated in areas at municipality of Siantar and Bandar, in the regency of Simalungun, North Sumatra province. The site is about 150 km from Medan the capital of North Sumatra province and it can be accessed using Trans Sumatra road. Situated in the wet tropical areas, the plantation has sufficient water supply Appendix A 246 from rivers of Bah Bolon, Bah Silaen and Bah Pamujian as well as adequate rainfall of 2,990 mm a year and solar exposure of more than 54% in average. The land itself is majority of flat plain with gradient varies from 0 to 4% and situated outside protected forest area as this plantation is primarily converted area of rubber plantation. .
Annex A3.3 Socfindo palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 1994
Project description
The Project involves the construction and operation of palm oil plantation and rubber plantation as well as its corresponding palm oil and rubber crumb mill with a total area of about 6,120 ha. The capacity of rubber mill is 475 kg rubber crumb per hour while the capacity of palm oil is 20-30 ton FFB per hour. The plantation itself has long been established since 1926 but the licence itself was renewed in 1977. The current EIA study has not been carried out until 1994. The study identified a relatively light impact on the rivers of Martebing and Merah as the effluent from palm oil mill and rubber sheets plant processed in the water treatment facility before it is returned to the plantation using land application method. Therefore, potential contamination to the nearby rivers due to effluent leakage could be minimised. In terms of social and economic impact, potential negative impact has not been foreseen as the land ownership and compensation dispute in this project has long been settled. The project even highlighted significant benefit that could be accrued in the next fifteen years due to additional employment generation and other economic benefits due to increasing demand of goods and services.
Project proponent
PT. Socfindo
Project Location
The plantation covered areas at municipality of Dolok Masihul, Teluk Mengkudu and Tebing Tinggi, regency of Deli Serdang, North Sumatra province. Those plantation areas are roughly around 60 to 90 km south of Medan, the capital of North Sumatra province. In addition, it can be accessed by Trans Sumatra road. Situated in tropical areas, the plantation Appendix A 247 has sufficient water supply from rivers of Martebing and Merah The land itself at the time of writing the EIA report has long been established as plantation area.
Annex A3.4 Andalas Wahana Berjaya palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2007
Project description
The project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 17,800 ha and a capacity of 60 ton FFB per hour. The project is a form of foreign direct investment located in the secondary forest formerly operated by PT. Ragusa in which its license has been revoked. The rest of 7,960 ha are from traditionally owned land and operated through cooperative partnership with the company.
The study identified a significant impact in the quality of water in the river Batang Koto Balai, Batang Nyonyo, Batang Plangko and Batang Piruko. It also has potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as negative potential impact of the biodiversity of flora and fauna due to land use change from secondary forest (former area of logging company) to plantation. The study concluded an overall estimation of 13.6% environmental degradation (compared to its previous background condition) due to development of this project. The study also identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The study however also identified potential positive aspect on the job creation and its positive impact on the local economy as well as improving income of the local people. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on land clearing to avoid the fire, maintaining equipment and machineries according to the standard noise. In addition, the study recommends intensive socialization of the project to the community together with providing a fair land compensation as well as carrying out community projects and prioritise employment opportunities as much as it can to the local people.
Project proponent Appendix A 248
PT. Andalas Wahana Berjaya
Project Location
The project covers areas at municipality of Pulau Punjung, Sitiung, Koto baru and Sungai Rumbai, in the regency of Dharmasraya of West Sumatra province. It is situated between longitudes 101o24'27" and 101o37'48" East and Latitudes 1o00'46"and 1o10'07"- South and about 175 m above sea level. The site is about 340 km from Padang, the capital of West Sumatra province and can be accessed by provincial road to Solok - Gunung Medan. Situated in the wet tropical areas, the plantation has sufficient water supply from two rivers of Batang Koto Balai and Batang Piruko as well as adequate rainfall of 3,107 mm a year with average humidity of 85% and solar exposure of more than 70%. The land itself is 60% from the site formerly used by logging company and classified as secondary forest which was the home of various exotic tropical animals such as tiger, deer and Malayan 'sun bear' which is also known as the "honey bear" (Helarctos malayanus). The rest of the plantation (5,768 ha) is in the form of plasma owned by the local people. Appendix A 249
Annex A3.5 Budidaya Agro Lestari palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2003
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 20,958 ha and a capacity of 60 ton FFB per hour. The study identified a significant impact in the quality of water in the river Gemaga and Kedawangan and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The study also identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance set by the Director General Plantation no. 38/KB-110/SK.BJ.BUN/05.95 as well as forming fire units within the company structure to enforce and monitor the land clearing practices. The company also commits to maintaining equipment and machineries according to the standard noise and conducting through consultation with the community in the process of the land compensation as well as maximising employment opportunities to the local people.
Project proponent
PT. Budidaya Agro Lestari operates as a subsidiary of Sime Darby Berhad, Malaysia
Project Location
The plantation covered areas at municipality of Marau, Regency of Ketapang West Kalimantan province. Situated in the wet tropical areas, the plantation has sufficient water supply from two rivers of Gemaga and Kedawangan as well as adequate rainfall of 2,300 mm a year and solar exposure of more than 51%. The land itself is mixed of flat plain and situated outside protected forest area and it was mixture of formerly secondary forest, alang-alang land (Imperata cylindrica land) and local traditional farm. Appendix A 250
Annex A3.6 Asiatic Persada palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2003
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 27.252 ha and a capacity of 45 ton FFB per hour. The study identified a significant impact in the quality of water in the Kandang river and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The study also identified potential impact of social unrest due to dispute in land compensation, negative community perception on the project and potential social unrest due to influx of outside workers. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on forest fire. The company also commits to maintaining equipment and machineries according to the standard noise and conducting through consultation with the community in the process of the land compensation as well as maximising employment opportunities to the local people.
Project proponent
PT. Asiatic Persada
Project Location
The plantation covered areas at municipality of Muara Bulian, regency Batanghari South Jambi province. Situated in the wet tropical areas, the plantation has adequate rain fall of 2,220 mm per year, with monthly relative humidity range of 54 to 91%. Majority of the land is hilly areas with the slope ranges from 15 to 25%. The plantation concession is situated outside protected forest area and it was mixture of formerly secondary forest (former area of logging company), alang-alang land (Imperata Cylindrical land) and local traditional farm. Appendix A 251
Annex A3.7 Agromuko palm oil plantation and mill project
Project type: Palm Oil and rubber plantation and palm oil and rubber sheet mill
Type of report: Environmental Report (EIA)
Completed: 2005
Project description
The Project involves the construction and operation of palm oil plantation and rubber plantation as well as palm oil and rubber crumb mill with a total area of 22,928 ha. The palm oil mill has a capacity of 120 FFB per hour and the rubber sheet plant is of 0.5-ton dry rubber per hour.
The study identified a light impact due to the odour generation from rubber and palm oil mill operation. Fortunately, the odorous impact can be minimised as the location the source is far from residential areas. The company has set a mitigation measures by implementing sanitary landfill for the solid wastes of those mills and the empty fruit bunch of palm oil will be returned to plantation field as mulching materials. The study also identified significant impact of erosion due to plantation opening especially in the higher slope areas of more than 40%. Various measures are carried out including bench terrace followed by planting Legumae crops (beans) to reduce run-off or its velocity so that it can minimize soil erosion.
The study also highlighted significant impact in the quality of water in the river Betung and Teramang kecil from land erosion and discharged effluent from palm oil mill in Bunga Tanjung and Sari bulan. To overcome highly concentrated BOD (biological oxygen demand) from palm oil mill and Rubber sheet plant, a series of aerobic and anaerobic ponds will be installed to reduce its contaminant to meet the standard effluent quality set for the palm oil industry. The standard may refer to the Ministry of Environment decision No. 51/1995 regarding effluent standard for palm oil industry with maximum COD of 500 mg/l with maximum loading of 3.0 kg COD per ton palm oil) as well as local regulation set by the governor of Bengkulu No. 92/2001.
The study also identified potential impact due to forest conversion on the flora and fauna. The impact mitigation is carried out by allocating conservation areas within the plantation concession. Such conservation regions are normally in the high slope areas, which are less suitable for plantation business. Unfortunately allocating such areas invites poachers from the local people as access within plantation has been improved. To overcome this problem, Appendix A 252 limiting the access to the areas, improving the structure and enriching the flora and fauna types as well as a close cooperation with the local government agency to educate the people about the importance of having conservation areas.
In terms of economic and social aspects, the study also identified potential positive aspect on the job creation and its positive impact on the local economy. However, such an economic development may not be distributed evenly in the community and social unrest may arise due to difference in economic levels between the local people and outside workers from other provinces. The land compensation received by the locals in general were wasted on consumptive items while the new comers from other areas such Javanese and Bataknese invested their income to purchase land for growing palm oil. In addition, the outside workers including the people from transmigration villages has relatively better work ethics and agricultural knowledge than the ones from local has made economic effects from palm oil development skewed toward the outside workers. To mitigate such a problem various measures have been proposed including more intensive community consultation regarding purchase price of palm fruit, land compensation and village fund management, recruiting local workers, as well as developing community services such as health and education.
Project proponent: PT. Agro Muko
Project Location
The plantation covered areas at municipality of Muko, Lubuk Pinang, Teras Terunjam and Pondok Suguh, regency of Muko Muko, Bengkulu province. Comprised at 7 plantation estates, the centre of plantation site is about 200 km from Bengkulu, the capital of Bengkulu province and can be accessed by trans Sumatra road. Situated in the wet tropical areas, the plantation has sufficient water supply from six rivers of Majunto, Selagan, Dikit, Bantal, Teremang kecil and Teremang as well as adequate rainfall of 3,076 mm a year. The land itself is mixed of flat plain with gradient varies from 0 to 2% and a majority of hilly land with gradient between 15-24%. The company owns half of the concession area, while 15% is still in the form of primary forest and another 15%is considered shrub land and the rest are either smallholder plantations. The company also allocated 450 ha of plantation land as village fund to be used as a source of community development fund. Appendix A 253
Annex A3.8 Banyu Kahuripan Indonesia palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2005
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 44,000 ha and a capacity of 60 ton FFB per hour. The study identified a significant impact in the quality of water in the Kandang river and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The study also identified potential impact of social unrest due to dispute in land compensation, negative community perception on the project and potential social unrest due to influx of outside workers. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on forest fire. The company also commits to maintaining equipment and machineries according to the standard noise and conducting through consultation with the community in the process of the land compensation as well as maximising employment opportunities to the local people.
Project proponent
PT. Banyu Kahuripan Indonesia
Project Location
The plantation covered areas at municipality of Buyung Lencir, regency Musi Banyu Asin, South Sumatra province. Situated in the wet tropical areas, the plantation has adequate rain fall of 2,220 mm per year, with monthly relative humidity range of 54 to 91%. Majority of the land is hilly areas with the slope ranges from 15 to 25%. The plantation concession is situated outside protected forest area and it was mixture of formerly secondary forest (former area of logging company), alang-alang land (Imperata cylindrica land) and local traditional farm. Appendix A 254
Annex A3.9 Perkebunan Mitra Ogan palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2008
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 31,180 ha and a capacity of 60 ton FFB per hour. The study identified a significant impact in the quality of water in the nearby river and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The study also identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on forest fire. The company also commits to maintaining equipment and machineries according to the standard noise and conducting through consultation with the community in the process of the land compensation as well as maximising employment opportunities to the local people.
Project proponent
PT. Perkebunan Mitra Ogan
Project Location
The plantation covered areas at municipality of Batanghari Leko, Musi Banyu Asin regency South Sumatra province. Situated in the wet tropical areas, the plantation has adequate rain fall of 2,320 mm a yea, with relative humidity of 86.6 %.The land itself is mixed of flat plain and hilly areas with maximum slope of 8%. Situated outside protected forest area and it was mixture of formerly secondary forest, Imperata cylindrica land and local traditional farm. Appendix A 255
Annex A3.10 Palm Lampung Persada palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2000
Project description
The Project involves the construction and operation of palm oil plantation and palm oil with a total area of 24,910 ha and palm oil mill of 2 x 60 FFB per hour. It is classified as the KKPA program with the nucleus plantation owned by the PT. Palm Lampung Persada of about 3,000 ha and the rest of 21,910 ha are called plasma area owned by a local farmer cooperative.
The study identified a potential significant impact in the quality of water in the river Way Umpu and Way Sungkai/Way Serupa, which is closed to the site of the two palm oil mills, and potential land erosion. The land erosion however, could be mild as majority of concession areas are relatively flat with a slope less than 8%. To overcome highly concentrated BOD from palm oil mill and aeries of aerobic, facultative and anaerobic ponds will be installed to reduce its contaminant to meet the standard effluent quality set for the palm oil industry (Ministry of Environment decision No. 51/1995 regarding effluent standard for palm oil industry)
The study also identified potential impact due to secondary forest conversion on the flora and fauna, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The impact mitigation for protecting flora and fauna is carried out by limiting access to the plantation areas as well as a close cooperation with the local government agency to ban people from hunting exotic animals in the area. In addition, strict monitoring and guidance on land opening to avoid the fire, maintaining equipment and machineries according to the standard noise
In terms of economic and social aspects, the study also identified potential positive aspect on the job creation and its positive impact on the local economy. It is estimated 10,000 families will come to occupy the plasma area as well around 2,774 new workers who works in the land opening and plant construction. However, such an economic development may Appendix A 256 potentially create unrest if the purchasing mechanism of palm fruit bunch is not carried out transparently. In addition, the conflict of land compensation will also be a major problem if it is not managed well. Thus, the study suggested that an intensive community consultation regarding purchase price of palm fruit, land compensation would be carried out.
Project proponent: PT. Palm Lampung Persada
Project Location
The plantation covered areas at municipality of Bahuga, Pakuan Ratu, Blambangan Umpu in the regency of Way Kanan and municipality of Sungkai Selatan, Sungkai Utara and Abung Barat in the regency of Lampung Utara, Lampung Province. The site is about 180 km from Bandar Lampung, the capital of Lampung province and the site can be accessed by trans Sumatra road. Situated in the wet tropical areas, the plantation has sufficient water supply from four rivers of Way Umpu, Way Kanan, Way Besai and Way Sungkai as well as adequate rain fall of 1867 - 3254 mm a year. Majority of the land itself is flat plain mixed with hilly land with gradient varies from 0 to 15%. Appendix A 257
Annex A3.11 Sajang Heulang palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2000
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 40,000 ha and a capacity of 2 x 60 ton FFB per hour. The project is classified in the KKPA program with the nucleus plantation is owned by the PT. Sajang Heulang and a local farmer cooperative owns plasma area that utilise the land allocated previously from transmigration program and unused land from indigenous people. The study identified a significant impact in the quality of water in the river Bakarangan and Sebambam and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance on that aspect. The study also identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on land opening to avoid the fire among others. It also recommends maintaining equipment and machineries according to the standard noise. To deal with potential social and economic impact, the company should avoid intermediary in the land compensation process, carry out community projects and prioritise employment opportunities as much as it can to the local people.
Project proponent: PT. Sajang Heulang
Project Location
The plantation covered areas at municipality of Satui, Sungai Oban and Kusan Hulu, in the regency of Kotabaru South Kalimantan province. The site is about 200 km from Banjarmasin, the capital of South Kalimantan province and can be accessed by Trans Kalimantan road. Situated in the wet tropical areas, the plantation has sufficient water supply from two rivers of Sebambam and Bakarangan as well as adequate rainfall of 2,300 mm a year and solar exposure of more than 51.5%. The land itself is a mixed of flat plain Appendix A 258 and hilly land with gradient varies from zero to 15% and situated outside protected forest area but some parcel of land in the south side is formerly converted productive forest (HPK) that can be converted into secondary forest. Appendix A 259
Annex A3.12 Etam Bersama Lestari palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2000
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 12,000 ha and a capacity of 60 ton FFB per hour. The study identified a significant impact in the quality of water in the Karangan river, disturbance on the flora and fauna, potential fire due to slash and burn practices by some despite strict guidance on the land opening activities as well as potential social unrest in the community due to influx of outside workers. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment of palm oil mill effluent, establishing conservation areas within the plantation concession, strict monitoring and guidance on forest fire. The company also commits to consulting the local communities during the process of land compensation as well as maximising employment opportunities for the local people. The study also identified several key measures to improve the community services in the area of health and education.
Project proponent
PT. Etam Bersama Lestari
Project Location
The plantation covered areas at municipality of Sangkulirang, Kutai regency, East Kalimantan province. Situated in the wet tropical areas, the plantation has adequate rain fall of 1,979 mm a year, with average relative humidity of 92 %. The water for palm oil mill and its residential areas can be supplied from two rivers of Karangan and Pelawan. The land itself is a mixed of flat plain and hilly areas with maximum slope of 8%. Situated outside protected forest area and it was mixture of formerly secondary forest of former logging company of PT. Hanurata (about 10,465 ha), shrub land of about 1,500 ha and local traditional farm of 25 ha. Appendix A 260
Annex A3.13 Katingan Indah palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2007
Project description
The Project involves construction and operation of palm oil plantation with total area of 22,126 ha and palm oil mill with a capacity of 60 ton FFB per hour, upgradeable up to 90 ton FFB per hour. The study identified a significant impact in the quality of water in the nearby river and potential land erosion, decreasing air quality and excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices by some despite strict guidance. The study also identified potential impact of social unrest due to dispute in land compensation and negative community perception on the project. The study also identified potential positive aspect on the job creation and its positive impact on the local economy. The study also outlined various measures to reduce potential negative impacts that include construction of adequate wastewater treatment, strict monitoring and guidance on forest fire. The company also commits to maintaining equipment and machineries according to the standard noise and conducting thorough consultation with the community in the process of the land compensation. The company also promised to maximising employment opportunities to the local people as well as providing clear guidelines in price purchase agreement of palm fruit bunch to the small holders (plasma entity).
Project proponent: PT. Katingan Indah
Project Location
The plantation covered areas at municipality of Parenggean and Mentaya Hulu, Regency of Kota Waringin Timur, Central Kalimantan Province.
Annex A3.14 Budidaya Agro palm oil plantation and mill project
Project type: Palm Oil plantation and palm oil mill
Type of report: Environmental Report (EIA)
Completed: 2003 Appendix A 261
Project description
The Project involves the construction and operation of palm oil plantation and palm oil mill with a total area of 20,598 ha and a capacity of 60 ton FFB per hour. The study identified a significant impact in the quality of water in the rivers Gemaga and Kendawangan. To overcome highly concentrated BOD from palm oil mill effluent, a series of aerobic, facultative and anaerobic ponds will be installed to reduce its contaminant to meet the standard effluent quality set for the palm oil industry (Ministry of Environment decision No. 51/1995 regarding effluent standard for palm oil industry). The study also identified potential erosion particularly in the area with slope between 8-15% of about 3,400 ha, which may cause sedimentation in river run off Kendawan. The total land erosion however, could be mild as majority of concession areas are relatively flat with a slope less than 8%. A construction of bench terrace will be carried out and followed by planting legumes crops in the erosion prone areas.
The study also identified potential impact due to forest conversion on the flora and fauna. The impact mitigation is carried out by creating conservation area and a dedicated traditional forest within the plantation concession. Such areas normally in the high slope areas that is less suitable for plantation business.
In addition to establishing a conservation zone, the company committed to put clearly marked warnings and enforce a limiting access to that area as well as forming a close cooperation with the local government agencies.
The study also identified excessive noise during plantation opening and construction of the mill as well as potential fire due to slash and burn practices despite strict guidance on that aspect. Therefore, the company commits to maintaining equipment and strict guidance on land opening to mitigate this impact.
Despite potential negative impact due to influx of workers from outside areas, the study noted potential positive aspect on the job creation and its positive impact on the local economy. Therefore, conducting through consultation with the community in the process of the land compensation as well as maximising employment opportunities to the local people are necessary to ensure social unrest in the community around plantation could be avoided.
Project proponent: PT. Budidaya Agro
Project Location Appendix A 262
The plantation covers areas at municipality of Marau, Ketapang regency, West Kalimantan province. It is situated between longitudes 110o29'06" and 111o02'30" East and Latitudes 1o573'46"and 02o15'36"- South, and about 158 km from Ketapang. To access Ketapang from Pontianak, the capital of West Kalimantan province, a flight of approximately 1 hour or speedboat of 6 hours is required. Situated in the wet tropical areas, the plantation has adequate rainfall of 3,416 mm a year, with relative humidity of 86.5 % and 66% solar exposure. The land itself is a mixed of flat plain and hilly areas with maximum slope of 15%. Majority of the land itself is flat plain mixed with hilly land with gradient varies from 0 to 15%.Situated outside protected forest area and it was mixture of formerly secondary forest, shrub land and local traditional farm. Appendix B 263
Appendix B Detail Life Cycle Inventory of Indonesian biofuel
Annex B1 Life Cycle Inventory of Biodiesel and Indonesian ADO for 1 GJ energy content Annex B1.1 System description of palm biodiesel and Indonesian ADO
The description palm biodiesel and Indonesian ADO can be best described according to Figure A-1 which comprises of steps prior land use, palm plantation, palm oil mill, biodiesel plant and energy use.
Input: Land, used up materials including: raw material, and others such as fertilizers, methanol, chemicals and energy
Prior Oil Palm Palm Oil Biodiesel Energy Use Land Use Plantation Mill Plant of 1GJ
Output: Emissions to environment
Figure A-1 Boundary of LCA biofuel system
Life Cycle steps of biodiesel
Step 1. Prior land use
As it was explained in the Chapter 5, prior land use of biodiesel may depend on the type of land that was converted into palm oil plantation. It may come from various land cover classification including forest, shrub land, peat land or even barren land (degraded land). Each land cover type has distinct characteristic including the amount of carbon stored both underground and above ground biomass. Discussion on the type of land cover can be found in detail in Chapter 5 section 5.3.2. Appendix B 264
Step 2: Palm plantation
Unlike other vegetable oils like canola, soybean and rapeseed, palm oil is a perennial tree crop (Elaeis guineensis), that is suitable in typical tropical areas such as West Africa and South East Asia. Growing to a height of 15 m, the palms produce fleshy fruits, 3 cm long, containing a white kernel within a hard black shell. Palm oil is extracted from the pulp and kernel and used in making soaps, margarine, lubricants, etc. It has generic life of over 200 years, but the economic life is 20-25 years, with gestation period of 3 years and the first harvest can be carried out at the age of 4 years old. It has planting density of 128-148 palms/ha, depending on planting material, soil and climate. Most common spacing is 9m x 9 m triangular (= 143 palms/ha) (Von Uexkull 1992).
The yield starts at about 5 tonnes per ha at the and gradually increase when it reaches the mature age of 8 to 18 years and decline after reaching the age of 20. The peak production of palm oil could reach up to 46 tonnes Fresh Fruit Bunch (FFB) per ha (Von Uexkull 1992). Depending upon the solid type, average yield is about 20 tons FFB per ha (US EPA 2012), with the extraction rate of palm oil is about 22 to 24 % (Manurung 2001). To sustain optimum production, the roles of fertilizer and best practices in palm oil plantation are essential. The physical nature of palm oil tree requires high labour intensity especially during the harvesting despite recent efforts to mechanize several plantation activities.
The harvested FFB is usually loaded into a truck or lorries (railway cars) and transported to a nearby palm oil mill. It is important to immediately processes the FFB to avoid the built up of free fatty acid in the fruit.
Step 3: Palm oil mill process
Dry and wet methods of are normally employed in extracting process. The latter however is a common practice exists in the South East Asian plantation. This process is characterized by sterilizing the FFB in order to inactivate the natural enzymes and loosen the fruits of the bunch, resulting in easier extraction of oil. A field trip to Indonesia in May 2013 was intended to obtain the life cycle inventory data for this stage for Indonesian context. Those data relevant to palm oil plantation were collected from the Bekri palm oil plantation in Lampung province, which is owned by PTPN VII, a state-owned plantation company. Appendix B 265
The FFB in this plant arrived were unloaded on a ramp and put into containers of 2.5-3.0 tons each. The FFB was sterilised in batch with the application of live steam at 3 bars. The wastewater generated at this step was from steam condensate at about 0.15-0.18 m3 Kg/t FFB (Kittikun et al. 2000). The containers with the sterilised bunches are emptied into a rotary drum thresher where the fruits are separated from the bunch stalk. This processing step generates the empty fruit bunches (EFB) at 230-250 Kg /t FFB (Mahlia et al. 2001). The separated fruits were carried into digesters and mechanically crushed into mash. The oily mash was fed into a continuous screw press system. The extracted oil phase was collected and discharged to the purification section. The remained press cake was transported to a separation system consisting of air classifiers and cyclones for drying and separation of nuts and fibres. Kernels are recovered from nuts in the crackers. The oil was also extracted from kernels by screw press to get palm kernel oil although they normally sell the kernel as nuts. Fibres and shells are solid residues generated during at a rate of 145 and 60 Kg/t FFB fed into the boilers (Mahlia et al. 2001).
Hot water was added to the raw oil to improve oil clarification, and passed through a vibrating screen to separate large size solids. The oil after sieving still contained small size solids and water. The mixture of oil, water and suspended solids were separate in the settling tank. The tank was heated using steams and the oil collected by a funnel then sent to crude oil tank.
The tank underflow was collected in the sludge tank and subsequently treated to recover oil. The pre-cleaned sludge was collected in a buffer tank and then pumped to a two-phase centrifuge (separator) or decanter for oil recovery. The recovered crude oil was pumped to the settling tank. Oil from the settling tank combined with recovered oil from the sludge tank is centrifuged to remove fine suspended solids. After centrifugation, the crude oil still contained water, which was then removed by a vacuum evaporation system. Subsequently, the dried crude oil was kept in storage. Residues of the drying step were mostly cooling water with the quantity of about 300 Kg/t FFB (Kittikun et al. 2000).
The wastewater produced from palm oil mill mostly come from sterilizer and purification process while the solid waste was mostly produced as empty fruit bunch (EFB). Despite relatively low air emission, the boiler operation using fruit fibres and shell nuts potentially produce relatively higher particulate matter. The overall interaction of palm oil mill process can be found in the following diagram Figure A-2. Appendix B 266
Figure A-2 Diagram of Palm oil mill process
Source: (Kittikun et al. 2000) Step 3: Biodiesel Plant
For Europe, biodiesel is traditionally derived from rapeseed oil, while soybean oil is the preferred raw material source in the US. For Indonesia, palm oil and fatty acid waste from palm oil mill are considered as one of the most reasonable sources of raw material for biodiesel. Currently, a process called transesterification is mostly employed to produce biodiesel (Ma & Hanna 1999). The biodiesel data for this inventory were collected from various local plants in Indonesia including PT Indo biofuel Energy in Merak-Banten province, BPPT owned biodiesel plants in Jakarta and Riau as well as the one operated by Lemigas Indonesia in Jakarta
The large branched triglyceride molecules of bio-oils and fats are transformed into smaller, straight chain molecules. These straight-chain molecules have similar properties as fossil diesel fuel. The vegetable oil is first filtered, and preprocessed with alkali to remove the free fatty acids. It is then mixed with an alcohol (usually methanol) and a catalyst (usually sodium or potassium hydroxide). The oil's triglyceride compounds react to form esters and glycerol, which are then separated from each other and purified. It takes about 0.88 kg of palm oil to produce a litre of methyl palm oil. Appendix B 267
C-OOC-R1 R1-COO-R’ C-OH Catalyst
C-OOC-R2 R2-COO-R’ C-OH 3R’OH
C-OOC-R3 R3-COO-R’ C-OH
Alcohol Fatty Acid Ester Triglyceride (methanol) Glycerin
With R:
Figure A-3 Simplified palm oil trans-esterification reaction
Source: (Fukuda, Kondo & Noda 2001)
The process is simple and it can even be carried using rudimentary tools such as bucket and simple stirrer. Such a simple process outlined can become more complex in terms of its unit operations if the biodiesel plant has various feed stocks. Crude or unrefined Palm oil may contain free fatty acids and gums that must be removed before entering the methyl ester process. The pre-processing can take place in the form of refining, degumming and filtering to remove the impurities. Degumming involves mixing a small amount of water (about 3-5%) with the feedstock to precipitates the gums. The mixture is then can be separated by centrifuging the liquid. Refining involves adding sodium hydroxide to the feedstock to form a soap that can be separated by centrifuge from the oil. Other feedstock such as yellow grease or spent restaurant fats must be filtered and refined to remove the free fatty acids and residual cooking fines.
Moreover, a more complex process flow sheet may be necessary if the main products and byproducts have to meet a certain standard, be energy efficient and produce minimum waste. The glycerol for example, may need a further processing if it is intended for pharmaceutical grade. The price of by product is more expensive than the main product. However, if this new fuel industry is well established, it might reduce the glycerol price in the market.
In addition, the water and un-reacted methanol should be recycled in every step of the process to minimize its usage and meeting a biodiesel standard. Figure A-4 shows the Appendix B 268 simple main processes of biodiesel and Figure A.5 shows additional processes that are necessary to meet the variation of feedstock, be energy efficient and produce minimum waste.
Figure A-4 Flow diagram of palm oil transesterification
Source:Hamilton (2004)
Figure A-5 Typical Biodiesel process Source: Appendix B 269
Source:Hamilton (2004)
A European standard such as DIN 51606, for example specifies that the minimum of water content should be less than 300 ppm while the American standard of ASTM-D6751 put a figure of less than 500 ppm. The methyl palm ester produced in the transesterification reaction has similar property of fossil diesel. It has a better cetane number than fossil diesel fuel but higher viscosity. The high viscosity may cause difficulty in pumping the fuel into the combustion engine. Although its calorific value is slightly less than fossil diesel fuel (only about 90%), it has a better performance in the combustion engine at a lower value of air to fuel ratio.
The use of methanol in the process may potentially pose a problem if it is not handled properly. The potential wastewater discharged to the environment is from the washing column in which the biodiesel product, glycerine and unreacted methanol separated using water. The nature of this process is to try reusing the water. Thus, effluent released to the environment can be minimized. In relation to the solid waste production, this plant has minimum solid type of waste. The only possibilities are from the containers of chemicals and the waste from the office and laboratories.
The following Table A-1shows typical palm biodiesel properties compared to fossil diesel.
Table A-1 Properties of biodiesel and typical ADO
Properties Units Typical Indonesian PO biodiesel Diesel fuel1 Density at kg/m3 820-870 (15°C) 850 – 890 (40°C) Kinematic Viscosity at 40oC mm2/s (cSt( 1.6-5.8 2.3-6.0 Cetane Number min. 45 min. 51 Flash Point oC min. 60 min. 100 Cloud Point oC max. 18 Pour point oC <65 -14 Copper strip Corrosion (3 hours at max. no.1 max. no.1 50oC) Carbon Residue (10% dist.) mass% max. 0.1 max. 0.3 Ash mass% - Original sample max.0.05 Appendix B 270
- 10% distillation Ash max. 0.1 max.0.30 Water and Sediment %vol. max 0.05* max.0.05 Distilation Temperature 90 % °C - max. 360 Distilation Temperature 95 % °C max. 370 - Sulphated ash mass% max.0.01 max.0.02 Sulphur ppm-m (mg/kg) max. 5000 max. 100 Phosphorous ppm-m (mg/kg) - max. 10 Acid number mg-KOH/g max.0.6 max 0.6 Free glycerol mass% - max 0.02 Total glycerol mass% - max. 0.24 Methyl Esther content mass% - min. 96.5 Iodide Number mass% (g-I2/100 - 115 g) Oxidative Stability Method Rancimat EN 15751 or see section minutes - 360 9.17.1, SNI 7182:2012 Petro Oksi ASTM D 7545 or see - 27 section 9.17.1, SNI 7182:2012 Note: * It can be tested separately with maximum sediment content of 0.01%vol (1) Director General Oil and Gas - MEMR Indonesia (2006c) No 3675 K/24/DJM/2006 (2) Director General Oil and Gas - MEMR Indonesia (2006b) No 3674 K/24/DJM/2006 As in typical production processes for biomass to fuel, biodiesel production flow produces co-products and by-products, in which Glycerol is produced along with palm methyl ester. The co-products for biodiesel life cycle during the oil palm production however, are minimised. The model and analysis assume that the plantations are solely for biofuel production.Therefore, the allocation factors for palm oil production are as follows, palm oil is at 81.3%, palm kernel oil is at 17.3% and palm kernel meal is at 1,4%. The allocation factors for biodiesel production meanwhile are as follows:
Palm methyl ester at biodiesel plant is produced at 972.7 kg per 1000 kg palm oil with allocation factor of 87.1% Glycerine from palm oil at biodiesel plant is produced 106.1 kg per 1000 kg of palm oil with allocation factor of 12.9% The input of 1.0 kg palm oil at biodiesel plant is therefore multiplied with the allocation factor of 87.1% and divided by 0.9727 (the amount of palm methyl ester produced per kg of palm oil). Hence, 0.895 kg of palm oil input is attributed to the production of 1kg palm methyl ester and 1.216 kg of palm oil is attributed to the production 1kg glycerine. Appendix B 271
In term of air emission, the production system normally uses the electricity grid and possible coal or natural gas as the source of it energy to generate heat or steam. Thus, the air emission related to the life cycle inventories will depend on the aggregate source of electricity generated in Indonesia as well as the selection of its energy source. The LCI of such various energy sources were obtained from ecoinvent database. The country electricity mix however, is obtained from the electricity supply configuration based on the report by the Indonesian government in 2008 (Suharyati et al. 2008). Majority of about 41% is from coal, 13.6% from fossil fuel base, 31.6% from natural gas, 7.7% from hydropower while another 5.5%% is from geothermal.
This biodiesel production step also includes the deliveries of the product to the point of use, which was assumed a distance average of 1000 km. This is reasonable as most plantation and biofuel plants are projected to be built in Sumatra, Kalimantan, Sulawesi and Papua while the customers are predominantly live in Java. The emission of such an activity will be estimated using typical tanker shipping for the designated volume of the fuel delivered.
As the biodiesel will be distributed to the customer from retail diesel station, therefore the LCI in this study will accommodate such a practice. Those aspects include delivery of biodiesel from biodiesel plant; electricity for retail fuel station as well as estimated loses of the fuel during the delivery and dispensing the fuel to customer vehicles. The data set for that purpose were taken from the ecoinvent database using the Swiss data adjusted to the Indonesian context in terms of distance and the type of electricity mix.
Step 4: Application of biodiesel at 1 GJ energy
This is the final use of palm biodiesel with functional unit of 1 GJ combustion based on its energy content. The fuel is converted to energy and produce gaseous tail pipe emission. Thus emissions in terms of solid and liquid wastes are hardly any. As the fuel will be distributed using the existing ADO distribution facilities, the effect from such an activity from both fuels, palm biodiesel and ADO, is about the same. The advantage of biodiesel in term of higher fuel efficiency due to relatively higher cetane value is ignored. The combustion emission from both fuels is based on their test on heavy-duty 28t trailer diesel vehicle with functional unit of 1 GJ energy used. The data set for biodiesel application were also taken from ecoinvent database, in particular referring to the chapter 20 of the report by Jungbluth et al. (2007). Appendix B 272
Figure A-6 Life cycle tree of biodiesel from palm oil at a functional unit of 1 GJ useful energy operated on heavy duty vehicle with GHG impact in kg CO2eq Appendix B 273
Annex B1.2 Life Cycle description of Industrial Diesel Oil
Automotive diesel oil is produced from the distillation of crude oil to produce light virgin gas oil, which then becomes diesel fuel as the final product. The distillation is conducted in Indonesian refineries. The crude oil is imported from Middle East countries although Indonesia is currently an oil exporting countries and a member of OPEC organization. The crude oil referinery process is therefore carried out domestically and distributed using existing fossil fuel distribution facilities.
The final step of ADO life cycle would ultimately end in the combustion step. The fuel economy of the diesel fuel is based on the combustion of 1GJ. The emission due to combustion is based on its heavy-duty 28t trailer diesel vehicle with functional unit of 1 GJ energy used. The fuel is converted to energy and produce gaseous tail pipe emission. Thus emissions in terms of solid and liquid wastes are hardly any.
The data set for this ADO application were also taken from ecoinvent database, in particular referring to the chapter 20 of the report by Jungbluth et al. (2007). The emission due transportation of crude oil is therefore adjusted to suit the distance from the middle east countries to Indonesia. However, the energy flows in this life cycle was based on the production of fuel and electricity according to Indonesian energy mix. Electricity flow in particular, is dominated by coal and gas, while fuel is dominated by typical petroleum based fuel.
The quality of ADO it self was also typical Indonesian diesel fuel product, which has relatively high sulphur content. Thus, it will be reflected in the tail pipe emission in term of
SO2. The NOx and particulate matter emission were obtained from typical test of ADO on diesel engines using various studies from Indonesian tests. The sample life cycle tress tree of using ADO in heavy-duty 28t trailer diesel vehicle was then presented in figure A-7. A functional unit of 1GJ energy is spent on the vehicle with material flow of GHG emission. Appendix B 274
Figure A-7 LC Tree of ADO with Functional Unit of 1GJ energy and GHG impact Appendix B 275
Annex B2 Life Cycle Inventory of Pure plant oil Annex B2.1 System description of pure plant oil and Indonesian Fuel Oil/Industrial Diesel Oil
The description Pure Plant Oil and Indonesian Fuel Oil/Industrial Diesel Oil can be best described according to Figure A-8 which comprises of steps prior land use, palm plantation, palm oil mill, biodiesel plant and energy use.
Input: Land, used up materials including: raw material, and others such as fertilizers, methanol, chemicals and energy
Prior Oil Palm Palm Oil Pure plant oil Energy Use Land Use Plantation Mill plant of 1GJ
Output: Emissions to environment
Figure A-8 Pure plant oil life cycle diagram
Life Cycle steps of pure plant oil
Step 1, 2, 3
The step of prior land use, palm plantation and palm oil mill process within the pure plant oil life cycle is the same as the ones present in biodiesel life cycle.
Step 4: Pure plant oil process
Pure plant oil is basically a refined vegetable oil that does not undergo esterification/trans-esterification process (Guillot 2010). This oil is normally degummed, bleached and deodorized. It is suited to low to medium speed diesel engine. Household applications such as for wick or pressurized stoves are also possible.
The notable characteristic of pure plant oil is the high viscosity at normal temperature compared to fossil diesel fuel, thus lead to potential problems in cold start up. Various methods have been applied successfully in the diesel engines and they include preheating the pure plant oil to about 90oC to lower its viscosity to match the viscosity of fossil diesel fuel. Another method is using separate fuel tank for pure plant oil and fossil diesel fuel in which normal fossil diesel fuel will only be used during start up and switching Appendix B 276 off. Hence, at the end of pure plant oil cycle, the engines injectors will be flushed with normal diesel oil so that the next start is again with diesel fuel. Another method is blending the pure plant oil with diesel oil as well as biodiesel in order to lower the viscosity at the room temperature. The Ministry of Energy and Mineral Resources (MEMR) has established the properties of pure plant oil in Indonesia. The Table A-2 below shows the properties of pure plant oil and compared with the typical industrial diesel oil.
Table A-2 Properties of Pure Plant Oil and typical Industrial Diesel Oil
Properties Units Typical Indonesian Pure plant oil2 Industrial Diesel fuel1 Density at kg/m3 900-920 (15°C) 900 -920 (50°C) Cetane Number - 35 39 Kinematic Viscosity at 40oC mm2/s (cSt( 2.5-524 max. 36 Flash Point oC min. 60 min. 100 Pour Point oC 18 - 20 Carbon Residue (10% dist.) mass% 0.5 - 3 max. 0.4 Water and Sediment* %vol. 0.25-0.30 max.0.075 Sulphated ash mass% 0.02-0.05 max.0.02 Sulphur mass % 1.5 - 2 max. 0.01 Phosphorous mg/kg - max. 10 Unsaphonified matter mass % - max. 2.0 Saphonification number mg-KOH/g - 180-265 Iodine Number (g-I2/100 g) - max. 115 Acid Number mg-KOH/g max.2.0 Note: * It can be tested separately with maximum sediment content of 0.01%vol (1) Director General Oil and Gas - MEMR Indonesia (2008) No 14499K/14/DJM/2008 (2) Director General Renewable Energy- MEMR Indonesia (2013), SK 903 K/10/DJE/2013 In order to achieve the specified characteristic of pure plant oil, the crude palm oil has to be refined to remove it impurities including moisture content, gum as well as free fatty acid. The following is the typical crude palm oil. There are two alternatives of palm oil refining, wet refining method and alternatively is using physical process Appendix B 277
Table A- 3 Typical analysis of crude, degummed bleached and RBD Palm Oil
Parameters Crude Palm Oil Degummed Bleached RBD Palm Oil (CPO) Palm Oil (DBPO) (RBDPO) FFA 2 - 5 % 3 – 5 % ~ 0.05 M & I 0.15 – 3.0 % ~ 0.2 % ~ 0.02% PV 1.5 -5.0 Nil Nil AV 2 – 6 2 – 6 ~ 2.0 β-carotene content 500-600 ppm - - DOBI 2 – 3.5 - Phosphorus 10-18 ppm ~ 4 ppm ~ 3 ppm Iron (Fe) 4-10 ppm ~ 0.15 ppm ~ 0.15 ppm Copper (Cu) ~ 0.05 ppm ~ 0.05 ppm ~ 0.05 ppm Colour (5.25” Lovibond - - Red 2.0 Cell) Source: Er (1985) The standard process of producing pure plant oil has not been specifically identified in Indonesia. However, the underlying process for producing the relatively refined palm oil product such as pure plant oil from palm oil, one can no look further than the current recognised palm oil refining technology, which in general can be classified into chemical (alkaline) refining and physical refining. The differences between these 2 types are basically based on the type of chemicals used and mode of removing the FFA.
The original objective of this process is to remove the impurities and other components, which will affect the quality of finished product. The qualities of the finished product that need to be monitored are flavour, shelf-life stability and colour of the products(Leong 1992). Implementing fully the conventional process of palm oil refining for producing pure plant oil from oil palm, may be considered over killed as the final product has the FFA content of less than 0.05% and has lightly oil coloroured that is attractive for edible purposes.
Hence, majority experiment of pure plant oil utilization in Indonesia used relatively low quality of RBD palm oil that was intended for edible purposes. The meaning of lower quality was indicated by relatively higher FFA content of less that 1% and slightly reddish colour otherwise meet the maximum standard of water and phosphorous content as well as free from gummed chemicals or phosphatides. Appendix B 278
As physical refining has been more popular this day due to the higher Refining Factor, the consequence of high acidity content (FFA) in chemically refined oil, suitable for low-content phosphatides vegetable oil such as palm oil. Thus, physical refining is proven to have a higher efficiency, less losses (refining factor (RF) < 1.3), less operating cost, less capital input and less influent to handle (Yusoff & Thiagarajan 1993).
Therefore this study will make use of it with slight modification of producing refined palm oil with lower FFA content but still meet the quality standard specified in the Indonesian pure plant oil.
The inventory data of such a process is derived from the study (Tan et al. 2010). As the biodiesel will be distributed to the customer from retail diesel station, therefore the LCI in this study will accommodate such a practice. The data set for that purpose adopted the ecoinvent database using the Swiss data adjusted to the Indonesian context in terms of distance and the type of electricity mix.
Similar to biodiesel, the proses of producing RBD palm oil as pure plant oil is a multiple output process. It has products of RBD palm oil and Fatty acid. The allocation factor and mass balance for this production process are followed.
RBD palm oil is produced at the rate of 950 kg per 1000 kg palm oil with allocation factor of 95% Free fatty acid is produced at the rate 50 kg per 1000 kg of palm oil with allocation factor of 5% Therefore, the input of 1.0 kg palm oil at pure plant oil refinery is multiplied with the allocation factor of 95.0% and divided by 0.95 (the amount of pute plant oil produced per kg of palm oil). Hence, 1 kg of palm oil input is attributed to the production of 1 kg pure plant oil and 1 kg of palm oil is attributed to the production 1kg of free fatty acid.
Step 4: Application of pure plant oil at 1 GJ energy
This is the final use of pure plant oil from oil palm with functional unit of 1 GJ combustion based on its energy content. The fuel is converted to energy and produce gaseous tail pipe emission. Thus emissions in terms of solid and liquid wastes are assumed to be minimal. As the fuel will be distributed using the existing ADO, IDO and Fuel Oil distribution facilities, the effect from such an activity from both plant oil and ADO/Fuel oil/IDO is about the same. The advantage of pure plant oil in term of higher fuel efficiency due to relatively higher cetane value is ignored. Appendix B 279
To account the effect of tail pipe emission, the pure plant oil is assumed to be used in industrial furnace though it can also be the fuel for boiler as well as for low and medium speed engine. The functional unit is 1 GJ energy used. The basis for the calculation is a fuel energy expended of 1.05 MJ required to produce one MJ heat. This size is equal to the consumption of 0.02342 kg of IDO (light fuel oil) to produce one MJ of fuel energy.
As actual data for such a test are not available, the tail pipe emissions of pure plant oil for the same functional unit of 1 GJ energy used are assumed to be the same as the ones from biodiesel and the trend of various study on direct combustion in furnace using plant oil. The reason for assuming the tail pipe emission of pure plant oil will likely follow the trend exhibited by the emission characteristic of biodiesel is that both are from contain more oxygen hence it will have more efficient combustion than the one from diesel fuel. Consequently both will emit more NOx as the temperature of combustion has increased.
The following table shows the comparison of tail pipe emission of biodiesel and pure plant oil with respect to industrial diesel oil (IDO). Those values indicate that pure plant oil is likely to perform similarly to the one shown by biodiesel. As the table shows that the tail pipe emission from both biofuels indicate similar trend, therefore the data set for pure plant oil application on the vehicle could be inferred from ecoinvent database, in particular referring to the chapter 20 of the report by Jungbluth et al. (2007). It means that the tail pipe emission of pure plant oil will be collected from the test industrial furnace, boiler as well as low and medium speed engine with the functional unit of 1GJ biofuel energy.
Table A-4 Tail emission profile of palm oil methyl ester and pure plant oil with respect to ADO and IDO
Pollutant tail pipe emission of tail pipe emission of Tail Pipe emission methyl ester pure plant oil from from Soybean oil compared to ADO oil palm compared compared tondiesel (Jungbluth et al. to ADO (Hossain fuel (Bazooyar et al 2007) & Davies 2010) 2015). Nitrogen oxides 3% generally higher Increase 15% Particulates,>2.5um,and<10um -38% lower Reduce about 60% Carbon Monoxide (fossil and -44% generally lower - biogenic) Sulphur Dioxide -100% -100% -100%
Heavy metals -100% -100% none Appendix B 280
A study by Bazooyar et al has shown that in general the NOx emission due to the use pure plant oil is higher than that of industrial diesel oil. In the case of particulate matter emission, the figure is generallay lower than that of industrial diesel oil.
The life cycle assessment of pure plant oil was therefore carried out using a common functional unit of 1 GJ fuel used for combustion in a 1-MW industrial furnace. The basis for the calculation is a fuel energy expended of 1.05 MJ required to produce one MJ heat. This size is equal to the consumption of 0.02342 kg of IDO (light fuel oil) to produce one MJ of fuel energy. The life cycle trees of pure plant oil and industrial diesel oil with respect to GHG emissions are presented in Figure A-9 and Figure A-10 respectively.
Annex B2.2: Life Cycle description of Industrial Diesel Oil
Industrial diesel oil is a kind of distillate fuel containing heavy fractions or a mixture of light distillate fractions and a heavy fraction (residual fuel oil) and dark black, but remain liquid at low temperatures (Pertamina 2018). The use of industrial diesel oil is generally for diesel engines with moderate or slow rotation (300-1000 RPM) or it can also be used as direct fuel combustion in industrial furnace. The crude oil is imported from Middle East countries although Indonesia is currently an oil exporting country and a member of OPEC organization. The crude oil refinery process is therefore carried out domestically and distributed using existing fossil fuel distribution facilities.
The final step of IDO life cycle would ultimately end in the combustion step. The fuel economy of the diesel fuel is based on the combustion of 1GJ. The emission due to combustion is based on 1 MW industrial burned with functional unit of 1 GJ energy used. The fuel is converted to energy and produce gaseous tail pipe emission. Thus, emissions in terms of solid and liquid wastes are hardly any.
The data set for this IDO application were also taken from ecoinvent database. The emission due to transportation of crude oil is therefore adjusted to suit the distance from the middle east countries to Indonesia. However, the energy flows in this life cycle was based on the production of fuel and electricity according to Indonesian energy mix. Electricity flow in particular, is dominated by coal and gas, while fuel is dominated by typical petroleum-based fuel.
The quality of IDO is typical Indonesian diesel fuel product, which has relatively high sulphur content. Thus, it will be reflected in the tail pipe emission in term of SO2. The NOx and particulate matter emission were obtained from typical test of IDO on diesel Appendix B 281 engines using various studies from Indonesian tests. The sample life cycle tress tree of using ADO in heavy-duty 28t trailer diesel vehicle was then presented in figure A-7 with functional unit of 1GJ energy spent on the vehicle with material flow of GHG emission. Appendix B 282
Figure A-9 Life cycle tree of pure plant oil palm at a functional unit 1GJ of useful energy with GHG impact in kg CO2eq Appendix B 283
Figure A-10 Life cycle tree of Industrial Diesel Oil at a functional unit 1GJ of useful energy with GHG impact in kg CO2eq Appendix B 284
Annex B3 Life Cycle Inventory of bioethanol from sugar cane and molasses and Indonesian Petrol Annex B3.1 System description of Bioethanol
The description of bioethanol and Indonesian petrol can be best described according to figure A-10 which comprises of steps prior land use, sugar cane plantation, sugar mill ethanol, anhydrous alcohol plant, and energy use.
Input: Land, used up materials including: raw material, and others such as fertilizers, methanol, chemicals and energy
Sugar mill Unhydrous Prior Sugar cane ethanol 95% Alcohol plant Energy Use Land Use Plantation from 99.7% of 1GJ molasses
Output: Emissions to environment
Figure A-11 Bioethanol life cycle diagram
Life Cycle steps of bioethanol
Step 1. Prior land use
As it was explained in the Chapter 5, prior land use of biodiesel may depend on the type of land that was converted into palm oil plantation. It may come from various land cover classification including forest, shrub land, peat land or even barren land (degraded land). Each land cover type has distinct characteristics including the amount of carbon stored both underground and above ground biomass. Discussion on the type of land cover can be found in detail in Chapter 5 section 5.3.2.
Step 2: Sugar cane plantation
The dataset is for the production of 1 kg sugar cane, at farm, in Indonesia. All data in the present report are referred to 1 kg sugar cane fresh matter. The system includes the process with consumption of raw materials, energy, and infrastructure as well as the emissions to air, water, and soil. It also includes transportation of the raw materials. Appendix B 285
The LCI data for this stage was primarily taken from ecoinvent database provided in SimaPro (Jungbluth et al. 2007), in which the practice of producing sugar cane in Brazil was adopted. Indonesian data were also incorporated in this LCI and the following Table A-5 list them.
Table A-5 Additional transport data related to LCI bioethanol
yield of sugar cane Based on own calculation for 2010-2012 harvest at 78.2 TSC/ha Method of transportation All the transportation of sugar cane harvest to the sugar mill usually employs 5 t trucks. Therefore, data set for lorry 3,5- 16 t will be used as proxies.
Step 3. Sugar mill with alcohol plant at 95% from molasses
The harvested cane arrives at the mill (essentially by truck). It is weighed and sampled to measure the fibre and sucrose content, and washed in order to remove impurities such as earth, sand, etc. The subsequent stage is juice extraction and this is a critical stage in the processing chain from the point of view of bioenergy, as it leads to three more potential processing routes for the sugars.
(1) The factory produces only raw table sugar (hereby referred to as raw sugar)
(2) Factory that produce only ethanol
(3) Integrated ones that produce both raw sugar and ethanol.
The use of both molasses and sugarcane juice to produce ethanol is only economically feasible in factories belonging to the third category. Figure A-11 below shows diagram of an integrated sugar and ethanol factory. Appendix B 286
Factor y Gate Raw Sugar Final raw production sugar x 1 t Sugar cane Fermentable sugar is harvested and sent extracted from cane Molases to the gate of Sugar crushing mill (1-x) Note: Alcohol 95% Alcohol X is fraction of cane juice sent fermentation Dehydration plant : to sugar manufacturing 99.7%
Figure A-12 Diagram of mass balance integrated sugar and ethanol factory
Source (Gopal & Kammen 2009)
Majority of the sugar factories in Brazil belong to the third category (BNDES 2008) with 83%. of them prefer to produce alcohol directly from cane juice rather than from molasses (Jungbluth et al. 2007). The current system of alcohol production in Indonesia however is majority from molasses (Gopal & Kammen 2009) meaning that the value of X as the fraction of cane juice sent to sugar manufacturing is equal to 1. Therefore, the main product of sugar mill in this case is sugar with molasses as by product.
However, the projection of the future of bioethanol in Indonesia will most likely to follow the structure of ethanol production in Brazil, by which ethanol will be produced from both molasses and sugar cane juice depending on the ratio between the price of sugar and the price of molasses. Should the price ratio of the sugar to molasses price drops below a given breakeven value (which lies between 2 and 2.5), it is not attractive from either lifecycle GHG standpoint or commercial aspect to produce ethanol from molasses. It is therefore as a comparison, a future projection of Indonesian bioethanol; an alternative route of its production would likely to follow an 83% from cane juice and 17% from cane molasses.
Typically, all sugarcane factories meet their process energy demand by combusting bagasse, a fibre by-product of sugarcane crushing, to power a steam turbine. For every ton of sugar cane, the process produces:
122.3 kg of pure white sugar (100% dry matter);
9.0 kg of hydrated ethanol (95% wt., dry basis); Appendix B 287
30.3 kWh of electricity (net production);
19.1 kg of excess bagasse (78.7% dry matter, 21.2% water);
93.8 kg of vinasse (15% dry matter, 85% water).
The vinasse, which is wastewater from the washing and other processes and the still age from the distillation unit, is assumed to be returned to the field as fertilizer although some small independent distillery still using open pond to treat it. The vinasse contains organic matter, phosphorus, nitrogen, and potassium (Borrero, Pereira & Miranda 2003) while its COD content is estimated around 120,000 ppm (Kurniawan & Santoso 2008).
The practice of returning vinasse for fertilizer to the field has avoided potential CH4 emission. Such a practice offers a more cost-effective treatment that anaerobic digestion as sugar mill with ethanol fermentation plant has sufficient energy supply from bagasse and the new plant that is being constructed in the East Java province is projected to sell its excess electricity to the PLN grid. The LCI data for this stage was primarily taken from ecoinvent database provided in Simapro (Jungbluth et al. 2007), in which the practice of sugar mill process in Brazil was adopted. Indonesian data were also incorporated in this LCI.
Step 4: Anhydrous bioethanol plant
For fuel ethanol anhydrous ethanol (99.7 % m/m) is needed. As it is not possible to remove remaining water from rectified spirit by straight distillation due to formation of azeotrope mixture, therefore, a special process for removal of water is required for the production of absolute alcohol. Various dehydration processes are available which include exploring cyclohexane for an azeotrope distillation, ethylene glycol for extractive distillation as well as physical absorption using zeolite (typical molecular sieve) and membrane filtering. As fuel grade ethanol is an infant industry and currently only one commercial plant owned by PT. Molindo Raya and research plant by BPPT Indonesia exists in Indonesia from the type of molecular sieve , therefore in this LCI study, the molecular sieve technology for dehydrating 95% alcohol feed is assumed.
The short description of such a process as is started when the super-heated 95% alcohol spirit from stripping column is passed through Molecular Sieve units for dehydration. The molecular sieve material adsorbs the water in the incoming vapour stream until the sieve itself is saturated and anhydrous ethanol vapour comes out from the unit. The hot anhydrous ethanol vapour is then condensed and cooled down in the product Appendix B 288
Cooler to ambient temperature. As the molecular sieve bed units regenerate regularly, it requires at least two beds of molecular sieve, which operate sequentially and are cycled so that one is under regeneration while the other is under operation adsorbing water from the vapour stream. The regeneration is accomplished by applying vacuum to the bed undergoing regeneration. The adsorbed material from the molecular sieves desorbs and evaporates into the ethanol vapour stream. Further detail of the molecular sieve operation on alcohol dehydration should be referred to the Alpha Laval India that supplied both ethanol dehydration projects in Indonesia
Because these processes are assumed not to be separated from the ethanol plant no stillage production is considered. In addition, the energy used in this plant is assumed primarily supplied by steam and electricity generated from bagasse boiler and thus minimal fossil fuel is required in this process. This assumption is intended for forward trajectory of alcohol industry architecture in Indonesia in which they are going to be integrated. Although in reality, smaller distillery in Indonesia uses kerosene, biomass and coal to supply their energy to produce alcohol at technical grade (70%).
Table A-6 Properties of bioethanol and typical petrol
Properties Units Typical Indonesian Fuel grade bioethanol2 Unleaded Petrol1 Density at 15oC kg/m3 715-780 794 - 796 Octane Number RON 88 N/A Oxidation Stability minute 360 N/A Lead g/l 0.013 N/A Copper strip corrosion merit class 1 N/A Vapour Pressure kPa 62 N/A Oxygen content % m/m 2.7 N/A Ethanol Content %-v , min max 10% 99,5 (before denature added) 94 (after+Denature added) Methanol Content %-v , max None 0.5 Water content(Moisture) %-v , max N/A 0.7 Denaturee content %-v N/A 2-5 mg/l 4-10
Acidity as acetic acid mg/L N/A 30 Appendix B 289
Chloride ion ( cl-) mg/L N/A 20 Copper content (cu ) mg/kg N/A 0,1 Sulfur content ( s) mg/L, max 500 50 Gum mg/100 ml , 5 5 max Apearance clear Clear, bright natural no sedimentation partickel Note: (1) Director General Oil and Gas - MEMR Indonesia (2006a), No 3674 K/24/DJM/2006 (2) Director General New Energy and Renewable Energy - MEMR Indonesia (2013a), No722 K/10/DJE/2013
As bioethanol will be distributed to the customer from retail petrol station, therefore the LCI in this study will accommodate such a practice. The data set for that purpose adopted the Ecoinvent database using Swiss data adjusted to the Indonesian context in terms of distance and the type of electricity mix.
Step 4. Application of bioethanol at 1 GJ energy
The final step of fuel grade bioethanol would ultimately end in the combustion step. The emission at this step is taken from its application on the small vehicle with functional unit of 1 GJ energy used. The emission due to combustion is based on its use in the light vehicle of 15% volume of alcohol mixture with unleaded petrol. As vehicle experiment of on pure fuel grade ethanol is rare, therefore, the emission is estimated using linear regression from the results of 15% alcohol blend with petrol. The emission however does not produce heavy metals, which are commonly found from the vehicle emission using fossil fuel. The data set for bioethanol application were also taken from ecoinvent database, in particular referring to the chapter 20 of the report by Jungbluth et al. (2007).
Annex B3.2 Option of the raw material of bioethanol
For commercial reason however, alcohol production in Indonesia is currently from molasses, a by-product of sugar (Gopal & Kammen 2009) despite being expected from dedicated biofuel plantation. Therefore, the following table shows the share of potential bioethanol from molasses and from dedicated sugar cane bioethanol plantation. Appendix B 290
Table A-7 The share of potential bioethanol from molasses and from dedicated sugar cane bioethanol plantation
Bioethanol required 9.6 GL ethanol from molasses 1.2664 mt 0.3068866 ethanol from sugar cane 6.1832 mt 0.20254353 Current sugar cane plantation 457000 ha
yield production 68.7 ethanol from molasses 0.3593 GL Percentage of ethanol from molasses 3.7429 %
Yield of Hydrated alcohol per ton of sugar cane 91.2 Gopal, 20 Yield of Hydrated alcohol per ton of sugar cane 84.1
The case for Indonesia may be slightly different as the size of sugar cane production is not as much as the one in Brazil. Assuming all molasses from the current 457 thousand hectares of sugar cane plantation in Indonesia (Pusdatin Kementan 2013) is used for bioethanol production and with average yield of 68.7 tons cane per hectare (Jungbluth et al. 2007), that would equal to about 0.36 GL bioethanol production. This molasses-based bioethanol would only contribute to about 3.7% of the total bioethanol required for meeting the target in 2025, while the rest would be sourced from new sugar cane plantation dedicated for bioethanol production. To provide a comparison, the GHG emission during the life cycle of bioethanol in this chapter will accommodate the one solely from sugar cane juice, molasses and a combined cane juice (96.3%) and cane molasses (3.7%) as the raw material.
As the production of bioethanol from molasses is the type of multiple output process, therefore a market value of a co product allocation is required to provide fair assessment for molasses. A higher value of ethanol in the market would make molasses to be no longer a waste product as it is regarded a valuable product for the fuel purposes. Using the values of typical sugar and molasses conversion factors per ton of sugar cane obtained from Gopal and Kammen (2009) and projected price of sugar and ethanol derived from Baffes and Ćosić (2013), the market allocation factors for bioethanol from molasses could be calculated as input in the SimaPro model. Appendix B 291
1E3 MJ Operation based on energy used , ethanol 100%, 15.3 kg CO2 eq
37.1 kg Ethanol, 99.7% in H2O, from cane juice of biofuel 15.3 kg CO2 eq
37.1 kg Ethanol, 95% in H2O, from sugar cane, at 15.3 kg CO2 eq
516 kg 1.32 kg 5.13 tkm Sugarcane, at Lime, hydrated, Transport, lorry farm/ID U packed, at >16t, fleet plant/CH U average/RER U 12.3 kg CO2 eq 1 kg CO2 eq 0.68 kg CO2 eq
0.206 kg 2.67 tkm 10.5 tkm 1.32 kg 539 m Urea, as N, at Transport, tractor Transport, lorry Lime, hydrated, Operation, lorry regional and trailer/CH U 3.5-16t, fleet loose, at plant/CH >16t, fleet storehouse/RER U average/RER U U average/RER U 0.682 kg CO2 eq 0.823 kg CO2 eq 2.7 kg CO2 eq 0.995 kg CO2 eq 0.552 kg CO2 eq
5.98 MJ 5.84 MJ 0.423 kg 4.62E3 m 1.07 kg Heat, natural gas, Electricity, medium Ammonia, steam Operation, lorry Quicklime, in at industrial voltage, reforming, liquid, 3.5-16t, fleet pieces, loose, at furnace production UCTE, at plant/RER U average/RER U plant/CH U 0.428 kg CO2 eq 0.856 kg CO2 eq 0.808 kg CO2 eq 2.15 kg CO2 eq 1.05 kg CO2 eq
8.99 MJ 6.66 MJ Natural gas, Electricity, high burned in voltage, industrial furnace production UCTE, 0.612 kg CO2 eq 0.954 kg CO2 eq
7.38 MJ Electricity, production mix UCTE/UCTE U 1.04 kg CO2 eq
Figure A-13 Life cycle tree of bioethanol from sugar cane juice only with a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq Appendix B 292
1E3 MJ Operation based on energy used , ethanol 100%, 25.7 kg CO2 eq
37.1 kg Ethanol, 99.7% in H2O, from molasses, PTP XI 25.7 kg CO2 eq
37.1 kg 6.74 tkm Ethanol, 99.7% in Transport, lorry H2O, from 20-28t, fleet molasses, at average/CH U 24 kg CO2 eq 1.29 kg CO2 eq
37.1 kg 1.16E3 m Ethanol, 95% in Operation, lorry H2O, from 20-28t, fleet molasses, at PTPN average/CH U 24 kg CO2 eq 1.08 kg CO2 eq
0.42 kg 0.569 kg 678 kg 25.5 tkm Ammonium Diammonium Sugarcane, at Transport, lorry sulphate, as N, at phosphate, as N, farm/ID U 3.5-16t, fleet regional at regional average/RER U 1.13 kg CO2 eq 1.59 kg CO2 eq 16.2 kg CO2 eq 6.55 kg CO2 eq
15.7 MJ 1.16 kg 3.51 tkm 1.12E4 m Heat, natural gas, Ammonia, steam Transport, tractor Operation, lorry at industrial reforming, liquid, and trailer/CH U 3.5-16t, fleet furnace at plant/RER U average/RER U 1.12 kg CO2 eq 2.22 kg CO2 eq 1.08 kg CO2 eq 5.22 kg CO2 eq
20.8 MJ 12.1 MJ 1.77 kg Natural gas, Electricity, medium Diesel, burned in voltage, low-sulphur, at industrial furnace production UCTE, regional 1.41 kg CO2 eq 1.78 kg CO2 eq 1.07 kg CO2 eq
14.1 MJ Electricity, high voltage, production UCTE, 2.02 kg CO2 eq
15.7 MJ Electricity, production mix UCTE/UCTE U 2.21 kg CO2 eq
Figure A-14 Life cycle tree of bioethanol from molasses at a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq Appendix B 293
1E3 MJ Operation based on energy used , ethanol 100%, fleet 16.8 kg CO2 eq
34.7 kg Ethanol, 99.7% in H2O, from biomass, production ID, at 16.8 kg CO2 eq
34.7 kg 6 tkm Ethanol, 99.7% in Transport, lorry H2O, from biomass, 20-28t, fleet at distillation/ID U average/CH U 15.2 kg CO2 eq 1.15 kg CO2 eq
1.29 kg 33.5 kg 1.03E3 m 1.91E-6 p Ethanol, 95% in Ethanol, 95% in Operation, lorry Lorry 28t/RER/I U H2O, from H2O, from sugar 20-28t, fleet sugarcane cane, at average/CH U 0.635 kg CO2 eq 14.5 kg CO2 eq 0.959 kg CO2 eq 0.0521 kg CO2 eq
514 kg 1.19 kg 4.84 tkm 9.44 MJ Sugarcane, at Lime, hydrated, Transport, lorry Natural gas, burned farm/ID U packed, at plant/CH >16t, fleet in industrial furnace U average/RER U >100kW/RER U 12.3 kg CO2 eq 0.904 kg CO2 eq 0.642 kg CO2 eq 0.642 kg CO2 eq
0.205 kg 2.66 tkm 10.8 tkm 1.19 kg Urea, as N, at Transport, tractor Transport, lorry Lime, hydrated, regional and trailer/CH U 3.5-16t, fleet loose, at plant/CH U storehouse/RER U average/RER U 0.679 kg CO2 eq 0.819 kg CO2 eq 2.78 kg CO2 eq 0.898 kg CO2 eq
6.49 MJ 0.442 kg 4.76E3 m 0.979 kg Electricity, medium Ammonia, steam Operation, lorry Quicklime, in voltage, production reforming, liquid, at 3.5-16t, fleet pieces, loose, at UCTE, at grid/UCTE plant/RER U average/RER U plant/CH U 0.952 kg CO2 eq 0.845 kg CO2 eq 2.21 kg CO2 eq 0.956 kg CO2 eq
7.86 MJ 0.978 kg Electricity, high Diesel, low-sulphur, voltage, production at regional UCTE, at grid/UCTE storage/CH U 1.13 kg CO2 eq 0.592 kg CO2 eq
8.7 MJ Electricity, production mix UCTE/UCTE U 1.23 kg CO2 eq
Figure A-15 Life cycle tree of bioethanol from combination of sugar cane juice and molasses at a functional unit 1GJ of useful energy with GHG impact in kg CO2-eq Appendix B 294
Annex B3.3 Life Cycle description of Unleaded Petrol
Petrol is a transparent, petroleum-derived liquid that is used primarily as a fuel in 'internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Similar to the automotive diesel oil, the refinery activity is carried out in Indonesia while the crude oil is imported from Middle East countries despite the fact that Indonesia also produces crude oil and formerly a member of OPEC organization. The final step of petrol life cycle would ultimately end in the combustion step. The fuel economy of the diesel fuel is based on the combustion of 1 GJ. The emission due to combustion is based on its use in the light vehicle. Appendix B 295
1E3 MJ Operation based on energy used, petrol, fleet average/ID U 91.5 kg CO2 eq
23.7 kg Petrol, unleaded, at regional storagen and service station 14.9 kg CO2 eq
23.7 kg Petrol, unleaded, at refinery/ID U
14.3 kg CO2 eq
22.3 kg 5.3 MJ 93.2 MJ 32 MJ Crude oil, production Electricity, medium Refinery gas, Heavy fuel oil, RME, at long voltage, at grid/ID U burned in burned in refinery distance furnace/MJ/RER U furnace/MJ/RER U 3.57 kg CO2 eq 1.22 kg CO2 eq 5.94 kg CO2 eq 2.72 kg CO2 eq
23.4 kg 215 tkm 5.36 MJ 1.86 kg Crude oil, at Transport, Electricity, high Refinery gas, at production transoceanic voltage, at grid/ID U refinery/RER U onshore/RME U tanker/OCE U 2.72 kg CO2 eq 1.2 kg CO2 eq 1.22 kg CO2 eq 1.02 kg CO2 eq
9.65 MJ 13.6 MJ 215 tkm 5.74 MJ 5.51 MJ Diesel, burned in Natural gas, sweet, Operation, Electricity, Electricity, medium diesel-electric burned in production transoceanic production mix voltage, production generating set/GLO flare/MJ/GLO U tanker/OCE U ID/ID U UCTE, at grid/UCTE 0.833 kg CO2 eq 0.927 kg CO2 eq 0.985 kg CO2 eq 1.22 kg CO2 eq 0.808 kg CO2 eq
5.9 MJ Electricity, high voltage, production UCTE, at grid/UCTE 0.845 kg CO2 eq
5.98 MJ Electricity, production mix UCTE/UCTE U 0.845 kg CO2 eq
Figure A-16 Life cycle tree of petrol at a functional unit 1 GJ of useful energy with GHG impact in kg CO2-eq Appendix B 296
Reference
Baffes, J & Ćosić, D 2013, Commodity markets outlook October 2013, The World Bank. Bazooyar, Bahamin & Shariati, Ahmad & Hashemabadi, Hassan. (2015). Economy of a utility boiler power plant fueled with vegetable oil, biodiesel, petrodiesel and their prevalent blends. Sustainable Production and Consumption. 3. 1-7. 10.1016/j.spc.2015.06.001. Borrero, M, Pereira, J & Miranda, E 2003, 'An environmental management method for sugar cane alcohol production in Brazil', Biomass and Bioenergy, vol. 25, no. 3, pp. 287-99. Director General New Energy and Renewable Energy - MEMR Indonesia 2013a, SK 722 K/10/DJE/2013 Standar dan Mutu (spesifikasi) Bahan bakar Nabati (Biofuel) Jenis Bioetanol yang dipasarkan dalam negeri, Jakarta. ---- 2013b, SK 903 K/10/DJE/2013 Standar dan Mutu (spesifikasi) Bahan bakar Nabati (Biofuel) Jenis MInyak Nabati Murni untuk bahan bakar motor diesel putaran sedang, Jakarta,
Kurniawan, Y & Santoso, H 2008, 'Isolation of Molds for Reducing the Color of Vinase', IPTEK, The Journal for Technology and Science, vol. 19, no. 1. Leong, WL 1992, The Refining and Fractionation of Palm Oil, PORIM, Bang. Ma, F & Hanna, MA 1999, 'Biodiesel production: a review', Bioresource Technology, vol. 70, no. 1, pp. 1-15. Mahlia, TMI, Abdulmuin, MZ, Alamsyah, TMI & Mukhlishien, D 2001, 'An alternative energy source from palm wastes industry for Malaysia and Indonesia', Energy Conversion and Management, vol. 42, no. 18, pp. 2109-18. Manurung, EGT 2001, Analisis Valuasi Ekonomi Investasi Perkebunan Kelapa Sawit di Indonesia. Pertamina 2018, Pertamina Fuel Product,
Appendix C Material BCA Data
Annex C1 Liquid Fossil Fuel Annex C.1.1 Historical and projection price of Liquid Fossil Fuel in US$/kL
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Automotive 121 205 172 173 203 287 405 483 534 756 435 Diesel Oil Petrol 133 205 173 176 218 297 392 460 521 649 443 Industrial Diesel 98 152 128 144 165 175 254 306 365 498 367 Oil Fuel Oil - - - - - 207 234 396 541 651 351 Kerosene 136 216 178 177 207 299 427 507 546 768 441 Crude Oil (bbl) 18 28 24 24 25 29 53 64 71 97 62
Year 2010 2011 2012 2013 Automotive 563 802 755 724 Diesel Oil Petrol 556 755 736 715 Industrial Diesel 461 768 768 592 Oil Fuel Oil 525 681 653 674 Kerosene 567 567 796 729 Crude Oil (bbl) 79 104 105 105
Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Automotive 729 710 703 701 700 698 697 697 696 696 696 697 Diesel Oil Petrol 720 701 694 692 691 689 688 688 687 687 687 688 Industrial Diesel 596 580 575 573 572 571 570 570 569 569 569 570 Oil Fuel Oil 680 661 655 653 652 650 650 649 649 649 649 649 Kerosene 734 715 708 706 704 703 702 702 701 701 701 702 Crude Oil (bbl) 106 102 101 100 100 99 99 98 98 98 97 97 Appendix C 299
Annex C2 Biofuel Annex C.2.1 Historical and projection price of Biofuel in US$/kL
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Biodiesel 394 273 249 372 428 454 384 435 751 901 672 Bioethanol 358 608 687 668 644 475 569 882 672 684 924 Pure Pant Oil 364 252 230 345 396 420 355 403 695 834 622
Year 2010 2011 2012 2013 Biodiesel 898 1,124 981 1,154 Bioethanol 971 886 906 937 Pure Pant 831 1,040 942 1,067 Oil
Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Biodiesel 1,163 1,131 1,120 1,117 1,115 1,112 1,111 1,110 1,110 1,110 1,110 1,110 Bioethanol 891 980 977 974 972 969 967 964 962 960 956 954 Pure Pant 1,076 1,047 1,037 1,033 1,032 1,029 1,028 1,028 1,027 1,027 1,027 1,028 Oil Appendix C 300
Annex C2.2 The price of CPO and Molasses for the past 10 years
Year CPO price Molasses (US$/Tonnes)1 price(US$/Tonnes)2 1999 377.28 0.32 2000 261.14 52.93 2001 238.40 69.66 2002 356.75 65.67 2003 410.37 60.53 2004 434.72 24.86 2005 367.69 44.75 2006 416.81 110.80 2007 719.12 66.48 2008 862.92 69.05 2009 644.07 119.57 2010 859.94 129.38 2011 1076.50 111.51 2012 939.83 115.83 2013 764.20 122.27 2014 860.00 112.61 2015 880.00 131.32 2016 871.70 130.67 2017 863.40 130.15 2018 855.20 129.64 2019 847.10 129.12 2020 839.00 128.60 2021 831.10 128.08 2022 823.20 127.57 2023 815.40 127.05 2024 807.70 126.40 2025 800.00 125.89
References 1. MPOB - Malaysian Palm Oil Board 2003, Malaysian Palm Oil information [Online] Available from: http://porim.gov.my/, (Accessed 22 August 2003) 2. Table 42a--U.S. blackstrap molasses prices Appendix C 301
Annex C2.3 Calculation of typical production of palm oil
Value Unit a. Average typical unproductive life of palm oil tree1 3 year b. Average typical productive life of palm oil tree1 22 year Average Value Accuracy Unit c. Output of FFB Per Ha1. 25.0 t/ha/year d. CPO extraction rate1 23 1 % e. Total tree per Ha 143 Von Uexkull 1991 f. CPO produced per year/ha = c*d 5.8 0.3 t/ha/year g. Solid waste per year due to replanting2 2.86 t/ha/year h. Solid waste produced per ton of FFB =h/c 0.11 t/t of FFB
Note:
1. Manurung, 2001 2. Assume that old tree weighs 0.5 t per tree
References:
Manurung, E.T.G. 2001, ‘Analisis valuasi ekonomi investasi perkebunan kelapa sawit di Indonesia’ NRMP ( Natural Resource Management Program) Available from: http://202.58.67.35/DownLoad/Publications/ Report_NRM2/60_Palm_Oil_Study.pdf (Accessed 29 April 2004) Von Uexkull, H.R. 1991, World Fertilizer Use Manual Oil Palm, [Online] Available from: http://www.fertilizer.org/ifa/publicat/html/pubman/oilpalm.htm (Accessed date: 6 March 2004) Appendix C 302
Annex C3 Economic Data Annex C3.1 Indonesia’s inflation rate
Year Inflation Rate Year Inflation Rate Year Inflation Rate (%) (%) (%) 1970 12.3 1986 5.9 2002 11.8 1971 4.4 1987 9.3 2003 6.8 1972 6.4 1988 8.2 2004 6.1 1973 31.0 1989 6.4 2005 10.5 1974 40.6 1990 7.9 2006 13.1 1975 19.1 1991 9.4 2007 6.7 1976 19.8 1992 7.5 2008 9.8 1977 11.1 1993 9.7 2009 4.8 1978 8.1 1994 8.5 2010 5.1 1979 22.0 1995 9.4 2011 5.4 1980 18.5 1996 7.9 2012 4.3 1981 12.2 1997 6.2 2013 7.3 1982 9.5 1998 58.0 2014 7.5 1983 11.8 1999 20.7 Average for the 5.3 past 10 years 1984 10.4 2000 3.8 1985 4.7 2001 11.5
References: IMF -see International Monetary Fund, World Economic Outlook Database, October 2013,
Annex C3.2 Economic cost of emission of pollutant (US$/Tonne)
Cost of pollutant in particular year Cost pollutant adjusted to the year 2003 CPI conversion Min Max Year of Data Factor to 2003 Min Max Average Pollutant (A) (B) (CPI) (Sahr 2004) (A/CPI) (B/CPI) Value Accuracy a THC 100 8000 19941 0.8050 124 9 938 5 031 4 907 b CO 1000 1069 19942 0.8050 1 242 1 328 1 285 43 c NOx 2700 2700 19903 0.4480 6 027 6 027 6 027 0 d PM10 372 4856 19944 0.8050 462 6 032 3 247 2 785
5 e CO2 17 22 2003 1 17 22 20 3
6 f SO2 128 272 2003 1 128 272 200 72 Note: 1. Chang 1992, 2. Public Utilities report (MA, NV) quoted in Chang 1994 3. The Energyguy 1990 4. Fraas 1990 5. Cleaner Greener 2004 6. USEPA 2003 Appendix C 303
References:
Chang, T. Y. 1992, ‘Urban and Regional Ozone Air Quality: Issues Relevant to the Automobile Industry’, Critical Reviews in Environmental Control 22 (l/2): 22-66. Chang, R.K. 1994, An Analysis of Economic and Environmental Impacts of Using Biodiesel in the: Kansas City Metropolitan Area, PHD Thesis University of Missouri Columbia, USA. Cleaner and Greener 2004, Emission Trading: Examples of Transactions [Online] Available from: http://www.cleanerandgreener.org/environment/transactions.htm (Accessed date:12 April 2004). Fraas, A.1990, ‘Alternative fuels for pollution control: An empirical evaluation of benefits and costs", Contemporary Policy Issues, Vol. 8, pp 62-74. Public Utilities report (MA, NV) quoted in Chang, R.K., 1994 An Analysis of Economic and Environmental Impacts of Using Biodiesel in the: Kansas City Metropolitan Area, PHD Thesis University of Missouri Columbia, USA. Sahr, R. 2004, Inflation Conversion Factors for Dollars 1665 to Estimated 2014, Oregon State University [Online] Available from: http://oregonstate.edu/Dept/pol_sci/fac/sahr/cf16652014.pdf (Accessed date 20 May 2004) The Energyguy 2000, An introduction to externalities, The energy guy.com [Online] Available from http://www.theenergyguy.com/externalities.html (Accessed date 11 March 2004) US EPA, 2003, Acid Rain Allowance Auction Results Allowances Available for Auction [Online] Available from: http://www.epa.gov/airmarkets/auctions/2004/04summary.html (Accessed date: 10 April, 2004). Appendix C 304
Annex C3.3 CBA flow sheet
Figure A-17 Cash Flow Spread Sheet of Cost and Benefit Analysis of the Indonesian Biofuel Program Appendix D 305 Appendix D: Material for experts’ opinions
Cover Letter:
Dengan Hormat, Saya Arie Rahmadi, seorang mahasiwa pasca sarjana pada University of Melbourne dengan topik riset.... . Berkaitan dengan penelitian saya tersebut, saya bermaksud melakukan survey pendapat mengenai pengembangan bahan bakar nabati di Indonesia berkaitan dengan target pemerintah sebesar 5% terhadap bauran energi primer pada tahun 2025 sesuai dengan Perpres no, 5/2005. Untuk itu saya mohon kiranya bapak/ibu bersedia untuk menjadi responden survey yang saya lakukan ini sebagai bahan kelengkapan thesis saya. Dalam survey ini, terdapat dua dokumen. 1. Dokumen tentang kesimpulan sementara terhadap topik riset tersebut dengan melakukan analisa LCA, EIA dan BCA. Tujuan dokumen ini adalah untuk memberikan gambaran kepada bapak dan ibu atas kesimpulan sementara saya. 2. Doumen kedua adalah lembar survey. Mohon bapak ibu bersedia mengisinya dan mengembalikannya kepada kami dengan alamat kontak:
arie rahmadi Renewable Energy and Energy Efficiency Group, Department of Infrastructure Engineering, The University of Melbourne, Victoria, 3010, Australia Telp: 61-413218960 Email:: [email protected] atau [email protected]
Sebelumnya, Saya mengucapkan terimakasih atas kesediaan bapak dan ibu berpartisipasi dalam survey yang saya lakukan ini.
Hormat saya
Arie Rahmadi Appendix D 306
QUESTIONNAIRE FOR EXPERTS’ OPINION: ASSESSING INDONESIAN BIOFUEL PROGRAM
0. Introduction 0.1. Name: 0.2. Contact Details: 0.3. Position/area of focus: 0.4. Background:
Survey Questionaires General perception of the biofuel. a. What are the key benefits and risks associated with biofuel? b. How is the current state of biofuel program in Indonesia? Respond to the national biofuel target? a. Has the national biofuel policy been formulated correctly to reach the biofuel target of 5% energy mix in 2025 and considered all aspect of environment, social and economy? b. Which policy instruments do you think being the most important to reach the biofuel target of 2025. Biofuel appropriateness a. When we consider the aspect of environment, social and economy, which one do you think is the most important aspect? b. Indonesia has implemented Environmental Impact Assessment as part of the standard procedure of issuing project license. Environmental impact of biofuel project could be significant given the size of land required for this bio energy crop may reach 6 million ha. When it comes to biofuel related project, do you think EIA be used as the safe guard to such a project proposal? c. Life cycle analysis has shown that in general biofuel perform better in term of GHG in the final use but fail during the early chain production. Do you think it is crucial factor? d. Given the cost of biofuel is in general more expensive than its corresponding fossil fuel, is it reasonable economically to fulfil the biofuel target in 2025. Cooperation among stake holders (Government, Business and Academician) Appendix D 307
a. Are you aware of strategic planning from other biofuel stakeholders outside your institutions? b. Among the stake holders, which one do you think is the well prepared stake holder to execute its task? Outlook and moving forward a. How can identified challenges in biofuel development best be overcome using policy tools? b. What kind of technology that can overcome the biofuel risks? Appendix D 308
Table A-8 Response to Experts’ Survey
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward Academician It is working well, The policy was Minimising social impact Lack of coordination. Investing in advanced 1 particularly for poorly designed at such as local employment MEMR is the head of biofuel to overcome biodiesel. Lack of the beginning but it and migrant worker are this program environmental concern feedstock is the was understandable important to the success of of conventional biofuel. problem for as Indonesia had to biofuel. Therefore, Need to allocate bioethanol. Social response to the monitoring and good dedicated land for aspects related to rising crude oil. governance is the key to biofuel so that it would land acquisition; Social aspect is protect our environment. not compete with food. employments for viewed as the Lack of Indonesian Need to do more local are the main important aspects. capacity to realize the research issues. biofuel implementation measure does not justify discontinuing the Indonesian biofuel program. Do not forget that, we are net oil importer. To have biofuel is a good thing. Academician So far, only biodiesel It was fairly good Indonesia biofuel program We have good Farmers prefer biomass 2 is working. Other policy, but lack of is appropriate as coordination among sources with higher biofuel such as thorough scrutiny. environmental and social biofuel stakeholders. energy yields/hectare, ethanol has been Economic aspect aspect can be managed However, the president thus dedicated land for struggling due to should be relatively well. What we himself should be in biofuel is preferable. feedstock and prices. considered properly need is removing our charge of this policy. Appendix D 309
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward We need to support while environmental dependence on fossil fuel this program to and social aspect are and biofuel is the answer. diversify our energy fairly manageable. consumption. Academician Biofuel program It was a good policy It is appropriate as Have a good Improving the 3 created in previous considering the Indonesia requires coordination so far. agricultural sector by government might pressing issue of significant investment in MEMR should be the allocating dedicated land be in danger as the high-rise of oil price the rural areas and we are leading institution. for biofuel to solve the incoming at that time. agricultural country. supply. Second government Expecting thorough Employment opportunities generation biofuel could emphasize on the consideration in a cannot be necessarily come be the key and we need financial benefit and policy making is too to manufacturing as many to fund the research. neglecting other much for a country of Indonesian are not aspects such as such as Indonesia. equipped with suitable set environment and of skills necessary in that social. field. Environmental concern is fairly justified but not significant as people need stable jobs particularly in the agricultural sector where biofuel operation is mostly concentrated. Business 1 It is working well It is good policy and We view renewable energy I understand and aware Land allocation should and should be rightly so as we are is the future trend and large of other stakeholders’ be improved so that continued, as the net oil importers. oil companies such as BP activity. MEMR biofuel raw material fossil oil is getting Reasonable and Total are going into through Directorate supply could be secured. harder to find, economic that business. General for New, Appendix D 310
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward particularly in consideration Environmental and social Renewable Energy and Indonesian territory. should be the aspects do provide us a Conservation should be Relying on import is guiding principle. concern, but let us focus the leading sector. not sustainable from on the benefit that the energy security. biofuel could generate for the people. Moreover, we are now net oil importers. Energy security is important. Business 2 The program is in It is fairly good For us in the automotive The fact that biodiesel Second generation of danger of being policy and the sector, the emergence of implementation in biofuel is the preferable discontinued as government has biofuel is worldwide trend Indonesia is the largest option from the prices of biofuel in fairly did a good job and we have to embrace it. and successful automotive industry, but general is more to have the However, we should be implementation is an the first generation still expensive than the consensus among careful who owns the land indication that be around in the short fossil fuel and the automotive for the biofuel plantation. coordination and term. Therefore, suffered from industry in Is it local or foreign consensus did happen. rigorous quality technical as well as particular. companies? Of course ego-sectoral monitoring should be quality issues. Strong Moreover, we should rely driven by economic implemented. The recent government’s action on our own resources consideration do exist. biodiesel contamination is required during difficult times. To MEMR should be the should be avoided. It have biofuel would be leading sector in this undermined the good to our energy security case. consumer confidence. Business 3 It is working well It was a good policy, As a biofuel producer, we We are involved closely Quality assurance of especially biodiesel. but more need to be committed to having good with other institutions biofuel is necessary, but Government done in term of quality biofuel product per particularly MEMR. need to think of incentive is needed dedicated land Indonesian standard. allocation specially Implementing EIA is part Appendix D 311
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward intended for biofuel of our culture. More need additional burden cost to raw material to be done in monitoring the business. plantation. the operation in the upstream stage such as opening plantation, planting and operation. Government It does not work for Good policy but It was an appropriate BPPT is working Second generation of 1 ethanol, as the price should consider policy. Environmental closely with other since biofuel is the preferable of the feedstock is more on the concerns should be the beginning of this option to solve for the determining economic aspects. handled properly without biofuel program. technical and factor that causes Greater emphasize ignoring the economic MEMR should be the environmental reason. the final ethanol should be on the aspects. I suggest using leader in this regard. Since the first generation price is much more raw material supply, wide range raw material of biofuel is likely to be than petrol. particularly for instead of the conventional in the short term, we ethanol. palm oil for biodiesel and should invest more on cassava or molasses for the research that could ethanol. Sago starch from minimise such Sago palm could be deficiencies. alternative as it was growth, harvested in fairly sustainable way. Do not forget, energy security is important. Government The government is It was a good policy, It was well thought policy. We share our policies MEMR commits to 2 working hard to and this policy was Our concern is to reduce to other stakeholders implementing biofuel implement the the reason this our dependence in the and we work tirelessly target as planned. program. Financial bioenergy foreign oil import and with NGO to However, the progress could be slower due to Appendix D 312
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward aspect is the key directorate was improve our energy communicate our various reason but problem. created. security. mutual concern. mainly financial and economic problems related to tax, subsidy as well as technical issues related to biofuel quality. Government This is important It was a good policy, It is appropriate policy and At the beginning, we Advanced biofuel is the 3 program and we can but in danger of Indonesia has actively did have good key for the success of afford to have it fail. being discontinued involved in Roundtable coordination, but lately biofuel in the future. Government should due to lack of Sustainable Palm Oil. it is beginning to However, uncertainty step in to fix the government resolve. However, such a weakness dwindle. The president surrounding the issues of economic in the EIA and LCA of should be in charge performance and and social aspects. biofuel should be answered directly. viability of advanced by conducting more biofuels are lingering: Is research using our own the waste available to data. Reducing GHG make significant emission is important but contribution. What providing jobs is more about uncertainty in the important. Biofuel is the environmental impact, answer to improving our fuel-engine energy security. compatibility? The first- generation biofuels are still needed and it requires alternative raw materials. NGO 1 This is a good policy Good policy but Given the current Cooperation and A moratorium on oil to reduce our should consider environmental degradation coordination among palm plantation dependence on more on the and on going social conflict Government stake expansion should be Appendix D 313
Name General Biofuel National Biofuel Biofuel appropriateness Cooperation among Biofuel outlook and Perception Response stake holders moving forward fossil fuel and our Environmental and in the oil palm plantation, holders and line implemented. Improving nation energy social aspect. the biofuel appropriateness ministries is weak. the current palm oil yield security. However, is highly questioned. Morover, lack of through introduction of evironemental and monitoring of various technology is more social impact practices in the field desirable to meet the particularly during has exacerbated the biofuel feedstock the operation of oil situation. palm plantation should also be addressed NGO 2 It is relatively fair It was a good policy, It is not appropriate as There is problem of Stop expansion of oil policy. The but in danger of there is an impression that coordination among palm plantation. It government should being embargoed by this biofuel emphasizes stakeholders, in should utilise biomass as not emphasise more the European more on the downstream particular related to oil byproduct of the current on biofuel governments application and less on palm plantation. oil palm plantation. production, but upstream raw material address the production environmental impact in the biofuel plantation instead. NGO 3 Though it is a good Good policy but The policy is not Coordination is weak, Government monitoring policy, it has should consider sustainable as it has particularly during the post EIS need to be problems in the raw more on the people problems during the project initiation and implemented. Auditing material production and environment production of raw the making of EIS. This the land allocation and of biofuel. that suffer from oil materials. is partly due to permit against the palm expansion. progress in the field. Appendix D 314
Minerva Access is the Institutional Repository of The University of Melbourne
Author/s: Rahmadi, Arie
Title: Effectiveness of biofuel development for Indonesia
Date: 2018
Persistent Link: http://hdl.handle.net/11343/219390
File Description: Effectiveness of biofuel development for Indonesia
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