A green fuel boom is incinerating the rainforest - IOL

A firefighter from the Regional Disaster Management Agency douses a forest fire at Sungai Rambutan village in Ogan Ilir, South Sumatra last weekend. Toxic haze has shrouded parts of Indonesia and Malaysia for weeks as Jakarta struggles to contain fires that have scorched large tracts of Borneo and Sumatra.

Here’s a rare success story from Asia’s post-Hormuz energy crisis: Indonesia has managed to use biofuels to end its dependence on imported diesel. And here’s the dark side: The same policy may be exporting even more choking smoke to its neighbours.

The reason is palm oil. About a fifth of global production this year will be burned in an Indonesian engine. A government mandate requires a 50% biofuel blend in diesel, mainly used in trucks and small back-up generators.

That has helped one of the world’s biggest oil importers ride out the effects of the Iran war. In his initial response to the conflict, President Prabowo Subianto accelerated a shift from 40% to the current 50% level. That decision ended diesel imports and is saving the country $9.5 billion a year, he said last month.

The policy, however, is raising the value of a commodity intimately linked to the pall of haze currently descending across tens of millions of people in Singapore, Malaysia, the Philippines, and Indonesia itself. Electrifying the country’s truck fleet would provide the same energy security with far less cost to the environment and human health.

Burning forest lands to clear acreage for palm oil plantations is nothing new in Indonesia, and the resulting pollution has been a problem for decades. But with more than 200,000 hectares burned by August and the worst weeks still ahead, this wildfire season could be Indonesia’s most severe since 2015. 

That episode caused $16 billion of economic losses and more than 100,000 premature deaths, and prompted Jakarta to tighten up its approach to forest protection. In Europe, it bolstered an anti-palm oil campaign that eventually prompted the European Union to stop classifying palm biodiesel as renewable, cutting consumption. Indonesia stabilized the resulting glut by gradually raising its blending mandate to the current level.

You can paint this as either a positive or negative story, because palm has a Jekyll-and-Hyde quality. From an established plantation, lifecycle emissions can be roughly half those of diesel. But clear rainforest or drain peat to grow it and the picture grows darker: Emissions can be twice as high as from fossil fuels.

Whether Indonesia’s biofuel push helps or harms the climate, therefore, depends overwhelmingly on where the extra biofuel comes from. The government only sees the positive side of the story, arguing that all the growth in demand can be met by improving the productivity of long-established plantations and planting on degraded land.

The data suggests otherwise. Every bit of the country’s palm-oil production growth since 2015 has come from putting more land under cultivation. Palm oil acreage is up 65%, while yields have actually fallen 7%.

“Degraded land” is also a slippery term. A 2024 study found that more than half of Indonesia’s palm estate was in areas that had been old-growth forest in 1990. Most wasn’t converted immediately to palm. Today’s rainforest can become tomorrow’s fire-front, then degraded scrub and eventually a “sustainable” plantation. While international standards attempt to prevent that practice, Indonesia’s domestic rules are far looser. As a result, the passage of time can effectively launder deforestation. Nor is there much mystery about who starts the fires. Local officials say almost all are caused by humans, and 80% of burnt land ends up as plantations.

Conditions this year are particularly combustible. The hot, dry weather brought by the current super-El Niño means infernos will burn longer and further. Crude oil has hit $100 a barrel and US diesel is at record levels, so hectares capable of growing a substitute are more valuable than ever. With tinder-dry undergrowth everywhere, the only upfront investment needed is a match. 

Prabowo’s rhetoric, combining ongoing promises of protection with a vow to open up millions of hectares of woodlands for food and ethanol biofuel, also muddies the anti-deforestation message. His plan to increase the blending rate to 60% as soon as next year adds a further accelerant: It would require about 23 million metric tons of palm oil each year, an increase of a third relative to current levels.

There’s a better way to zero out diesel import dependence: Eliminate truck engines altogether. Look at the example of the world’s biggest fuel importer, China. It has already bought roughly a million electric trucks, equivalent to about one-sixth of Indonesia’s commercial vehicle fleet. The energy to power them comes overwhelmingly from domestic sources.

The islands of Java, Sumatra and Borneo are rich in generation opportunities, but they’re being squandered. Putting just 10% of the palm estate under solar panels would generate enough electricity to power all of Southeast Asia, plus Japan. Only about a quarter of the country’s hydroelectric potential is being exploited. Electric vehicles already comprise nearly a quarter of car sales, but trucks and two-wheelers, hampered by inconsistent or non-existent policy support, are badly lagging. 

Indonesia has found one way to escape reliance on imported diesel. China is demonstrating a better one, which can preserve both the balance of payments and the landscape. Electrification can even reduce the noxious pollution from burning land and exhaust fumes, a plague that’s reducing the health and life expectancy of millions across Southeast Asia. There’s a grand bargain out there, if only Prabowo could seize it.  |  Bloomberg