Indonesia prepares funding scheme for E10 bioethanol rollout

According to ESDM Minister Bahlil Lahadalia, the framework aims to protect domestic producers and farmers while addressing market price disparities when global crude oil prices fall below bioethanol production costs.

“We will develop a sound financing mechanism that benefits the industry, farmers, and the state,” Bahlil told reporters in Jakarta on Monday (August 3).

The proposed financing model may draw inspiration from the Palm Oil Plantation Fund Management Agency (BPDPKS), which administers subsidies for the biodiesel program.

Under the plan, the government will set reference prices for key bioethanol feedstocks—corn, cassava, and sugarcane—to help ensure stable returns for local farmers.

The initiative supports Indonesia’s roadmap to reduce its heavy reliance on imported gasoline.

Following extensive policy reviews, the government plans to mandate a 10 percent bioethanol blend (E10) starting in 2027, with a gradual increase to an E20 blend between 2028 and 2029.

However, industry experts note that cost competitiveness remains a major challenge.

Ali Ahmudi Achyak, an energy expert from the University of Indonesia, said that while alternative feedstocks such as sorghum do not compete directly with the food supply chain and are more cost-efficient than sugarcane or corn, bioethanol generally remains more expensive than conventional gasoline.

To overcome the cost barrier, Achyak urged the government to introduce targeted supply-side incentives, including subsidies for seeds and fertilizers, as well as dedicated research funding to improve feedstock productivity.

Related news: How sugarcane is powering Indonesia’s bioethanol ambition

Related news: Indonesia has 1 million tons of molasses for bioethanol: Economist

Related news: Prabowo reviews sugar-to-bioethanol project to boost energy security

Translator: Putu Indah Savitri, Yashinta Difa