Why US Bioethanol Imports Risk Adding Subsidy Burdens
A commitment to import bioethanol from the United States has emerged in the official trade agreement document—the Agreement on Reciprocal Trade (ART)—between Indonesia and the US. Trend Asia assesses that this obligation risks creating a double subsidy burden before the ethanol is converted into biofuel or other products.
Zakki Amali, Research and Investigation Manager at Trend Asia, stated that ethanol imported from the US is typically corn- or flour-based. “When imported, it requires subsidy, and subsidy for how this biofuel becomes a blend,” he said during a hybrid media briefing on Tuesday, 10 March 2026.
According to Zakki, blending requires substantial costs and thus necessitates subsidies. The expenses incurred extend beyond the blending process alone but continue when the product reaches the market. “Including when sold at retail through petrol stations, this also requires subsidy,” he said.
Trend Asia believes that the agreement for purchasing energy commodities from the US should not only consider domestic import requirements. It should also measure the emissions generated and calculate additional subsidy costs that emerge.
The bioethanol import commitment is set out in article 2.23 of the ART document. This clause prohibits Indonesia from adopting or maintaining any policy that would impede bioethanol imports from the United States.
A phased mandate for ethanol use is also included in this article. “Indonesia will implement its policy to provide transport fuel blended with up to five per cent bioethanol (E5) by 2028 and up to 10 per cent bioethanol (E10) by 2030,” states the second point of article 2.23.
Additionally, Indonesia will endeavour to implement its policy on the use of bioethanol blends in transport fuel up to 20 per cent bioethanol (E20), contingent upon fuel supply availability and the readiness of supporting infrastructure.
Previously, the Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, stated that the plan to import US bioethanol aims to fill the gap between domestic demand and domestic production.
“For this ethanol import, if there is a shortfall between our needs and our production. For instance, if our production is 10 and our needs are 20, we can import 10, including from America,” said Bahlil following a press conference on recent Middle Eastern developments and their implications for the ESDM sector, held at the Ministry of Energy and Mineral Resources office in Jakarta on Tuesday, 3 March 2026.