The effect of biodiesel utilization in transportation sector to pollutant emission and external cost: case study Jakarta

Abstract

Biodiesel development in Indonesia has been started since more than ten years ago but gained significant milestones in 2006 when the Indonesian government issued formally blending permit regulation of 10% biodiesel with mineral diesel fuel and PERTAMINA (Mineral oil State owned company) launched biodiesel blend B5 formally at public gasoline station with the trade name of BIOSOLAR. To continue reducing Indonesia’s dependency on fossil resources for its energy source and to improve the air quality level in its major cities, PERTAMINA has been expanding BIOSOLAR market at almost all fuel outlets in Java and will continuously open outlets in all parts of Indonesia. Moreover, the state owned company will increase the blending content at least up to B20 in 2025 as stated on President Decree No. 5/2006 regarding the National Energy Policy. Despite efforts by the government and Pertamina, broader commercialization of biodiesel in Indonesia could not achieve its target. The most significant hurdle found is its cost. In addition, the consumers mostly still consider the fuel price in selecting the fuel for their cars. Fluctuation of biodiesel price which is usually higher than that of mineral diesel and lack of subsidy given to biodiesel cause the price of biodiesel blend fuel is often higher than the standard mineral diesel fuel. On the other hand, the advantages of biodiesel such as a renewable energy, lower exhaust gas emission and effect to the longer engine life time is often ignored. Overcoming these drawbacks is by imposing the “polluter pay principle” which would internalize as many of the externalities. Having derived monetary values to reflect the external costs of differing technologies, the next step is to devise a mechanism for “internalizing” them into market pricBiodiesel development in Indonesia has been started since more than ten years ago but gained significant milestones in 2006 when the Indonesian government issued formally blending permit regulation of 10% biodiesel with mineral diesel fuel and PERTAMINA (Mineral oil State owned company) launched biodiesel blend B5 formally at public gasoline station with the trade name of BIOSOLAR. To continue reducing Indonesia’s dependency on fossil resources for its energy source and to improve the air quality level in its major cities, PERTAMINA has been expanding BIOSOLAR market at almost all fuel outlets in Java and will continuously open outlets in all parts of Indonesia. Moreover, the state owned company will increase the blending content at least up to B20 in 2025 as stated on President Decree No. 5/2006 regarding the National Energy Policy. Despite efforts by the government and Pertamina, broader commercialization of biodiesel in Indonesia could not achieve its target. The most significant hurdle found is its cost. In addition, the consumers mostly still consider the fuel price in selecting the fuel for their cars. Fluctuation of biodiesel price which is usually higher than that of mineral diesel and lack of subsidy given to biodiesel cause the price of biodiesel blend fuel is often higher than the standard mineral diesel fuel. On the other hand, the advantages of biodiesel such as a renewable energy, lower exhaust gas emission and effect to the longer engine life time is often ignored. Overcoming these drawbacks is by imposing the “polluter pay principle” which would internalize as many of the externalities. Having derived monetary values to reflect the external costs of differing technologies, the next step is to devise a mechanism for “internalizing” them into market prices.