Indonesia to switch 10 pct petroleum to biofuel

[ reuters ]

By Fitri Wulandari and Naveen Thukral

JAKARTA (Reuters) - Indonesia plans to substitute around 10 percent of its fossil fuel transport consumption with biofuel products by 2010, a senior government official said on Monday.

The resource-rich tropical nation has been pushing the use of biofuels made from various resources such as palm oil, sugar cane and cassava to cut the use of costly petroleum products.

The move aims at easing burden of hefty subsidy on petroleum products without raising the price of subsidized fuel sold on domestic market.

"We can't increase prices of subsidized fuel as it will hurt consumers. But we may be able to cut consumption and replace it with biofuel," Evita Legowo, secretary at the National Biofuel Development Team said at the Reuters Global Agriculture and Biofuel Summit.

By 2010, biofuel products are expected to account for 3.8 million kilolitres of total petroleum consumption for transportation at estimated 34.75 million kilolitres.

Indonesia is Asia Pacific's only OPEC member but it is one of the smallest producers in terms of production and relies on fuel imports as it has failed to tap new oilfields fast enough.

The country has to spend billions of dollars on oil subsidies and importing oil products.

For that, the government plans to increase bioethanol blend in gasoline to 5 percent by 2010 from 3 percent, using cassava and cane molasses--thick syrup produced from sugar cane during the sugar extraction process--as feedstock, she said.

Production capacity for bioethanol using both cassava and cane molasses is expected to reach 3.77 million kilolitres per year, from 135,000 kilolitres per year by the end of December 2007, data from the biofuel team showed.

As for biodiesel, Legowo said the government may keep the biodiesel blend in diesel oil at 2.5 percent due to soaring palm oil prices while trying to boost output of jatropha, a non-edible oil that grows in arid land and needs little care.

"Biodiesel blend will stay at 2.5 percent ... maybe less because we are still waiting for jatropha that we planted last year," Legowo said.

Indonesian state-owned oil firm Pertamina which retails biodiesel at home, has cut the biodiesel blend in diesel fuel to 2.5 percent as rising palm oil prices and lack of incentives cut margins.

Malaysian crude palm oil futures hit a record on Monday with the benchmark March contract KPOH8 ending at 3,414 ringgit a tonne after hitting 3,420 ringgit, surpassing a high of 3,280 ringgit reached on Friday.

Palm oil prices, up nearly 12 percent since the start of the year, were also supported by prospects of Malaysia introducing palm oil-blended diesel at home this year and Indonesia's plans to double biodiesel production.

There are also plans for 12 special biofuel zones by 2010 where investors could develop an integrated biofuel industry, if approved by the government, said Legowo.

Indonesia is developing other raw materials to ensure feedstock supplies for biodiesel and biofuel production. It plans to plant 5.25 million hectares of unused land with palm oil, jatropha, sugar cane and cassava by 2010.

By that time, biofuel products will account for 2 percent of the country's total energy mix of 5.29 million kilolitres.

(Editing by Peter Blackburn)

Greenpeace and Bali hotels work together in energy efficiency program

[ JakartaPost ]

BENOA, Bali (JP): Hotels in Bali, working together with environmental organization Greenpeace, launched Tuesday an energy efficiency program aimed at promoting responsible and climate friendly tourism on the resort island.

Greenpeace Southeast Asia Climate and Energy Campaigner, Shailendra Yashwant, said the program, called “Switch off, Unplug, Enjoy – Energy Efficient Bali”, set an ambitious target of lowering hotel electricity consumption by 40 percent within a year.

“We are very ambitious, but it is very possible to achieve,” Shailendra said.

The program was launched aboard the Greenpeace flagship Rainbow Warrior, currently docked in Benoa Harbor off Nusa Dua, where the United Nations conference on climate change is underway.

Environment Minister, Rachmat Witoelar, welcomed the initiative. “Undoubtedly, like any other sector, tourism potentially contributes to the problem of climate change. On the understanding that everyone must do their share to reduce our collective carbon footprints, the Indonesian government welcomes this Greenpeace initiative to kick-start a conscious effort to help offset some of the problems associated with inefficient energy use,” he said.

The United Nations World Tourism Organization (UNWTO) says international tourism contributes some 5 percent to global carbon emissions. Based on UNWTO tourism market forecast, if no mitigation measures are taken, the industry’s carbon emissions could grow by 150 percent in the next 30 years.

Greenpeace has surveyed 15 hotels in Nusa Dua, Bali, under the program, to see their existing energy and environmental conservation practices.

“There are a lot of things that can be improved, such us using renewable energy for power sources. Even though the sun shines all year round, hotels here do not use solar power water heaters,” Shailendra said.

Sulistyowati, deputy assistant to Environment Minister for the impacts of climate change affairs, says hotels in Indonesia, including in Bali, have not been energy efficient.

“The designs of the hotels should be made in a way that could save energy. The more windows, for instance, the less energy will be spent on lights and air conditioning,” she said.

She added that the latest study on hotels’ contribution to global warming showed that lighting accounted for 70 percent of their contribution, compared to water (12 percent), greenhouse gasses (30 percent) and waste (65 percent).

Data from the Bali office of state electricity company, PLN, reveals that hotels – especially in Badung regency and Denpasar city -- consume 70 percent of the total electricity supply, which reaches 439 megawatts during peak hours. Nusa Dua resort area, the venue of the UN climate conference, alone consumes over one third of the power allocated for the hotels.

Shailendra said the energy saving program will consist of training on energy conservation, water conservation and waste management for hotel staff. Greenpeace will also provide energy efficiency and energy conservation awareness for tourists and will persuade the Indonesian government to provide incentives and subsidies that allow hotels to invest in renewable energy.

Urs Klee of the Bali Hotels Association said that hotels welcomed the program, which could give a medium 300-room-hotel savings of up to US$30,000 per year by installing solar water heaters.

“Using renewable energy saves money. The (establishment) costs will be returned within two to three years,” he said. (Ary Hermawan and Prodita Sabarini)

President asks private sector to develop biofuel

[ Antara ]

Nusa Dua (ANTARA News) - President of Indonesia Susilo Bambang Yudhoyono Tuesday appealed to the private sector to increase its role in developing biofuel which is environment-friendly and more economical than fossil fuel.

The president made the appeal when visiting a Sugar Group Companies (SGC) pavilion in a Cool Energy Exhibition held on the occasion of the United Nations Framework Convention on Climate Change (UNFCCC) on Tuesday.

"I hope it will be developed further," he said.

Biofuel was far more economical than fossil fuel, SGC President Director Gunawan Yusuf said in reply to the head of state`s question.

"Without government subsidy premium-grade gasoline is currently priced at 72 dollar cents or around Rp6,600 per liter, while ethanol is only priced at Rp5,000 to Rp6,000 per liter," Gunawan said.

In the long run, another 2.5 million hectares of land would be needed to develop biofuel to replace fossil fuel.

The government would use idle land which currently covered an area of 7 million hectares to meet the need for land, he said.

Separately, on Tuesday, Chief of the National Biofuel Development Team Al Hilal Hamdi said the team intended to make use of another 5 to 6 million hectares of idle land to develop biofuel until 2012. The land is located outside Java.

"We must develop the mass production of biofuel. Therefore, the government has set itself the target of using another 6 million hectares of land until 2012," he said.(*)

More bad rap on Asian biofuels

[ Asia Times ]

by Marwaan Macan-Markar

BANGKOK - European Union (EU) demand for Asian-produced biofuels, particularly palm oil, is coming at a high social and environmental cost, a report released on Tuesday by the United Nations Development Program (UNDP) warns.

The UN agency in its annual "Human Development Report 2007/2008" cautioned countries in the region against following the lead taken by Indonesia and Malaysia, the main producers of palm oil as a biofuel.

"Expansion of cultivation of [oil palm] in East Asia has been associated with widespread deforestation and violation of human rights of indigenous people," said the report, entitled "Fighting climate change: Human solidarity in a divided world".

"Since 1999, EU demand for palm oil, primarily from Malaysia and Indonesia, has more than doubled to 4.5 million tons, or almost one-fifth of world imports," added the 384-page report. "Opportunities for supplying an expanding European Union market have been reflected in a surge of investment in palm oil production in East Asia."

UNDP climate change advisor Martin Krause said at the launch of the report in Bangkok: "There are a lot of safeguards that have to be built in if you want to make palm oil production environmentally sustainable. The debate on this has just begun."

The concerns echo a similar red flag raised last week by another report, "Up in Smoke: Asia and the Pacific", released by a coalition of British development and environmental groups. The rapid growth of palm oil plantations has resulted in massive deforestation in Indonesia, which has led to large amounts of carbon dioxide trapped in the forests being emitted into the atmosphere, stated that report.

"As a result of deforestation, some of which is for palm oil, Indonesia is the third-largest emitter of carbon dioxide, after the USA and China," it said. "Deforestation to make way for large-scale mono-cropping of energy crops obliterates the 'green credentials' of the biofuel."

These cautionary views about the downside of palm oil are expected to feed into discussions at an international climate change meeting to be held in early December in the Indonesian resort-island of Bali. The United Nations Climate Change Conference will be attended by representatives from more than 180 countries with a mission to craft a blueprint for global action to forestall the emerging environmental catastrophe caused by climate change.

The global cultivation of palm oil had reached 12 million hectares by 2005, according to the UNDP, which was almost double the plantation area in 1997. The agency notes that production is dominated by Indonesia and Malaysia, with the former registering the fastest rate of increase anywhere in terms of forests converted into palm oil.

According to the British report, the Southeast Asian archipelago has nearly 6 million hectares of land under palm oil cultivation and Jakarta has set its sights on further expansion. "In 2007, the Indonesian government signed 58 agreements worth US$12.4 billion in order to produce about 200,000 barrels of oil-equivalent biofuel per day by 2010."

Environmentalists view the forests of Indonesia and others in Asia, now under severe threat of being converted into palm oil plantations, as essential to absorb global carbon dioxide emissions. As important are peatlands, which are part of the region's natural forests and are likewise being destroyed at a rapid rate.

"Peatland forests are traditional carbon storehouses. Typically they store up to 30% carbon dioxide," said Shailendra Yashwant, climate and energy campaigner for global environmental lobby Greenpeace in Jakarta. "A 4-million hectare peatland forest in a province in northern Sumatra stores 14.6 gigatons of carbon dioxide."

Greenpeace studies reveal that nearly 28 million hectares of forests have been destroyed in places like Sumatra, Suleweisi and Kalimantan in Indonesia since 1990. Currently thousands of hectares of peatland are being cleared for palm oil plantations - all of which are owned by private companies.

The attraction to palm oil plantations, which preceded the emerging demand for biofuels from the EU, stems largely from the relative ease with which they can be grown and the economic returns they generate. Prices for palm oil have held up well over the years and its not a labor-intensive crop like many other tropical commodities.

As such, other Southeast Asian countries including Myanmar, Thailand, Cambodia, Vietnam and the Philippines are beginning to follow Indonesia's and Malaysia's slash-and-burn model of palm oil production. The Thai government has set its sights on having 1.6 million hectares under oil palm cultivation in the next two decades, a nearly five-fold increase from the current 320,000 hectares.

It's still unclear how much of that earmarked cultivation area will require clear-cutting. The UNDP pointed to some success stories, where environmentally friendly and socially responsible ways of cultivation have taken root in small-scale agro-forestry ventures. However to date, most of that green friendly production has taken place in West Africa, not Asia.

Bali's climate conference

[ inside indonesia ]

Rich countries should pay big bucks to reduce emissions in the developing world

Frank Jotzo

Source: http://siteresources.worldbank.org/INTINDONESIA/Resources/Environment/Climate Change_ExecSum_EN.pdf

Climate change has climbed up the agenda in the global public and policy discussion. Indonesia is no exception, as the country is vulnerable to future climate change impacts and is a major greenhouse gas emitter.

The spotlight is on Indonesia as the host of this year’s UN climate conference. Over 10,000 delegates, including ministers and heads of state, will descend on Bali in December. The talks are shaping up as the launching pad for negotiations for a new international agreement, after the first period of the Kyoto Protocol runs out in 2012.

Science shows more strongly than ever the risk of dangerous climate change. It is no longer just an environmental problem, but a challenge to development and economic prosperity. People in developing countries like Indonesia are most vulnerable. To limit the risk of dangerous climate change, the goal being discussed is a 50-80 per cent reduction in global greenhouse gas emissions by 2050 compared to levels in 2000. Global emissions rose by 70 per cent from 1970 to 2004. Continuing on this path would set the globe on a trajectory of rapid climate change.

To turn ever rising global emissions around is a daunting task, and all countries need to be involved if it is to happen. Rich countries are historically responsible for greenhouse gases already in the atmosphere and can more readily pay for action. But the bulk of the increase in greenhouse gas emissions each year comes from developing countries. The international discussion tends to focus on China and India as the global centres of growth, but Indonesia has huge emissions from deforestation, and emissions from energy use are growing swiftly as well.

Impacts and Indonesia’s vulnerability

Climate change is not just an issue of higher temperatures and sea-level rise, but of flow-on effects throughout the climate system, in particular changes in rainfall patterns. Indonesia can expect longer dry seasons and shorter but more intense wet seasons. That means greater risk of flooding and droughts. Agricultural growing patterns will change, and with that come risks to regional food security.

Sea-level rise can cause sea-water inundation, with damage to agricultural growing areas and urban infrastructure. Higher temperatures worsen the spread of water- and vector-borne diseases, and have direct health effects through increased heat stress. Impacts are expected to differ strongly between regions. In some ways climate change could be beneficial, but overwhelmingly the impacts disrupt established systems.

Jakarta flood 2007 - Taxi drowned Source: gajahmada - flikr / Wikimedia Commons

Climate change will affect the poor more than the rich, because they are often more vulnerable to disruptions to their physical environment. Flooding in Jakarta in 2006, for example, hit poor flood-prone areas whose residents could not readily pay for health care or reconstruction of their homes.

Adapting to climate change will be important for continued development and economic prosperity. Infrastructure will need upgrading, from transport networks to flood defences. Improvements will be needed in public health, emergency management, agricultural extension, urban planning and so forth.

But spending scarce public resources in preparation for long-term future risks is problematic. In Indonesia as elsewhere it is difficult to justify spending big money on structural improvements for climate change, when there are many more pressing concerns in areas like health and education.

Even further down the list are investments to reduce greenhouse gas emissions, whose benefits are dispersed over the whole globe and over future generations. This leads us to Indonesia’s greenhouse gas emissions.

Deforestation

Indonesia’s carbon emissions made headlines earlier in 2007 when a report entitled ‘Indonesia and climate change’ pointed out that Indonesia is the third largest greenhouse gas emitter, behind the United States and China, and ahead of Brazil, Russia and India. This is on account of land-use change, mainly deforestation. Clearing land releases carbon stored in trees and in biomass below ground into the atmosphere as carbon dioxide. This occurs either by fire or by later decomposition of wood and wood products. Peatland fires in Kalimantan and Sumatra are a major source of carbon dioxide emissions, and also a big factor in the ‘Asian haze’.

To substantially slow global deforestation will require tens of billions of dollars per year, not tens of millions

Deforestation is thought to account for almost 20 per cent of current total global greenhouse gas emissions, with Indonesia and Brazil the largest sources. Tropical forests are often converted for private economic gain that is small compared to the amount of carbon dioxide released, when emissions are valued at prices paid in emerging carbon markets in developed countries.

Plans for an international incentive scheme against deforestation are expected to figure prominently at the Bali meeting. Mechanisms need to be devised that have real prospects of reducing deforestation and that encourage financial flows from rich countries. Different models are in the debate, including a global fund to pay for avoided deforestation or, alternatively, creating tradable offsets for avoided deforestation. Each model has its own difficulties, from how to estimate the amounts of emission saved to how to allocate funding and check it is spent properly.

Indonesian provinces that have not yet begun to exploit their natural forest resources heavily may be interested in carbon payments as an alternative to large-scale land conversion. Large amounts of money will be needed, to essentially buy out competing economic interests. Incentives to retain forests need to outweigh the opportunity costs of foregoing other development options.

Australia recently pledged A$200 million over five years to support projects aimed at reducing net forest loss, principally in Indonesia. This sends a positive signal, but by itself it is the proverbial drop in the ocean. To substantially slow global deforestation will require tens of billions of dollars per year, not tens of millions. And at current rates of forest conversion, little time is left.

Fossil fuel emissions

The largest share of greenhouse gas emissions globally is carbon dioxide from burning coal, oil and gas. Indonesia’s fossil fuel emissions account only for a little under 1.5 per cent of the world total, about the same as Australia. But they are rapidly rising. They are now two and a half times larger than in 1990, and over that period have grown at a slightly faster rate than those of China. For the world as a whole, the rise since 1990 is about one third.

Remarkably, Indonesia’s emissions have risen faster than GDP growth, in contrast to most other countries. Over recent years, there has been a marked shift in Indonesia’s energy mix toward high-emissions sources. Most of the increased energy demand is met using coal, the most greenhouse gas intensive fuel, and oil products for transport. By contrast, use of gas (which has relatively low emissions) has stagnated since the financial crisis, and growth in renewable energies such as geothermal has been slow.

There are straightforward economic reasons for this. Indonesia has plentiful coal reserves that are easily accessible, and this is the cheapest fuel for electric power generation and some heavy industries. Gas is more profitable to export into booming markets in East Asia than to sell domestically. Investment in renewables suffers from high up-front expenditure and long payback periods, which is a particular problem when investors feel uncertain about future laws and regulations in Indonesia.

More coal expansion is planned. The government’s current answer to the looming electricity supply crisis is a ‘crash program’ for expansion of base-load capacity through coal-fired power plants. The plan is to install 10,000 MW of new coal-fired generating capacity by 2009/10 (existing on-grid capacity is around 23,000 MW), using low-grade coal. This will effectively lock in new high-carbon infrastructure for many decades.

Rich countries are historically responsible for gases already in the atmosphere and can pay for action. But the bulk of the yearly increase comes from developing countries

Yet there are large opportunities to follow a lower-carbon path. They include more efficient, energy-saving equipment; greater use of gas rather than oil or coal; expansion of renewable energy sources like geothermal and hydropower and, more controversially, large-scale biofuels production.,Even nuclear power remains in the discussion for Indonesia despite safety and security concerns. The common feature of most of these options however is that they are more expensive than the high-emissions alternatives.

The way forward

Curbing Indonesia’s emissions must be part of an effective future global response. Yet Indonesia, like other developing countries, has much more pressing and immediate concerns that need scarce public resources. Reducing greenhouse emissions is a global public good; its benefits are dispersed over everyone on the planet and future generations.

The logical conclusion is that rich countries need to pay for greenhouse gas reduction measures in developing countries like Indonesia on a big scale. This is far from easy to achieve. Issues of international equity and incentives to free-ride on other countries’ efforts remain tricky.

But political will to find a solution is growing. The Kyoto Protocol approach could be broadened using a portfolio of different commitment options, and made more flexible to accommodate individual countries’ preferences and circumstances. The Bali climate conference must mark an important step, and Indonesia as the host is in a good position to help the process along. ii

Frank Jotzo (frank.jotzo@anu.edu.au) is a research fellow at the Research School of Pacific and Asian Studies, Australian National University. He specialises in the economics of climate change and climate policy.