August 15th, 2025
In August 2025, Indonesia confirmed that it will increase its biodiesel mandate from B40 to B50 in 2026. Officials have said the rollout is unlikely to begin in January, as it will require up to eight months of technical testing. Once implemented, the shift will raise palm-based biodiesel production from 15.6 million kiloliters to about 19 million kiloliters per year. That additional 3.4 million kiloliters will use around 3 million metric tons of crude palm oil that would otherwise be available for food markets.
Biodiesel blend levels are measured by the “B” number, which refers to the percentage of biodiesel in the total fuel mix. In Indonesia’s case, B40 means 40 percent biodiesel and 60 percent petroleum diesel, while B50 means 50 percent biodiesel and 50 percent petroleum diesel. Their biodiesel is made mainly from palm oil. In the Philippines, our current mandate is B3, meaning 3 percent coconut methyl ester from coconut oil blended into 97 percent petroleum diesel.
The Philippines imports more than 1 million metric tons of palm oil annually, mostly from Indonesia and Malaysia, at about USD 950 per ton. A 5 to 10 percent increase in global prices would mean an additional USD 50 to 100 per ton in import costs. For consumers, that could translate to ₱2 to ₱4 more per liter of household cooking oil if supply is not secured early.
When I was Chair of the House Committee on Ways and Means, I exposed that palm oil had been misdeclared as animal feed to avoid tariffs and value added tax. This practice has been happening for years, with an estimated value of ₱300 billion over the past six years. That is about ₱50 billion a year in misdeclared volume, costing the government roughly ₱7.5 billion annually in lost revenues. Higher prices will make this scheme even more profitable unless the loophole is closed.
Palm by-products make up 2 to 3 percent of feed rations for poultry and hogs. A 10 percent increase in palm fat prices can raise total feed costs by about 0.3 percent, adding pressure to meat and egg prices.
In fuel, our biodiesel program remains at B3. Coconut methyl ester, made from coconut oil, costs about ₱90 per liter compared to diesel at around ₱55 per liter as of July 2025. Because it is significantly more expensive than petroleum diesel, any increase in the blend ratio directly raises pump prices. Moving to B4 would add about ₱0.35 per liter, while B5 would add about ₱0.70 per liter at current feedstock costs. This is why the National Biofuels Board decided to defer the planned hikes to B4 in 2025 and B5 in 2026. With vegetable oil prices already high due to tight global supply, higher blends now would have added to transport costs and overall inflation.
For coconut farmers, tighter palm oil supply usually raises lauric oil prices by 5 to 8 percent. With coconut oil averaging USD 1,600 per ton this year, that means an extra USD 80 to 130 per ton, pushing farmgate copra prices from about ₱35 per kilo to ₱37 to ₱38 per kilo. To maximize this opportunity, gains must reach farmers and not just traders.
My suggestions for policy:
1. Maintain the biodiesel blend at B3 until vegetable oil prices stabilize, to avoid adding pressure on pump prices and inflation.
2. Close the palm oil misdeclaration loophole to stop the estimated ₱7.5 billion in yearly revenue losses, through tighter customs inspection and coordinated enforcement.
3. Secure palm oil supply from multiple origins early through long-term supply contracts with private sellers, complemented by commodity hedging arrangements such as futures, swaps, or options to manage price risk.
4. Monitor food and feed prices closely so interventions can be triggered quickly when cost increases threaten household and livestock producer stability.
5. Channel the coconut price windfall into both long-term and short-term productivity measures under the Coconut Farmers and Industry Trust Fund. Short-term measures that can raise yields by 2026 include emergency fertilizer support, pest and disease control campaigns, distribution of high-yield seed nuts for quick-maturing intercropping varieties, and farmer training on improved harvesting techniques.
Indonesia’s B50 policy will have direct effects on our food, feed, and fuel prices. With early and coordinated action, we can protect consumers, stop revenue losses, manage import cost risks, and ensure that coconut farmers see tangible gains as early as the next harvest year.