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Biofuels At What Cost? Government support for ethanol and biodiesel in Indonesia

This report on government support to biofuels in Indonesia finds that the country has been slow to implement its ambitious plans for biofuel production and consumption, largely due to dramatic rises in feedstock prices in 2007 and early 2008.The report cautions Indonesia against setting a compulsory blending mandate; a policy which the Indonesian government has been considering. Letting fuel prices rise to levels prevailing in international markets would reduce consumption and improve efficiency, resulting in improved energy security. Adding an additional layer of subsidies for biofuels to an already distorted system makes little economic sense.

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