A fiscal-incentive program to produce SAF from used cooking oil in Indonesia

Indonesia is exploring pathways to incorporate sustainable aviation fuel (SAF) into its national biofuel program, with used cooking oil (UCO) emerging as a promising feedstock.

A new research brief by the International Council on Clean Transportation examines how the Indonesian government could establish a UCO fund to support SAF production through export-levy revenues, similar to the successful palm-oil estate-fund model used for biodiesel.  

The analysis surveys UCO-collection practices across Asian countries and evaluates three potential service-fee structures on UCO exports.

“Our findings indicate that implementing a service fee above $150 per ton could generate sufficient revenue to subsidize UCO-based hydroprocessed esters and fatty acids (HEFA) fuel production, helping Indonesia meet its 1 percent SAF blending target by 2027,” ICCT stated.

Policy considerations:

• Centralize UCO-collection regulations. Indonesia’s decentralized-collection scheme has achieved below 50 percent collection rates. Central government oversight with clear producer responsibilities could significantly improve UCO supply.  

• Establish a UCO fund. Following the successful model for palm-oil biodiesel, a UCO fund could provide incentives either for UCO collection or directly to HEFA producers to achieve price parity with conventional jet fuel. 

• Increase the UCO-export service fee. Raising the current 9.5 percent service fee to above $150 a ton would generate sufficient revenue to support the 1 percent SAF-blending mandate while creating surplus funds for future program expansion. 

To view the full research brief, click here.