A fiscal incentive program to produce sustainable aviation fuel 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. This research brief examines how the Indonesian government could establish a Used Cooking Oil Fund (UCOF) 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% SAF blending target by 2027. 

Policy considerations:

• Centralize UCO collection regulations. Indonesia’s decentralized collection scheme has achieved below 50% collection rates. Central government oversight with clear producer responsibilities could significantly improve UCO supply.  
• Establish a Used Cooking Oil Fund. Following the successful model for palm oil biodiesel, a UCOF 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% service fee to above $150/ton would generate sufficient revenue to support the 1% SAF blending mandate while creating surplus funds for future program expansion. 

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