The Indonesian government has announced an increase in palm oil export levies to fund the country’s ambitious B40 biodiesel program, which requires diesel fuel to contain 40% palm-based biodiesel. This policy change is expected to have significant implications for the global palm oil market.

Key Policy Changes

• Export levy increased from $55/ton to $85/ton for crude palm oil (CPO)
• Additional levy of $20/ton for processed palm oil products
• Revenue earmarked for biodiesel subsidy fund and smallholder replanting program

Impact on Palm Oil Prices

The increased levy is expected to reduce Indonesian palm oil exports by 5-8% in 2026, potentially supporting CPO prices at $900-1,000/ton range. Analysts expect this to benefit palm oil producers in Malaysia and Africa.

Implications for Palm Oil Mill Investors

• Higher CPO prices improve project ROI for mill investors
• Increased demand for efficient processing equipment to maximize oil extraction
• Growing market for palm kernel oil and palm oil by-products
• Opportunity for African producers to fill the supply gap

B40 Biodiesel Program

Indonesia’s B40 mandate, effective from January 2026, requires an estimated 14 million kiloliters of biodiesel annually, consuming approximately 4.5 million tons of palm oil — about 15% of Indonesia’s total production.