Managing the Biofuel Industry in Indonesia: A Conceptual Model of the Water-Energy-Food Nexus

Abstract

In an attempt to increase domestic palm oil consumption, Indonesia has enforced the mandatory use of 20 per cent blended biofuel (B20). This policy is a part of the government's efforts to reduce oil dependency in energy use and greenhouse gas emissions. Nevertheless, the policy implementation is prone to affect water and food availability as the demand for biofuel crops is expected to grow significantly in the coming years. Correspondingly, a sufficient quantity of water, energy, and food resources is considered essential to achieve the sustainable development agenda. The increasing demand for all three resources undeniably places a great strain on its preservation management. On the other hand, the planning and management of these resources are under dissonant sectoral systems. This issue, which can make the balance between the three resources arduous to realize, needs to be scrutinized. The complex relationship between the three resources reflects a complex dynamic system, needing a holistic approach that considers the integration of Water-Energy-Food (WEF) nexus to understand the system better. Therefore, this study aims to understand the trade-offs between the WEF nexus on the production and utilization of biofuel. For this purpose, a conceptual system dynamics model in the form of Causal Loop Diagram is developed to analyze the complex structure of biofuel development in Indonesia from the WEF nexus perspective. The conceptual model shows that many underlying factors affecting biofuel development should be considered when formulating policy for attaining a sustainable balance between water and food resources.