Beyond the B60 Ambition: Can Indonesia's Palm Oil Biodiesel Expansion Deliver Inclusive Prosperity for Independent Smallholders?

Abstract

Indonesia's ambition to advance its palm oil-based biodiesel programme toward B60 represents a significant opportunity to strengthen energy sovereignty, reduce dependence on imported diesel, and expand domestic value creation. However, whether this ambition can simultaneously improve the welfare of independent oil palm smallholders remains uncertain. This article critically examines the economic, institutional, agronomic, social, and environmental conditions under which B60 implementation could deliver inclusive and sustainable rural prosperity. Employing a qualitative literature review rather than a systematic literature review, the study synthesises interdisciplinary research published between 2020 and 2026, complemented by relevant policy documents. Six nterconnected themes emerge: energy and fiscal feasibility; value-chain transmission and distributive equity; productivity and replanting constraints; institutional inclusion; environmental sustainability; and livelihood resilience. The synthesis suggests that higher biodiesel demand does not automatically translate into improved smallholder welfare because benefits are mediated by pricing structures, market access, productivity, financing, and institutional arrangements. The article develops an Integrated Biodiesel–Smallholder Prosperity Framework and compares expansion-led, integrated-development, and adaptive implementation scenarios. It argues that B60 can contribute to more inclusive development only when supported by sustainable feedstock production, transparent value distribution, accessible replanting finance, farmer institutional strengthening, and enforceable environmental safeguards. An integrated policy roadmap and multidimensional monitoring framework are proposed to reconcile national energy security with equitable rural development.