Exploring the food-versus-fuel debate in Indonesia’s palm oil industry toward sustainability: A model-based policymaking approach

Indonesia, the world's largest palm oil producer, is facing challenges in allocating its abundant palm oil production between various sectors. Rising biodiesel mandates and growing domestic consumption have intensified the food-versus-fuel debate, especially amid policies such as export restrictions, domestic market obligations (DMO), and land expansion strategies. These overlapping measures have sparked concerns among stakeholders regarding their long-term sustainability. Therefore, we develop this study to investigate the food-versus-fuel dilemma through a model-based policymaking approach using system dynamics to assess the economic, social, and environmental impacts of key CPO-related policies. Utilizing national datasets, regulatory documents, and insights from stakeholder workshops, we simulate three policy scenarios: status quo (BAU), food security, and energy independence. Results show that no single scenario delivers optimal outcomes across all sustainability dimensions. The food security path best addresses cooking oil needs and emissions reduction, while energy independence generates the most employment but incurs higher environmental costs. The status quo supports GDP growth but fails to meet domestic food demand. Based on these findings, the study recommends adjusting the B100 target, prioritizing land conversion on low-emission grasslands, and establishing a cross-sectoral body to balance trade-offs. Furthermore, this research contributes to the development of more balanced and evidence-based strategies aimed at advancing a sustainable palm oil industry in Indonesia.