Mandatory ISPO for Biodiesel Producers Starts 20 March 2027, LPEM UI Flags Smallholder Risk

Jakarta — Mandatory Indonesian Sustainable Palm Oil (ISPO) certification for palm-based bioenergy businesses, including biodiesel producers, will take effect on 20 March 2027 under ESDM Ministerial Regulation No. 3 of 2026. At a public discussion titled "B50 and Indonesian Biodiesel Governance" at Katadata's office in Jakarta on Thursday, 30 July 2026, LPEM UI researcher Rafika Farah Maulia warned that the rule risks pushing smallholders out of the biodiesel supply chain if ISPO uptake among farmers stays low.

From plantation to biodiesel plant

ESDM Regulation 3/2026 implements Presidential Regulation No. 16 of 2025 on the Indonesian Sustainable Palm Oil Certification System. That regulation, signed by President Prabowo Subianto on 19 March 2025, replaced Presidential Regulation 44/2020. According to InfoSAWIT, the old rule required ISPO only for plantation businesses, while the new one extends it to downstream industries such as cooking oil and oleochemicals, and to bioenergy businesses producing biofuels, biomass and biogas.

According to a summary by Veritask, ESDM Regulation 3/2026 was issued on 13 January 2026 and entered into force on 22 January 2026, while the certification obligation takes effect on 20 March 2027 under the transitional provision in Article 35. Its main provisions:

• Scope: any individual or business entity producing palm-based biofuels, biomass and/or biogas.
• Traceability: a segregation model when all feedstock is ISPO-certified, and a mass balance model when certified feedstock makes up at least 10% but less than 100%.
• Process: applications go to ISPO certification bodies accredited by the National Accreditation Committee (KAN). Certificates are valid for five years, with the first surveillance within 12 months and at least every two years thereafter.
• Sanctions: up to three written warnings of 30 calendar days each, followed by an administrative fine based on non-tax state revenue (PNBP) rules and, if non-compliance continues, temporary suspension of business activities.

Concerns over smallholders

Quoted by Katadata, Rafika said the obligation could become exclusive to large CPO producers and large mills. She stressed the need to keep smallholders in the supply chain and questioned whether traceability can really be implemented well. She also called for feedstock diversification, such as palm waste, microalgae and cassava, smallholder replanting, and a review of fiscal mechanisms so that market risk is not borne by the state alone.

Her concern is rooted in certification data. Citing 2023 Ministry of Agriculture data, InfoSAWIT reported that about 5.6 million hectares, or 37.08% of oil palm plantations, held ISPO certificates, with minimal contribution from independent smallholders, who control nearly 40% of the national palm area. The main barriers are cost, administrative complexity and weak farmer institutions. At a workshop in April 2026, as reported by Republika, ISPO-certified area was put at more than 7.5 million hectares, without a breakdown by type of grower.

Efforts to speed up smallholder certification

The government is lining up funding support. According to Republika, Agriculture Ministerial Regulation No. 33 of 2025 allows smallholders to apply for ISPO certification funding through farmer institutions. The Plantation Fund Management Agency (BPDP) funds steps ranging from smallholder data collection, environmental management statements and internal control system training to mentoring, certification and surveillance, and has set up a coordination team to accelerate the process.

BPDP upstream fund disbursement director Normansyah Hidayat Syahruddin said smallholders who obtain certificates through BPDP funding will be prioritised for access to other programmes. GPPI chair Delima Hasri Azahari said financing support and stronger farmer institutions are key to helping farmers meet certification standards.

With B50 absorbing ever more CPO, the ability of biodiesel producers to trace fresh fruit bunches (FFB) back to supplying plantations will, from 20 March 2027, no longer be optional but mandatory. A list of related rules is available on our biodiesel regulation page.