Public Perception Pricing into Vehicle Biofuel Policy in Indonesia

Abstract

The Indonesian government established that Indonesia would implement EURO IV standard emissions by the end of 2021. Furthermore, to enhance the corresponding policy, the Indonesian government also eliminated policy incentives for fossil fuels, such as the fuel price subsidy. As an alternative, the government now supports biofuel as a new fuel technology to improve environmental conditions and increase palm production in Indonesia. The aim of this paper is to determine public perception toward the pricing policy at the time biofuel is introduced. We apply a discrete choice model through a stated preference survey. We found that the majority of people would shift to biofuel and particularly to green diesel, despite its higher price than current fuels, due to its similar molecular structure to petroleum diesel and its even better diesel properties. However, this condition only applies if no other alternative exists and if implementing EURO IV standard emissions becomes mandatory. Moreover, the implementation of biofuel and the EURO IV policy will also affect vehicle demand and purchases. Therefore, vehicle manufacturers need to be prepared for the increasing demand for particular types of vehicles.

Keywords

• biofuel
• demand
• discrete choice model
• stated preference