Billion-Dollar Biogas Potential in Indonesia's Palm Oil Waste
Indonesia has been the world's leading palm oil producer for decades, but this position also comes with a significant industrial by-product. Effluent from palm oil mills – known internationally as POME (Palm Oil Mill Effluent) – is traditionally stored in open, uncovered ponds, where the anaerobic decomposition of organic matter releases large amounts of methane into the atmosphere. According to a recent industry analysis, however, this waste stream is in fact one of the world's largest untapped sources of biogas. The Palm Oil Agribusiness Strategic Policy Institute (PASPI) estimates that up to 3.6 billion m³ of biogas a year could be produced from POME, yet the country currently uses only 15% of this potential.
Behind the numbers – how big is the real potential?
The Indonesian palm oil industry processes around 250 million tonnes of fresh fruit bunches (FFB) a year. According to Tungkot Sipayung, executive director of PASPI, each tonne of fruit bunches generates on average half a tonne of POME, around 125 million tonnes a year in total. With suitable methane capture technology, each tonne of POME can yield around 28.8 m³ of biogas – this multiplier gives the total annual potential of 3.6 billion m³.
Oil palm plantations currently cover 16.8 million hectares in Indonesia, and this area could expand further in the coming years. According to a study by researchers at Wageningen University, biogas from POME can have a methane content of up to 65%, which in energy terms means good-quality, readily usable gas (Nugroho et al., 2025).
Up to 3.6 billion cubic metres of biogas a year could be recovered from the Indonesian palm oil industry's effluent – almost seven times the amount actually used today.
Why is utilisation only 15%?
Despite the great potential, most palm oil mills still store POME in open, uncovered ponds, from which the methane produced simply escapes into the atmosphere. This is particularly worrying because – as Wageningen University's research also points out – methane is a greenhouse gas 28–36 times more potent than carbon dioxide, so current practice not only wastes an energy source but also imposes a climate burden.
Sipayung names the lack of regulatory mechanisms as the main reason for the gap. There are currently no requirements or incentives that would encourage mills to invest in methane capture systems. As a result, the technology – although available and proven – is spreading only sporadically across the industry, at different rates from mill to mill: some larger, export-oriented groups have already invested in closed digester tanks that use the biogas, while the vast majority of smaller, less well-capitalised mills still use traditional open-pond technology.
“If these three policies were implemented, I believe all palm oil mills would invest in methane capture.”
Three policy proposals
According to Sipayung, three specific government interventions are needed to make the POME biogas potential genuinely exploitable:
- A carbon trading framework designed specifically for POME methane capture.
- Mandatory methane capture at all palm oil mills, backed by investment incentives.
- Mandatory blending of biogas into the fossil gas supply.
The biogas produced can be used in several ways: for mills' own energy needs and for power generation, and after purification it can also be converted into bio-CNG – compressed natural gas from renewable sources – which can serve as a vehicle fuel. Pilot projects along these lines are already running in some parts of Indonesia. Although the government already funds POME-based biogas technology development through the Palm Research Grant programme, a comprehensive, binding regulatory framework is still missing – without it, much of the available resource will continue to be flared or simply escape into the atmosphere.
The wider context – climate commitments and economic benefits
POME-based biogas is relevant not only for energy but also for climate policy. According to Erma Yulihastin, a researcher at the National Research and Innovation Agency (BRIN), proper treatment of POME can cut emissions by around 1,131 tonnes of CO₂-equivalent a month at each facility.
This also chimes with Indonesia's international climate commitments. According to a study by Nugroho and co-authors (2025, Wageningen University & Research), developing POME-based biogas can contribute to meeting the country's nationally determined contribution (NDC), which requires an unconditional emissions cut of 31.89% by 2030, or up to 43.20% with international support. The development also serves the country's 23% renewable energy target.
The economic and social impacts are not negligible either: palm oil mills can also cut their energy costs by using biogas from their own effluent to generate electricity or heat – so in the long term POME could become one of the cornerstones of a sustainable, circular economic model.
Regional market outlook
Demand for biomethane in South-East Asia is set for dynamic growth: according to a forecast presented at an industry conference, the region's annual biomethane demand could grow from around 1 TWh today to between 32 and 55 TWh by 2040. Growth is driven mainly by shipping, hard-to-decarbonise industrial sectors, power generation and the ever-increasing energy demand of data centres. Indonesia – together with Malaysia and Singapore – could become one of the leading players in this market if it can connect its scattered palm oil mills with reliable buyers, the necessary certification systems and sources of finance.
“We already know how to produce biogas from POME. The unresolved question is how to connect hundreds of dispersed mills with reliable buyers.”
Wasted potential
In principle, Indonesia's palm oil industry could produce enough waste streams to grow into a significant energy industry segment in its own right. Experts at PASPI and BRIN both warn that the current utilisation rate of 15% falls far short of the technological and economic possibilities. The missing link is not technology but regulation: without mandatory methane capture, carbon trading and mandatory blending ratios, much of the 3.6 billion m³ potential will continue to leak away or be burned. If Indonesia takes these policy steps, the country could become a major player in the global biogas market while making a significant contribution to meeting its own climate commitments. The rapid growth of South-East Asian demand also creates time pressure: whoever is first to create the regulatory and market conditions could gain a long-term competitive advantage in the region's emerging biomethane market.
Indonesia's palm oil industry produces around 125 million tonnes of effluent (POME) a year, from which the Palm Oil Agribusiness Strategic Policy Institute (PASPI) estimates that 3.6 billion m³ of biogas could theoretically be recovered – yet only 15% of this is currently used. According to PASPI head Tungkot Sipayung, each tonne of POME can yield 28.8 m³ of biogas with suitable methane capture technology, underpinned by the country's 16.8 million hectares of plantations and 250 million tonnes of fruit bunches processed each year. The main reason for the underuse is a lack of regulation: there is no mandatory methane capture, carbon trading or blending requirement. According to BRIN researcher Erma Yulihastin, treating POME can cut emissions by 1,131 tonnes of CO₂-equivalent a month, serving Indonesia's 31.89–43.20% climate commitments and its 23% renewable energy target. The biogas can be used for power generation and, converted into bio-CNG, as a fuel, creating jobs.
Indonesia, the world's leading palm oil producer, generates around 125 million tonnes of palm oil mill effluent (POME) a year, which according to a recent analysis by the Palm Oil Agribusiness Strategic Policy Institute (PASPI) is one of the world's largest untapped sources of biogas. According to PASPI executive director Tungkot Sipayung, each tonne of POME can yield around 28.8 m³ of biogas with suitable methane capture technology, a theoretical potential of 3.6 billion m³ a year in total. By comparison, the country currently uses only 15% of this potential. Behind this lie the country's 16.8 million hectares of oil palm plantations and 250 million tonnes of fresh fruit bunches processed each year.
The reason for the underuse is not technological but regulatory: there is no mandatory methane capture, carbon trading framework or blending requirement, so most mills still store effluent in open ponds, from which methane – 28–36 times more potent than carbon dioxide – escapes freely into the atmosphere. Sipayung therefore calls for three policy steps: carbon trading, mandatory methane capture with investment incentives, and a mandatory blending ratio.
According to BRIN researcher Erma Yulihastin, proper treatment of POME can cut emissions by 1,131 tonnes of CO₂-equivalent a month per facility, serving Indonesia's 31.89–43.20% international climate commitment and its 23% renewable energy target. The biogas can also be used for power generation and – after purification – as bio-CNG vehicle fuel, while creating new jobs and revenue for the palm oil industry. The stakes are raised further by the fact that South-East Asian biomethane demand could grow from around 1 TWh today to 32–55 TWh by 2040, so for Indonesia closing the regulatory gap is a question not only of environmental protection but also of competitiveness in the emerging regional market.
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