SAF Implementation in 2027: A Case Study of Indonesia

Indonesia has a vision to reach net zero emissions in 2060. To reach the target set, the Indonesian government generates Enhance National Determined Contribution (ENDC). One of the activities on ENDC that is set to reduce emissions is using biofuel. Biofuel in the aviation industry is widely known as Sustainable Aviation Fuel (SAF). Indonesia already conducts test flights using SAF produced by SOE, PT Pertamina (group), to showcase Indonesia’s capabilities in producing SAF. The next step after conducting the test flight is preparing the implementation plan. Led by the Ministry of Maritime and Investigation, the current roadmap for SAF implementation is being made, including the implementation strategy. The study was conducted by assessing PESTLE analysis and Porter 5’s Forces analysis to understand existing conditions in Indonesia. Then, the scenario planning is generated by collecting data from in-depth interviews with all stakeholders involved, such as jet fuel producers and suppliers, the Ministry of Energy and Mineral Resources, the Ministry of Transportation, aircraft OEM, academics, and airlines in Indonesia. Eleven driving forces were identified in this study. Four scenarios are generated by combining the most impactful driving force, the SAF price, and the most uncertain driving force, the regulations for airlines. The desired scenario for the future is determined by the interviewee and then marked as an ideal condition in the future.

Introduction

Kyoto Protocol is one of the most influential international treaties adopted by many countries to commit to combating and fighting climate change. Nowadays, CO₂ become a benchmark that is widely used to describe emissions, usually known as eCO₂ or CO₂ equivalents. Kimet al. (2020). In 2015, another remarkable international treaty was called the Paris Agreement. The agreement also drives by the UN encourages UN members to create policies and actions to combat and fight climate change. This international treaty is adopted by many countries as a background or milestone to create more robust, more effective, and better action to fight climate change. This international action calls for aspects of fighting emissions, which gives another perspective to see emissions from different angles, such as labor, waste, and inequalities that create new challenges in climate change. All of these aspects cannot be ignored while fighting climate change. Cordonier Segger (2016) in her study, mentions that the sustainable development dimension of the Paris Agreement must ensure sustainable aspects mentioned in SGDS.

The Kyoto Protocol in 1997, which was accepted and signed by most UN members, agrees that UN members must combat climate change, and it acknowledges each member has different capabilities in combating climate change. According to Kimuraet al.(n.d.), final energy consumption from transportation sectors in 2020 accounted for 28% of total final energy consumption and is projected to increase to nearly 30% in 2040. Energy consumption from transportation sectors results in CO₂ emissions. Ritchie (2020) Energy consumption for transportation resulted in 16.2% of total CO₂ emissions in 2020. If we are more specific, the aviation industry accounted for 1.9%. Ritchieet al. (2020) different papers found that emissions from transportation generate 105,57 mTon eCO₂ emissions, specifically 2,2 mTon eCO₂ emissions from the aviation and shipping industry. If we are more specific, the aviation industry and the marine industry are two industries that connect all the dots in the world, which gives many opportunities and livelihoods in remote regions. Thus, maintaining this industry to be more sustainable by giving robust and effective solutions to solve the emission problem is a must to ensure the industry keeps growing while emission is reduced.

To Reduce carbon emissions in the transport sector, some solutions are available, but IATA mentions that the most contributing factor is using SAF (IATA, 2023). The SAF technology is crucial to achieving emission reduction potentials over the long term. To encourage the development and adoption of biofuels in the aviation industry in the coming decades, financial measures such as carbon taxes and SAF subsidies could be implemented. Huanget al. (2023) UN affiliate organization, ICAO, whose members consist of the Ministry of Transportation from each UN member, tried to push the Kyoto Protocol and Paris Agreement as background to encourage its members to develop a policy in each country to reduce emissions. The program called CORSIA, or Carbon Offset Reduction Scheme for International Aviation, is a mandate from ICAO to all aviation industry players to reduce emissions involving international flights between two ICAO member countries. Every three years, ICAO calls all of its members to present at high-level meetings that are considered one of the most influential international treaties in the aviation industry. ICAO’s last high-level forum in 2022 generated assembly resolutions A41-22, which encouraged ICAO members to develop solutions to reduce emissions in international flights, one of which is using SAF. Even though it is also considered currently, SAF cannot fulfill net-zero emissions as it still produces emissions; SAF is considered a big leap because it can reduce the majority of CO₂ in aviation industries (ICAO, 2022).

In the current condition of Indonesia, implementing SAF is equal to increasing the airline’s operational cost. Fuel costs for airlines make up to 40% of total operational costs. If current SAF prices are twice those of conventional jet fuel prices, it means that at least the total operational cost for airlines to operate will increase up to 20%, which will leads to a domino effect of increasing ticket prices. The domino effect is related to many aspects of Indonesian activity that will end up hindering economic growth. Hence, the government is formulating the policy for SAF very carefully. It can be seen that while Indonesia’s neighborhood country, Singapore, is mandating SAF for at least 1% of total jet fuel consumption in 2025, Indonesia still has not released any policy regarding the SAF mandate. From the problem mentioned above, reducing emissions from fuel burn by using SAF, Indonesia has to understand the impact of using SAF by developing a scenario for the future. This can be more clear for Indonesia if Indonesian has several scenarios resulting from the research of this paper that will guide how Indonesia can anticipate and react to implementing SAF.

Literature Review

The study conduct will generate scenario planning to determine what will happen in the future. At the same time, one of the scenarios will be determined as the most desired. The study will generate a scenario according to Garvin and Levesque (2006), and then PESTLE analysis will be conducted to understand the external existing conditions in Indonesia, while Poter’s 5 Forces analysis is done to understand the internal existing conditions in Indonesia, especially the industry landscape.

Regulation Review

Internal Regulation: MEMR Decree No. 12/2016 and Indonesia ENDC 2022

The policy plays a major role in setting a carbon reduction scheme in Indonesia. SAF is not yet mentioned clearly in Indonesia policy currently, but some of the policies target carbon that needs to be reduced. This will be considered as business issue. SAF is one of the methods that will reduce carbon emissions in the aviation sector and is seen as the most prominent way to achieve the target set by Indonesia.

External Regulation: CORSIA and RED 2, RefuelEU

ICAO, as nonprofit organization, plays a major role in setting schemes for carbon emissions in the aviation sector. Endorse by the UN, ICAO created CORSIA (Carbon Offset Reduction Scheme for International Aviation), which voluntary runs from 2020 to 2026, then the second phase, starting in 2027, will be mandatory. EU, through RED 2, set a specific policy called RefuelEU. The difference between external regulations that Indonesia’s internal regulations not mention why and how to reduced carbon emissions considering the creative side of the industry problem, while RefuelEU and CORSIA clearly mention why it needs to be reduced and how to reduce it

Scenario Planning

Petersonet al. (2003) mention that scenario planning is most effective when uncertainty is high and the controllability of the event is uncontrollable. Even though it concludes that scenario planning is potentially rewarding, sometimes risk-filling of predicted future often falls into the same traps similar to traditional planning. The factors that vary, which weigh the present and overestimate our ability to control the future, somehow can reduce the range of uncertainty. In the other research, Wright and Goodwin (2001) gives an example of practices that used scenario planning where all of the aspects of the future are initially assessed and then try to analyze the predetermined trends that eventually will evolve from the present to the horizon year ahead (Fig. 1).

Fig. 1. Factors or variables in scenario planning (Garvin & Levesque, 2006).

PESTLE Analysis

PESTLE analysis is a strategic management tool. The difference between PESTLE and other tools is that PESTLE focuses more on external factors, and its elements are explained in its acronyms: economic, economic, social, technological, legal, and environmental. This analytical tool has six elements that will give clear insight from each of the elements regarding external factors as exciting conditions for implementing SAF (Fig. 2).

Fig. 2. Porter’s 5 forces (Porter, 1997).

Porter’s 5 Analysis

Porter 5’s forces is a strategic planning tool often used to understand the current industry landscape in specific industrial sectors. As mentioned in the first chapter, this study will focus on the aviation industry, which will support Indonesia’s effort to reduce emissions. Indonesia’s effort to reduce emissions is predicted through scenario planning. Hence, Porter 5’s forces is a tool that can be used to understand SAF as a new product that will penetrate the aviation market in Indonesia. Proter 5’s forces are first known as frameworks or tools by Michale E. Porter, which try to find business strategy by understanding the five forces that drive the competition. The business landscape that provides SAF will give clear insight regarding internal factors (seen from the industry player point of view in Indonesia) as an existing conditions for implementing SAF.

Research Conceptual Design

Strategic management to find the best possible solution for some problems is considered a notable approach for policy makers or businesses. Lately, many studies or research (Bilodaeu & Rigby, 2007; Oliver & Parrett, 2018), have tried to examine some strategic management tools (Bilodaeu & Rigby, 2007). Research has shown that CRM and strategic planning, including scenario or contingency planning, are considered tools that deliver high satisfaction with a high amount of usage. Strategy-tool-in use to manage future uncertainty, also studied by Oliver and Parrett (2018), mentioned that scenario planning is used to examine inductive thematic analysis, which involves identifying and coding emergent themes within data. The conceptual framework for this study is explained in Fig. 3. Research conceptual design. This framework can be explained in details in Fig. 3.

Fig. 3. Research conceptual design.

To assess current conditions, especially for internal factor analysis, Poter’s 5 Forces is used in order to understand the aviation sector landscape. By using Poter’s 5 Forces, current conditions of how jet fuel suppliers compete with their competitors, as well as customer choices to select the substitute product, are examined. Hence, it can describe current aviation conditions if SAF is implemented in Indonesia.

External factor analysis is assessed using PESTLE. All aspects, starting from politics to environmental aspects of SAF implementation in the current condition. This analysis will be seen from SAF implementation.

To examine the desired scenario in the future, first scenario planning must be implemented to generate four scenarios by creating a 2 × 2 matrix from the most uncertain driving forces and most impactful driving forces. One of the interview questions also asks about the stakeholder’s desired scenario for the future. In conclusion, from all four scenarios, there will be one desired scenario as expected from all stakeholders.

The implementation plan is later arranged according to gaps between scenario planning as the ideal conditions and desired future and current existing conditions.

Research Methodology

Research Design

As mentioned in the previous chapter, a business issue highlighted in this study is how Indonesia needs to understand the scenario in the future on reducing emissions in the aviation sector using SAF, especially for domestic flights. To develop the scenario, the study conduct will mimic scenarios developed according to Garvin and Levesque (2006). Before generating scenarios, data collection will be started. Data collection consists of two activities: primary data collection and secondary data collection. Primary data collection will be done by conducting in-depth interviews; it will start by determining the issue and creating a list of interview questions. A list of interviewees is generated by understanding the related stakeholders and goals of each interview. Stakeholders currently related to developing SAF in Indonesia are the Ministry of Transport, the Ministry of Energy and Mineral Resources, the Jet Fuel Industry, Original Equipment manufacturers for airplanes (Airbus/Boeing), academics, and airlines that operate in Indonesia. All stakeholders have their own interest in SAF. Thus, their point of view is important in driving Indonesia’s direction for SAF (Fig. 4).

Fig. 4. Research design.

Data Collection Method(s)

There are two activities to collect primary and secondary data. Primary data is gathered using qualitative techniques, and in-depth interviews are the primary tools. All the qualitative data gathered from interviews is supported by various quantitative data that are used accordingly (Fig. 5). Some quantitative data is needed to determine the uncertainty and impact of driving forces. From all determined driving forces, scenarios will be developed.

Fig. 5. Flowchart on data collecting.

Primary Data: Interview-Based Method

There are two activities to collect primary and secondary data. Primary data is gathered. To ensure studies related to research topics, a list of interviewees should be made. To determine the interviewee, the first step is to list all of the stakeholders related to SAF. All respondents’ or interviewees’ perspectives are important to crafting the right driving forces of SAF implementation in Indonesia. The interviewees are the Ministry of Transport, Ministry of Energy and Mineral Resources, Jet Fuel Producer, Jet Fuel Provider/Seller, Original Equipment Manufacturer (OEM) for airplanes, academics, and three domestic airlines in Indonesia. All the interviewees are listed in Table I.

Table I. List of Interviewee

Initial	Background	Experience
IS	Jet fuel producer	>21 Years
HB	Jet fuel provider/seller	>27 Years
AI	Aircraft OEM	>6 Years
DW	Aircraft OEM	>9 Years
AF	Ministry of transportation	>16 Years
EW	Ministry of energy & mineral resoureces	>32 Years
IR	Academics	>35 Years
DK	Domestic airline	>24 Years
AS	Domestic airline	>20 Years
BT	Domestic airline	>24 Years

The semi-structured interview was chosen because it will give considerable freedom to adjust questions as the interview goes on and to probe far beyond respondents’ answers to predefined questions. Another reason is that the different backgrounds and goals of each interviewee give different approaches to the determined key focal issue. Questions begin with throw-away questions, according to Luo and Wildemuth (2017), which will give rapport at the beginning of the interview to connect the interviewee’s background to the key focal issue. According to Anderson (1954), the next questions are warm-up questions to guide the interviewee’s understanding of the key focal issue by asking about the current aviation industry in Indonesia. Next are the essential questions, and extra questions will be asked or usually known as main questions and follow-up questions. Probes questions will be asked if the interviewee gives an answer that can not be understood. The main questions or essential questions will mainly focus on the driving forces of SAF usage in Indonesia in order to reduce emissions. Then, follow-up questions or extra questions will be asked to determine the favorable outcome or unfavorable outcome from the answers for each driving force. The follow-up questions or extra questions will focus on which driving forces give a high degree of impact or a high degree of uncertainty. Details of the interview questions are listed in Table II.

Table II. Interview Questions

Questions type	Main focus	Questions
Throw-away questions	Getting information of the interviewee	Please introduce yourself by giving information related to your background in aviation industries?
Wamp-up questions	Guide the interviewee to understand the key focal issue	Would you elaborate how current aviation industries in Indonesia can reduce emission with SAF?
Essential questions	Find the driving forces of SAF implementation in Indonesia	What is the driving factors of SAF implementation in Indonesia?
	Find the most uncertain driving forces	Could you please to rank the 1–2 most uncertain driving factors of SAF implementation?
	Find the higest impact for driving forces	Could you please to rank the 1–2 highest impact driving factors of SAF implementation?
Extra questions	Understanding the reason of uncertain driving forces	Could you please elaborate why you choose the 1–2 most uncertain driving factors?
	Understanding the reason of impact for driving forces	Could you please elaborate why you choose the 1–2 highest impact for driving factors?
	To understand which is most desired scenario	Looking forward, what is the desired future of SAF implementation in Indonesia?
	To gives insight for mitigation action	Looking forward, how do you think the desired condition can be achieved?

Secondary Data: Literature Review

The secondary data is desk research, which gathers and analyzes the gathered information from published information such as papers, journals, state reports, or other trustworthy resources from the internet or interviewees. The desk report will focus on all published data that can be accessed by the public and has no confidential or private properties. All the acknowledgments of the data will be cited; hence, its originality can be tracked.

Data Analysis Methods

Internal Factor Analysis: Porter’s 5 Forces

In order to understand the current industry landscape in Indonesia, the aviation sector is ready to implement SAF and understand more deeply how the jet fuel industry in Indonesia runs. This analysis will give insight into how suppliers of jet fuel, substitute products of SAF, SAF customers, other potential entrants, and competitive rivalry of jet fuel suppliers’ conditions shape the industry.

External Factor Analysis: PESTLE

The other factors from external resources such as politics, especially geopolitics that drive how Indonesia should implement SAF include using specific sources of feedstocks, economics which drive the customer (airlines) behaviour on consuming SAF, social aspects of Indonesia people on how conscious of paying extra/premium prices so they can fly with cleaner energy or social aspects of the aviation industry to support CORSIA, the technology of Indonesia to produce SAF, legal aspects especially CORSIA implementation and environmental aspects of emission reduction of SAF that support president commitment and programs. The PESTLE analysis will be used to give insight on how external factors influence SAF implementation in Indonesia.

Scenario Planning Analysis

As mentioned in the previous chapter (Garvin & Levesque, 2006), there are five steps of scenario planning explained as follows: Stage 1: Orientation

The first step is determining the background research, interviewee, and interview goals, with the final result being the key focal issue. This stage is the beginning of scenario formulation. Stage 2: Exploration

The second stage is doing in-depth interviews by exploring all the information given as empirical data that becomes the basis of the scenario creation. All the interviewees are invited to explore the key focal issue by giving coherent views of driving forces. Then, all the driving forces are ranked based on a high degree of uncertainty and a high degree of impact. Stage 3: Scenario Creation

These steps generate the scenarios by examining the driving forces with the highest degree of uncertainty and the highest degree of impact. The final scenario is a 2 × 2 matrix that is formed by combining the determined scenario of the highest degree of uncertainty and the highest degree of impact. Stage 4: Options Consideration

This stage will be done by assessing all the options available to achieve the desired scenario. First, the desired scenario is obtained by asking each stakeholder about their desired scenario in the future. Then, find the implications and options of each scenario. Stage 5: Integrations

The last stage of scenario planning is integrations, which examine the current conditions and the desired scenario of the future. This latest stage is to find the early warning signals of each scenario that will lead to an achieved scenarios in the future.

Result and Discussion

Current Conditions

PESTLE Analysis

The external factors will describe the current conditions of Indonesia’s jet fuel industry. The following details of the analysis will be explained below: Political: Political, especially geopolitics, greatly influences the feedstocks of SAF as many developed countries that already produce and implement SAF for their daily aircraft refueling are fighting over reliable feedstock resources. Indonesia, as an archipelagic country, has many options over feedstock. Another point that is related to politics is the market itself. The market of jet fuel market in Indonesia is influenced by neighboring countries that can be reached within a 1–2 hour flight, such as Singapore or Malaysia, has great influence politically on the market. Economic: The economic factors of SAF are a big issue, especially for airlines. As mentioned in the earlier chapter of this study, SAF prices are currently 2–3 times higher than conventional jet fuel. This will disturb airlines’ cost structure because fuel, on average, makes up 40% of total operating costs. Hence, increasing the operating costs will lead to a snowball effect that will end up increasing ticket prices and other related issues. Social: Social factors such as Indonesia’s commitment to international treaties such as Paris Agreement or ASEAN’s commitment to reduce emissions are seen as social factors. This point will analyze how Indonesia puts itself as a country to socialize to ensure collective targets are achieved, as well as Indonesia’s own targets. Technological: Technological aspects of PESTLE for SAF implementation include the availability of technology licenses to be adopted by SAF producers in Indonesia. Environmental: The environmental aspect from the external point of view is about the framework adopted for SAF. As mentioned in the previous chapter, this study is considered SAF according to the CORSIA framework. Hence, the environmental factors that resulted from CORSIA calculations will be seen as external factors. Legal: Legal aspects that influence the external factors are internal regulations such as CORSIA implementation as well as regulatory regulation on neighboring countries such as Malaysia or Singapore that will impact Indonesia’s decisions.

Porter’s 5 Forces Analysis

According to the literature review and in-depth interviews, this study will conduct Porter 5’s Forces analysis to understand internal factors that influence SAF implementation in Indonesia. The following details of the analysis will be explained below: Rivalry: The rivalry of jet fuel in Indonesia creates a unique point of view due to its difference from other countries in the region, such as Malaysia and Singapore. Indonesia has only one supplier of SAF and one company that operates a refinery to produce SAF. Both supplier and refinery are state-owned enterprises, which leads to a monopoly of the market. Threat of New Entrant: New entrants for the jet fuel market in Indonesia will be defined as currently the market is monopolized by SOE. After 79 years of Indonesian independence, there was only one time, around 2008–2010, the jet fuel market is not monopolized by SOE, when Shell, an oil and gas company from the Netherlands, tried to explore the Indonesian market. They decided not to continue their operation in 2010 due to competition with Indonesia’s SOE. Supplier Power: The Indonesian palm oil industry is mature enough to supply feedstock for SAF. The other resource is cooking oil. The industry has had exponential growth for the past few years due to many seeking to use cooking oil as feedstock for renewable or low-carbon fuels. Buyer Power: Indonesia’s end-user of the aviation industry, which exploits air travel to commute, is determined in this section. This will give a point of view on how Indonesian people or foreigners use air travel to commute—airlines, which are mostly LCC (Low-Cost carriers), are willing to pay for SAF in doubt. Threat of Substitutes: Currently, Indonesia seeks and explores many options to reduce emissions. This effort is seen as a substitute product of SAF, which will decrease airline customers for jet fuel or SAF’s willingness to buy SAF. If Indonesia SPE-GRK (Surat Penurunan Emisi-Gas Rumah Kaca) can be claimed to reduce emissions by CORSIA and at the same time carbon credit has lower prices with high supply, airlines will shift to buy carbon credits instead.

Summary of Current Conditions

All the analysis done in Sections 4.1.1 PESTLE Analysis and 4.1.2 Porter’s 5 Forces Analysis is summarized in Table III, a summary of current conditions.

Table III. Summary of Current Conditions

No	Aspects		Indicators	Brief explanation of current conditions
	Internal	External
1.	Supplier power	Politics	Feedstock used	Indonesia has major potential using palm oil as source of feedstock but has negative sentiment from EU due to it’s consideration of high ILUC value, other potential is use cooking oil
2.	Buyer power & rivalry	Politics & Economic	SAF price	Current jet fuel price in Indonesia is refer to MOPS prices which also influence by world oil price and at the sametime refinery in Indonesia must reach it’s economic of scale for SAF production
3.	Threat of subtitute	Social	Subtitute products to reduce emission	Carbon credit market in Indonesia is open last year in Indonesia stock exhange market or IDX which seen as an option for airlines to go after cheaper alternative for SAF
4.	Rivalry	Legal	Regulatory for airlines	Indonesia regulatory for SAF is currently only oversee the supplier through MEMR decree 12/2015 but not mentioning obligatory for airlines
5.	Threat of subtitute	Social	Framework used	Indonesia through MOT as ICAO member which voulantary join CORSIA which automatically adopting the framework but MEMR has different opinion
6.	Buyer power	Economic	Market condition	Current condition where most of airlines are LCC (Low Cost Carrier) is doubt to pay more for SAF due to it’s consiusness to reduce emission as well as higher price
7.	Buyer power	Enviroment	SAF carbon footprint	SAF carbon reduction must be compared with carbon credit pricess as market will choose which has lower carbon reduction per amount of they pay, hence SAF must be made with feedstock which has highest degree of carbon reduction
8.	Threat of subtitute	Politics	Fiscal assistance	Mandating SAF means increasing operational cost for airlines, hence fiscal assistance is needed
9.	Supplier power & buyer power	Enviroment	Enviromental issue	Current enviromental issue is impact greatly for aviation industry. The aviation industry foound that season forecast is shifting in Indonesia
10.	Rivalry	Politics	Institutional collaboration	Currently all stakeholder involve in SAF implementation is heading on their own direction where there is no single instituion merge all the interest to has same goals
11.	Rivalry	Politics & economic	Production infrastructure funding	Currently Indonesia is waiting for the decision to build green refinery in Cilacap which can produce SAF. Hence, government support needed to secure for SAF production

Ideal Conditions (Scenario Planning)

Stage 1: Orientation

Mention the business issue; the key focal issue identified for this study is: What strategy can be taken by Indonesia to implement SAF in 2027?

Stage 2: Exploration

The exploration stages begin with defining driving forces that influence key focal issues. Data collection from in-depth interviews and literature reviews or desktop studies is collected and then processed to determine all the driving forces. All the driving forces are mostly determined by all the stakeholders through interviews. Since all the stakeholders involved in SAF implementation are being interviewed, the forces resulting from data collection are complete enough to determine how SAF implementation happen in the future.

The assessment of driving forces will be categorized into external and internal aspects and then grouped into indicators. After all scenarios are finished, the indicators will be compared with indicators from current conditions to find the gap. The gap will be grouped in a SWOT matrix, and then, finally, it will be the strategy taken to achieve the desired scenario. All the driving forces are briefly explained in Table IV.

Table IV. Driving Forces

Driving forces	Brief explanations
Feedstock used	Currently reliable feedstock source is contested around the globe where some states have tendency use feedstocks that meet their technology. Indonesia has plenty of feedstock source, two major reliable source is using cooking oil and palm oil. Palm oil has negative sentiment from EU where use cooking oil from Indonesia is explored by many states around APAC region. Usage of use cooking oil is more appealing for airlines because it gives more carbon reduction compared to palm but at the same time MEMR consider palm oil industry must be harvested as reliable resource for low carbon fuel similar to B30 program.
SAF price	SAF prices is currently out of reach for some airlines as it has 2-3 times higher compared to conventional jet fuel. It became government’s homework to reduce SAF prices to compete with conventional jet fuel. Some interviewees agree that where SAF supply is higher and their demand is still low which probably happen in next 3–5 years, the prices will be decrease following the market trend.
Subtitute products to reduce emission	Indonesia plan that supported by the Ministry of Maritime and Infestation to launch carbon market in Indonesia (IDX Carbon) is consider a big leap for industry player because government pave a way to increase many Indonesian company ESG score. This also influence SAF usage which create an option for airlines to buy substitute product for reducing emission. This hinder SAF implementation in the future especially if carbon credit price is lower compared to SAF.
Regulatory for airlines	Indonesia policy for emission reduction is currently only regulate the fuel producer and supplier to supply greener fuel. Some industries become an example to use B30 or B40 as their diesel fuel. (Bxx refer to blending % of FAME in diesel). Jet fuel has no spesific regulatory to regulate airlines use SAF and how airlines can benefit from it. Hence all of interviewee agree government must generate regulatory framework for airlines to use SAF.
Framework used	Framework used is debatable between all the interviewee, even though all agree the framework used is important to determine by government because it generate playing field for industry involved. Currently world has 2 frameworks widely used, RED II (Renewable Energy Directive II) by European Union and CORSIA (Carbon Offset Reduction Scheme for International Aviation) by ICAO to reduce emission. Both has different reduction limit, different basic life cycle emission value, etc. During interview MEMR mention that it is possible if Indonesia develop its own roadmap and not followed both framework. This will create an extra burden to industry due to its has to comply many frameworks especially if many of it generate extra cost.
Market condition	SAF uncertainty market condition hindering SAF implementation as its uncertainty comes from many aspect such as benefit for customer, how it impact airlines ESG score which lead to airlines to secure new bond, etc. This uncertainty is agreed by all of interviewee.
SAF carbon footprint	Feedstock changes will impact in SAF demand which end up increasing/decrease SAF usage. If the feedstock is considered as sustainable to CORSIA and all other framework and at some point the emission reduction of SAF which reduced by kind of feedstock used, will increase airlines willingness to use SAF. This driving forces is more foci.
Fiscal assistance	Government fiscal assistance will increase airlines willingness to pay for SAF. For example, MOT is assessing whether reducing operation cost through reducing non-tax state income from route, landing fee or even reducing tax such as from airlines imported spar part can stimulate airlines to use SAF.
Environmental issue	Environmental issue is affecting SAF implementation as aviation industry is affected directly from drastically weather or season changes in short amount of time. The effect that felt by airlines is generate consciousness for airlines to use SAF.
Institutional collaboration	If all institution or stakeholder is accept SAF as a way to reduce emissions, market uncertainty problem will be solved and feedstock source will be secure. The collaboration between stakeholder is important in early stage of implementation.
Production infrastructure funding	The SAF production infrastructure funding for some of interviewee is play an important role because many of interviewee believe before Indonesia can go further, at the very beginning Indonesia has to ensure its SOE which operates the only refinery in Indonesia is capable of produce SAF.

Next steps

After all interviewees mention their driving forces, all the interviewees must select two of the most uncertain and most impactful driving forces. All the interviewee’s selected driving forces are scored according to their priority. The greatest uncertain or impactful score was 2, while the least uncertain or impactful score was 1. Others, while not mentioned by the interviewee, have a score of 0. The score and priority explaned in Table V.

Table V. Category Score for Driving Forces

No.	Score	Priority
1.	2	Greatest
2.	1	Least
3.	- (blank)	No priority

All the impact and the uncertainty of the driving forces are then classified to their priority level. The less priority driving forces mean the driving forces are important for selected stakeholders but not related to the whole element of SAF implementation. The level of importance is determined by the sum of all driving forces selected by each interviewee. Each of driving forces is clasified by the priority level listed on Table VI.

Table VI. Priority Level Classification

Total score	Priority level
0–3	Low
4–6	Medium
>6	High

After classifying the priority level, it can be concluded that all the driving forces’ priority is described in Table VII.

Table VII. Classification of Driving Forces

No.	Driving forces	Impact		Uncertainty
		Totalscore	Prioritylevel	Totalscore	Prioritylevel
1.	Feedstock used	2	Low	5	Low
2.	SAF price	10	High	7	High
3.	Substitute products to reduce emission	–	Low	–	Low
4.	Regulatory for airlines	7	High	9	High
5.	Framework used	1	Low	1	Low
6.	Market condition	4	Medium	5	Medium
7.	SAF carbon footprint	–	Low	–	Low
8.	Fiscal assistance	3	Low	1	Low
9.	Environmental issue	2	Low	–	Low
10.	Institutional collaboration	1	Low	–	Low
11.	Production infrastructure funding	4	Medium	3	Low

Stage 3: Scenario and Narratives Creation

After all the driving forces are defined and the most uncertain and most impactful driving forces are determined, the scenario can be created. All the interview questions and interview answers are attached in Table II. The scenario was created by creating a 2 × 2 matrix according to the most uncertain driving forces, which are regulatory for airlines and SAF prices as the most impactful for airlines. Both driving forces (SAF Prices and Regulators for airlines) are considered bottlenecks nowadays, according to all interviewees with convergent interview results. The X-axis is the SAF prices as the most impactful driving force, while the Y-axis is Regulatory for Airlines. The scenario can be shown in Fig. 6.

• Scenario 1: Sunshine: This scenario is considered the most desired scenario, while the Low SAF Prices compete with conventional jet fuel prices, whether it is due to incentive, government regulation, or other factors involved. At the same time, the regulations for airlines to use SAF are firm, which stimulates airlines to buy and use SAF for their daily operation.
• Scenario 2: Windy: This scenario puts regulation first while the SAF price is high. This might be happening in Indonesia in the near future. Currently, stakeholders, such as the Ministry of Transportation, Ministry of Energy and Mineral Resources, Ministry of Marine & Infestation, and Ministry of Finance, are discussing regulations for SAF in Indonesia.
• Scenario 3: Rainy: A rainy scenario is when the SAF price is low, but the regulation is soft. Meaning there will be some sort of mechanism to suppress SAF prices to compete with conventional jet fuel. This usually rarely happens without government intervention.
• Scenario 4: Strom: The fourth scenario is a storm. This scenario happens when there are soft regulations for airlines and the SAF prices are high. There will be some sort of regulations for other stakeholders, such as SAF producers or SAF distributors. The conditions that might happen are not regulatory at all for all stakeholders, or there is a regulatory but not for all SAF ecosystems, creating unbalanced environments for SAF.

Fig. 6. Scenario defined.

Stage 4: Options Considerations

All the scenarios and narratives are already explained in stage 3; the next stage of scenario planning is the study of implications and selection of options. Table VIII, regarding implications and options, will explain briefly the implications of all scenarios created and the options gathered from the interviews and literature review.

Table VIII. Implications & Options

No.	Scenarios	Implications	Options
1.	Sunshine	Right regulatory for airline using SAF require big effort from every stakeholder	One of the ministries in Indonesia must lead discussion to create regulation that benefit all stakeholders
		Competitive SAF prices will shift demand to SAF where at some point it will increase the price	SAF prices mechanism is given to market, but government must regulate the bar for prices, similar to conventional fuel
		Ecosystem of SAF in Indonesia is set and mature enough to implement SAF	All stakeholders must explore new view to ensure how the SAF ecosystem benefit the most
		Substitute product for redacting emission will face tough challenge with SAF	There must be regulatory farmwork that ensure all options to reduce emission is count and an extra effort from government to raise demand from other industry
		The might be a domestic market obligation for feedstock resources in Indonesia	Government must diversify feedstock resources in Indonesia to ensure SAF production will not hinder by feedstock avaibility.
		There will be investment for green refinery in Indonesia to produce SAF	Stakeholders involves must maximize the green refinery build to produce other items needed
2.	Windy	There might be a protest by airlines where they might think they are being force to use SAF	Government have to find mechanism to reduce SAF prices or giving other fiscal incentives for airlines
		Regulatory framework might require finding solution to reduce SAF	While arranging the regulatory framework for airlines, government must all fiscal elements for airlines to ensure high SAF prices will not hindering industry growth
		Higher SAF prices will generate tendency for airlines to find substitute product on reducing emissions	Government mandate on SAF must be clear with certain amount of % must be used each year to reduce emission
		Low enforcement of regulatory will let airlines operation using conventional jet fuel	Enformance for the regulatory arranged must be clear and ensure airlines to obey
		Airlines will choose another region as their flying hub where they are not mandate to use SAF	Regulatory for SAF must consider how aviation industry grow especially competition among airlines
		High SAF prices will generate snowball effect on ticket prices that will hindering economic development	Government must give another incentive through other activity such as tax deduction for purchasing airline tickets ensuring snowball effect to impacting economic development
3.	Rainy	Low SAF prices will increase Indonesia aviation growth due to number of airlines preferred Indonesia as flying hub for refueling SAF with cheap prices	Domestic airlines must be protected as the competition increase, otherwise Indonesia national air carrier is hard to compete
		Market will form itself from demand and supply of SAF, at some point low price of SAF will be higher from conv. jet fuel	The market will shape it’s own, regulation should interfere to ensure all stakeholder involved is benefit the most
		Soft regulatory for airlines might giving negative view from international community regarding Indonesia commitment to reach net zero	Government must involve indirectly to ensure SAF is being used airlines for their daily operation through SOE such as PT Pertamina group
4.	Strom	Indonesia government is questioned by international community for their commitment on reaching net zero	All stakeholder involved must giving extra effort to explain and promise reducing emissions can be form in many activities, now only using SAF
		Airlines grow might not hindering by expensive SAF prices	Airlines must put the budget to develop their business ensuring economic growth for Indonesia
		Indonesia effort to reduce emission must be enhance due to low contribution from aviation sector, especially biofuel	Government must consider other effort to reduce emission from different industry/sector or raise clean energy usage other than jet fuel
		Energy resources will not diversify in aviation industry due to lack of consideration for using SAF	Generating study for other energy resources in aviation industry

Stage 5: Integrations

One of the goals for this last stage of scenario planning is to discover the early warning signals. All the early warning signals must be identified which will affect the scenario orientation in the future. From an in-depth interviews and literature review, all the early warning signals is described in the explanation in Table IX.

Table IX. Early Warning Signals

Driving forces	Indicators	Scenarios
		Sunshine	Windy	Rainy	Strom
SAF price	Market condition	Regulated Market, but price is determined by the supply and demand	Regulated Market, price is determined from the supplier side	Market formed by the supply and demand	SAF market is intermittent or no SAF market at all
	Feedstock used	Diversify any kind of feedstock that accepted by intl. regulation	Feedstock is determined by the government	Feedstock is preferred by the airlines	Unsure on what kind of feedstock used to produce SAF
	Fiscal assistance	Fiscal assistance is available, whether formed by stakeholder involved or determined from gov.	Fiscal assistance might available, determined by government	Fiscal assistance is available, whether formed by stakeholder involved or determined from gov.	No fiscal assistance at all, strong financial airlines will voluntary using SAF
	Competition with other substitute products	SAF is able to compete also becoming preference of customer	SAF can only compete because of the regulation	SAF is able to compete but might not becoming the customer preference	There is no competition for SAF among other emission reduction activity
Regulatory for airlines	Framework used in Indonesia	Clear framework used, also align with international framework CORSIA	Clear framework used	Unclear framework used, might be regulate another sector that influence SAF indirectly	No framework at all
	Environmental issue	Environmental issue is highlight by government with clear target	Environmental issue is highlight by government with clear target	Environmental issue is forced by industry player	Lack of consideration on environmental issue, industry growth is top priority
	Certainty of supply	Fund to build green refinery is not a problem, SAF supply can fulfill demand	Fund to build green refinery is not a problem, somehow demand fulfilled by external supply	Demand fulfilled by refinery in Indonesia or external supply randomly	No discussing on supply, mostly SAF transaction is one time transaction

Ideal Conditions (Scenario Planning)

The next stage is an analysis to identify the strategy for implementing SAF in Indonesia. As mentioned in the previous sub-chapter, there are four scenarios. The desired scenario, according to the interview, is the ‘Sunshine’ scenario. The area of improvement must be determined to find the gap and treat the gap as a threat or weakness. The area that already exists and makes a good contribution to SAF implementation from Chapter IV.1 PESTLE and Porter 5’s Forces analysis will be treated as strength and opportunity. Improvement area needed (IAN)/No Improvement needed (N) is determined in Table X.

Table X. Determining the Area for Improvement (Improvement Area Needed (IAN)/No Improvement Needed (N))

No	Aspects		Driving forces	Existing condition	Ideal condition according to ‘sunshine’ scenario	IAN/N
	Internal	External
1.	Supplier power	Politics	Feedstock used	• Indonesia has abundant feedstock resources, two of them are Use Cooking Oil and Palm Oil • Indonesia currently not yet prioritize which kind of feedstock used for SAF • Indonesia has no regulatory for the exported Use Cooking Oil to generate ‘tariff’ or domestic market obligation	• Indonesia has firm decision on what kind of feedstock used and prioritize for SAF usage • There is clear regulatory framework for SAF ecosystem, including regulatory for feedstock used. Currently there are clear regulatory for Palm Oil but not for Use Cooking Oil	IAN
2.	Buyer power & rivalry	Politics & economic	SAF price	• Currently SAF prices is 2–3 times higher dan conventional jet fuel, it is unaffordable for airlines • There is no mechanism to reduce SAF prices	• SAF prices is compete with conventional jet fuel price • There is mechanism to decrease SAF prices or decrease other operating cost (for example reduce tax for aircraft spare part) that consider as non-direct financial assistance	IAN
3.	Threat of substitute	Social	Substitute products to reduce emission	• Carbon market in Indonesia (IDX Carbon) that push by Indonesia government can be double-edge sword for Indonesia. It giving options for industry, including aviation industry, to reduce emissions but at the same time hindering SAF growth • Other measurement can be used to offset emissions, such as operating new engine generation on aircraft that cut emissions	• There is clear framework to push SAF ecosystem, including regulate airlines to SAF with certain amount of % from their total emission	IAN
4.	Rivalry	Legal	Regulatory for airlines	• There is no mandate for airlines or no specific regulation exist for airlines for use SAF • No push from government to use SAF	• SAF regulatory is needed for airlines with push from government to ensure all the ecosystem for SAF is working	IAN
5.	Threat of substitute	Social	Framework used	• Currently there are two main frameworks exist for SAF, RED II (EU) and CORSIA (ICAO) • Indonesia announce will join CORSIA program but having no specific framework	• No need to create new framework but follow international scenario that adopted in national regulatory is also acceptable as long as emission reduction is recognized	N
6.	Buyer power	Economic	Market condition	• There is many uncertainties in SAF market, related to feedstock, higher prices, benefit for airlines etc. • SAF market in Indonesia is not yet establish	• In sunshine scenario, SAF market is establish, whether is regulated market due to regulatory for airlines or the market form itself	N
7.	Buyer power	Environment	SAF carbon footprint	• Current regulatory for SAF is unclear, made SAF carbon footprint calculation is debatable while there is no monitoring, reporting, validating activity for SAF footprint	• The monitoring, reporting and validating mechanism is needed to ensure environmental issue is tackled	IAN
8.	Threat of substitute	Politics	Fiscal assistance	• There is no incentive for SAF usage. • There is either non-direct fiscal assistance or non-fiscal assistance for airline for using SAF	• Mechanism to giving incentive whether it is direct or non-direct incentive for airlines is establish • There is non-fiscal benefit for airlines by using SAF such as giving flight slot on golden hour if using SAF etc.	IAN
9.	Supplier power & buyer power	Environment	Environmental issue	• Environment concern will urge SAF adoption • Airlines and government are aware of this issue	• All stakeholder involved is aware if environmental issue and willing to achieve Indonesia net zero ambition in the future	N
10.	Rivalry	Politics	Institutional collaboration	• Currently stakeholder is doing collaboration, especially for test flight using SAF. • Collaboration is led by the government but not in business area.	• All stakeholders must keep their collaboration for SAF implementation.	N
11.	Rivalry	Politics & economic	Production infrastructure funding	• Currently PT Kilang Pertamina International is planning to build green refinery to produce SAF	• The plan is on Proyek Strategis Nasional (PSN) fully support by government but unclear whether support will happen in financial form or not	N

All the improvement areas needed from Table X give clear insight into which area or improvement is needed to implement SAF in 2027.

Conclusion and Recommendations

Conclusion

The current conditions in Indonesia are analyzed using Porter’s 5 forces analysis and PESTLE analysis, which give views on 11 indicators that have the same point of view as driving forces in scenario planning for SAF implementation. The key focal issue determined for this study is “What strategy can be taken by Indonesia to Implement SAF in 2027?”. During the scenario planning, the driving forces are identified and analyzed through interviews and literature studies. There are a total of 11 driving forces.

The follow-up question for all interviewees is ranked the driving forces they mention. Then, analysis is done to find the most impactful and the most uncertain driving force. SAF price is the most impactful, and Regulations for airlines are the most uncertain. Then 4 scenarios were created according to the most impactful and the most uncertain by using a 2 × 2 matrix, called ‘Sunshine,’ ‘Rainy,’ ‘Windy’, and ‘Strom.’ According to in-depth interviews, the most desired scenario in the future, according to all stakeholders interviewed, is the ‘Sunshine’ Scenario. There are a total of 7 early warning signals that are related to the most impactful and the most uncertain driving forces.

The current conditions from PESTLE and Porter’s 5 Forces analysis are compared with the ideal conditions in the future, the ‘Sunshine’ scenario, to find gaps. Later, the gaps can be identified; there are gaps in Feedstock used, SAF price, Substitute products to reduce emissions, Regulations for airlines, SAF carbon footprint, and Fiscal assistance. All the gaps will later become recommendations for Indonesia’s government, which will be described in the next chapter.

Recommendation

Recommendation for Indonesia Government on SAF Implementation

Feedstock used: Indonesia must determine which kind of feedstock is used to determine policy in order to secure feedstock for the refinery as well as control feedstock prices as low as possible. SAF price: There should be fiscal assistance to stimulate the SAF market in Indonesia; otherwise, with current conditions where LCC(Lost Cost Carrier) dominates the Indonesia market, it is hard for airlines to buy SAF. Substitute products to reduce emissions: Indonesia is eager to have the Indonesia Carbon Exchange (IDCX). The side effect is when the carbon credit price is lower, the solution to reduce emissions, such as SAF, is questioned due to a substitute products with a more competitive prices being available. Hence, there must be mechanisms to ensure SAF is used. Regulatory for airlines: Current regulations is one-sided where the regulated institution is fuel producers through MEMR 12/2015 decree. The airline that acts as the end user of SAF is not yet regulated. To ensure SAF usage to reduce emissions, airlines must be mandated or obligated. SAF carbon footprint: There must be Monitoring, Reporting, and Validating mechanisms for emissions reductions using SAF. The MRV mechanism is needed to ensure SAF usage is giving added value to airlines. Fiscal assistance: Fiscal assistance is needed due to the premium prices that airlines have to pay for using SAF instead of conventional jet fuel. A condition that makes it competitive is needed.

Future research

Future research will focus on SAF market conditions and marketing strategies for SAF to penetrate the market in Indonesia. Due to its prices and the added value given by SAF, which can not give direct benefits to airlines, special marketing strategies are needed. Another recommendation for future research is to focus on policy taken by the government in order to establish an ecosystem of SAF.