How Regulation 12/2015 from MEMR Shift Supply and Demand in Indonesia Aviation Fuel Industries

The aviation fuel industry lately is shifting as new aviation products are penetrating the existing market all around the world, including Indonesia. Sustainable Aviation Fuel or known as SAF, is a new aviation industry product that aims to reduce emissions with the same specification and performance compared to conventional aviation fuel. As some countries or continents mandate the use of SAF, demand, and supply for SAF are forming while demand and supply for conventional aviation fuel is starting to shift. Indonesia through the Ministry of Energy and Mineral Resources encourages industry players to start using SAF. Many correlated industries favor the use of SAF as it will nurture new renewable energy businesses in Indonesia, starting from the feedstock industry such as the Used Cooking Oil Collecting industry, POME, etc. to renewable/green refines to refine the product. Ministry of Energy and Mineral Resources Regulation number 12/2025 Mandate the use of Bio Component of SAF which will shift the conventional aviation fuel demand.

Introduction

The economic impact of the pandemic causing budget constraints has already impacted ATM upgrades and Indonesia’s ability to support its aviation industry. The government should consider new options for financing ATM upgrades and other aviation-related projects that are critical for facilitating growth and are also needed to comply with international standards. The economic environment is uncertain and could lead to a reduction in discretionary income levels, resulting in a temporary reduction in air travel demand. Indonesia is a price-sensitive market vulnerable to inflation and rising costs (Development Bank, Asian, 2023).

The rise of the Aviation industry’s pasca COVID-19 favors the government’s vision on reducing carbon emissions in the Aviation Industry. As mentioned in the previous paragraph, the government must consider new options for financing related parties in aviation industries, including airlines and aviation fuel sellers, in order to reduce carbon emissions caused by burned fuel by aircraft. IATA predicts in 2030, the number of passengers traveling by air will double (IATA, 2023). Indonesia, as archipelago country depends on air or water transport. This situation challenges Indonesia to reduce carbon emissions in the transport sector, especially in air or water transportation.

To Reduce carbon emissions in the air transport sector, some solutions are available, but IATA mentions that the most contributing factor is using SAF (IATA, 2023) as shown on Fig. 1. 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).

Fig. 1. Contributing factors to achieve net zero in 2050 (IATA, 2023).

Literature Review

A Sustainable Aviation Fuel

According to CORSIA, Sustainable aviation fuel has a different definition, depending on whether it is produced before 2024 or after 2024. Referring to CORSIA, fuel can be categorized as Sustainable if it can reduce at least 10% carbon value in life cycle emission compared to conventional fuel.

Indonesia on the other hand, has plenty of Palm Oil. As MEMR regulates to using of bio components in fuel, including fuel in the aviation sector. The regulation favors the palm industry as it will grow as one of the feedstock used for SAF. But on the other hand, palm had specific conditions that must be met by the producer to ensure its sustainability.

As seen in Table II, if MEMR pushes industry players to produce SAF and use Palm Oil at the same time. To ensure carbon reduction of more than 10%, Palm Oil Producer must have anaerobic ponds that capture and oxidized biogas from Palm Oil Mill Effluent. Otherwise, the Life Cycle Emissions if using Palm Oil is 99.1 gCO_2e/MJ, which is more than conventional fuel (89 gCO_2e/MJ). This is a challenge for the Palm industry to produce Palm Oil to ensure they have carbon captured ponds.

Pathways to produced SAF are also impacted as the feedstock preference is chosen or driven specifically by MEMR regulation. Based on Table I, companies that aim to produce SAF in Indonesia only have specific solution to produce SAF, whether they will use HEFA or FOG Co-Processing because it only two pathways that can accept Palm Oil as Feedstock.

Table I. Sustainability Criteria According to CORSIA (ICAO, 2022a)

Theme	Principle	Criteria
Greenhouse gases (GHG)	CORSIA eligible fuel should generate lower carbon emissions on a life cycle basis.	Criterion 1.1: CORSIA eligible fuel will achieve net greenhouse gas emissions reductions of at least 10% compared to the baseline life cycle emissions values for aviation fuel on life cycle basis.
Carbon stock	CORSIA eligible fuel should not be made from biomass obtained from land with high carbon stock.	Criterion 2.1: CORSIA eligible fuel will not be made from biomass that is either obtained from land converted after 1 January 2008 that was primary forest, wetlands, or peat lands or contributes to degradation of the carbon stock in primary forest, wetlands, or peat lands as these lands all have high carbon stocks. Criterion 2.2: In the event of land use conversion after 1 January 2008, as defined based on the intergrovernmental Panel on Climate Change (IPCC) land categories, direct land use change (DLUC) emissions will be calculated. If DLUC greenhouse gas emissions exceed the default induced land use change (ILUC) value, the DLUC value will replace the default ILUC value.

Table II. Life Cycle Emissions Factor for SAF Processed Using HEFA (ICAO, 2022b)

Region	Fuel stock	Pathway specifications	Core LCA value	ILUC LCA value	LSf (gCO2e/MJ)
Global	Tallow		22.5	0.0	22.5
Global	Used cooking oil		13.9		13.9
Global	Palm fatty acid distillate		20..7		20.7
Global	Corn oil	Oil from dry mill ethanol plant	17.2		17.2
USA	Soybean oil		40.4	24.5	64.9
Brazil	Soybean oil		40.4	27.0	67.5
Global	Soybean oil		40.4	25.8	66.2
EU	Rapseed oil		47.4	24.1	71.5
Global	Rapseed oil		47.4	26.0	73.4
Malaysia & Indonesia	Palm oil	At the oil extraction step, at least 85% of the biogas release from the Palm oil Mill Effluent (POME) treated in anaerobic ponds is captured and oxidized	37.4	39.1	76.5
Malaysia & Indonesia	Palm oil	At the oil extraction step, at least 85% of the biogas release from the Palm oil Mill Effluent (POME) treated in anaerobic ponds is captured and oxidized	60.0	39.1	99.1
Brazil	Brassica carniata oil	Feedstock is grown as a secondary crop that avoids other crops displacement	34.4	−20.4	14.0
USA	Brassica carniata oil	Feedstock is grown as a secondary crop that avoids other crops displacement	34.4	−21.4	13.0
Global	Brassica carniata oil	Feedstock is grown as a secondary crop that avoids other crops displacement	34.4	−12.7	21.7
Global	Camelina oil	Feedstock is grown as a secondary crop that avoids other crops displacement	42.0	−13.4	28.6
India	Jatropha oil	Meal used as fertilizer or electricity input	46.9	−24.8	22.1
India	Jatropha oil	Meal used as animal feed after detoxification	46.8	−48.1	−1.3

Regulation Correlated with SAF

Many regions or states are trying to mandate using SAF as it will reduce carbon emission compared to other factors. One of the drivers for the state or region is an organization called the International Civil Aviation Organization or ICAO. ICAO was formed in 1948, starting from 26 states, and created a convention that aimed to set a safety standard for aviation industries then ICAO became the agency of the United Nations to Economic and Social Council. Nowadays, ICAO assembly consists of 139 states which are led by 26 council states.

ICAO introduced CORSIA, or Carbon Offsetting and Reduction Scheme for International Aviation. There are 124 states that intend to join CORSIA implementation, including Indonesia. Indonesia, through DGCA, already covey CORSIA to related industries in the aviation sector. CORSIA also drives state and regional regulations to reduce carbon, one of them is ‘Fit for 55’ package from the EU shown in details on Table IV. EU aims to reduce carbon emission by at least 55% in 2030 by implementing Fit for 55. EU considers CORSIA as one of the tools that can leverage Fit for 55 packages. Hence, booth Fit for 55 and CORSIA are aligned.

As mentioned in Table III, the EU will mandate using SAF starting in 2025 by a minimum of 2% of total Aviation Fuel Demand. At current price levels, the CO₂ mitigation cost of SAF is much higher than any EU emission allowance for carbon offset. Therefore, operators across the EU are currently using only minor quantities of SAF, e.g., for marketing, PR, technical and operational trials. Yet, without a reliable demand for SAF, fuel producers may be reluctant to start production when risking to sell their SAF at the price of conventional aviation turbine fuel. (Pechsteinet al., 2020).

Table III. Feedstock Used and Maximum Blending Ratio for Each Pathway (Shahriar & Khanal, 2022)

Production pathway	Feedstocks used	Permissible blending ratio by volume
FT	Carbon-based biomass	50%
HEFA	Oil-based feedstock	50%
SIP	Lignocellulosic biomass	10%
FT-SKA	Carbon-based biomass	50%
ATJ	Alcohol or sugar-based feedstock	50%
CH	Algae, waste oil, oil plant	50%
HC-HEFA	Algae	10%
FOG Co-processing	Oil-based feedstock	5%
FT Co-processing	Carbon-based biomass	5%

Table IV. EU: Fit for 55 Package (Ovaere & Proost, 2022)

Instrument	Aviation
Cap-and-trade	Intra-EEA flights under EU ETS since 2012
Tax	Remove exemptions and reduced rates in all MSs. As of 2023, minimum tax level for non-sustainable fuels of €10.75/GJ, equivalent to around €0.41 per liter
Mandate	Share of SAF:2–5%–20%–32%–38%–63% in 2025–2050
Firm-level emission performance standard of new vehicles	N/A
Infrastructure mandate	Provide electricity supply to stationary commercial aircrafts at all gates by 2025
Investment subsidies	• The Recovery and Resilience Facility provides €86 billions of grants and loans to sustainable transport and charging stations (including rail) in 2021–2026 • Connecting Europe Facility provides €22.9 billion for transport infrastructure (including rail) for 2021–2027
Research subsidies and partnership (2021–2027)	• Horizon Europe €511 million funding in 2021–2022 for clean and competitive solutions for all transport modes • €1.7 billion for Clean Aviation2

Setting goalposts in the form of emissions targets can help local governments develop action plans, increase community engagement, and provide standards for others to follow (Lazaruset al., 2013) On the other hand, Indonesia in 2016 already had set regulations to follow by aviation industry players that mandate using bio components in several industries. Indonesia has planned to advance industries in Palm plantations since 2016, thus it created regulation that favors using of Bio components in the fuel. After ICAO introduced CORSIA in 2018, it aligned with Regulation number 12/2015 from the Ministry of Energy and Mineral Resources (MEMR) in terms of carbon emissions reduction.

Regulation number 12/2015 regulates bio components in aviation fuel is 2% in 2016 then gradually increase to 5% in 2025 where detail is drawn on Table V. Nowadays, this regulation is not yet implemented in industries, especially in aviation industries. Several factors such as industry readiness to serve SAF to airlines, airlines’ willingness to use SAF as a substitute for conventional fuel with higher prices, and last, there is no punishment if airlines cannot fulfill the mandate.

Table V. Mandate Using Bio Component in Fuels: C. The Phasing of Minimum Obligations for the Utilization of Pure Vegetable Oil (O100) As a Mixture in Petroleum Fuel

Type of sector		April 2015	January 2016	January 2020	January 2025	Notes
Household		–	–	–	–	Currently undefined
Industry and transportation (Low and medium speed engine)	Industry	10%	20%	20%	20%	Of all total demand
	Sea transportation	10%	20%	20%	20%	Of all total demand
Air transportation		–	2%	3%	5%	Of all total demand
Power generation		15%	20%	20%	20%	Of all total demand

Methodology

This paper aims to understand the influence of regulation on to supply and demand of aviation fuel. Furthermore, this paper will examine if the regulation can be fulfilled by adding subsidies to fuel prices will result in customer surplus or produce surplus loss.

This paper will draw the supply and demand curve for aviation fuel on existing data from conventional aviation fuel. Supply Quantity is considered from refineries Y production and import while Supply prices are indicated from Middle Oil Prices Singapore for Kerosine (MOPS Kerosine). MOPS price is common practice used in the oil and gas industry to determine prices in commodity trading. Demand Quantity is considered from Quantity Convensional Jet Fuel Sold by the company named X including its overseas sales with the contracting company and delivery company scheme. Demand Prices is company X posting prices in the biggest airport in Indonesia. This paper only covers the first six months in 2023 to form the Supply and Demand curve.

$$Q_{Supply}= Q_{Refinery ″Y″ Production}+ Q_{Jet Fuel Import}$$

$$Q_{Demand}= Q_{Sales Company ″X″}$$

$$P_{Supply}= P_{MOPS Kerosine}$$

$$\begin{array}{r}{P}_{Demand}=P_{PostingPrices{in}^{″}{A}^{″}airport}\end{array}$$

There will be new Quantity for demand as MEMR is mandated to use 3% in 2020 then gradually increase to 5% in 2025. It is assumed that % blending is 20% as it is common practice to blend 20% bio component to conventional jet fuel. MOPS SAF will be used and will be added to conventional jet fuel prices. By doing so, the princes will go higher then new demand curves will be formed. Quantity demand will be the same as the previous quantity before using SAF. The reason it will be the same because this paper assume quantity of the aircraft fleet is the same, route is the same, number of airlines is the same. This will simplify the calculation even though many variant factors are neglected.

$$\begin{array}{r}{P}_{Supply}^1=(80\mathrm{\%}\times P_{MOPSKerosine})+(20\mathrm{\%}\times P_{MOPSSAF})\end{array}$$

$$Q_{Supply}^{1\text{'}}= Q_{Sales Company ″X″ }\times 103\%$$

$$Q_{Supply}^{2\text{'}}= Q_{Sales Company ″X″ }\times 105\%$$

Then, we will try to implement ceiling prices to the demand and supply curve. Assume that ceiling prices will be implemented as the government tries to interfere with high prices for SAF then force them to lower the prices by subsidizing fuel prices. This will release airlines’ burden on paying extra for SAF, the reason the government giving subsidies to fuel prices is that without subsidy, airlines will give higher ticket prices because fuel prices are increasing. The variation in fuel price can affect the profitability of airlines as fuel is a major cost component. On average, 28.7% of airlines’ expenses are from fuel and the reduction in fuel price lowered industry-wide break-even load factors and improved airlines’ financial performance in 2015 (Hamdanet al., 2022a). It can be assumed that ticket prices and fuel prices are correlated, and airlines tend to burden higher fuel prices to the customers.

To form demand and supply curves, the linear regression method will be used.

$$\begin{array}{r}y=bx+C\end{array}$$

where y is Prices (P) and x is Quantity (Q). Regression will be calculated using Microsoft Excel. However, it must be acknowledged that our stylized version of the Supply and Demand Curves dynamics imposes a severe constraint on the potential sources of structural disturbances (Binet & Pentecôte, 2015). This disturbance will happen as this paper sets aside many aspects, such as airline fleet growth, disturbance in MOPS prices due to political issues, etc. This paper also only covers 6 months of supply and demand data, which might not reflect real industry conditions.

Discussion and Analysis

STEP 1: Determined Demand and Supply Curved

Quantity Refinery “Y” Production, including import product and MOPS Kero prices are given in Table VI.

Table VI. Quantity Supply and Price Supply

Month	Production qty (kilo liters)	MOPS kero prcs (USD/bbl)1	MOPS kero prcs (Rp/liters)2
	$Q_{Supply}$		$P_{Supply}$
January	430.000	114,99	10.341
February	401.000	106,61	9.588
March	373.000	98,74	8.880
April	368.000	96,77	8.703
Mei	369.000	97,85	8.800
June	407.000	99,26	8.927

Quanity product sold for company “X” and Posting Prices for airport “A” prices given in Table VII.

Table VII. Quantity Demand and Price Demand

Month	Sold qty (kilo liters)	Posting prcs (Rp/Liters)3
	$Q_{Demand}$	$P_{Demand}$
January	380.000	15.136
February	342.000	14.987
March	410.000	13.737
April	300.000	13.001
Mei	380.000	12.521
June	460.000	11.784

From the data given in Table VIII, using linear regression, we can determine the formula for each curve below.

Table VIII. Demand and Supply Coefficients Curve

Supply	Coefficients
Intercept	682,94
X Variable 1	0,02
Demand
Intercept	22729,87
X Variable 1	−0,02

From regression result in Table VIII, we can conclude that the formula for the curves is:

$$\begin{array}{r}{Y}_{Supply}=0,02x+682,94\end{array}$$

and:

$$\begin{array}{r}{Y}_{Demand}=-0,02x+22.729,87\end{array}$$

Then curves for supply and demand can be drawn.

According to the graph on Fig. 2, consumer surplus and producer surplus can be calculated by calculating the between Demand Curves and Supply Curves. It can be calculated the consumer surplus is 3.037.919.093 IDR and the Producer Surplus is 3.226.129.136 IDR.

Fig. 2. Demand and supply curves for conventional jet fuel.

STEP 2: Determined Changes Demand and Supply Curved by Regulating MEMR Regulation 12/201

Quanity from Refinery is forced to produce SAF. The prices for supply are changing describe on Table IX.

Table IX. MOPS Kero Prices & SAF Prices for Six Months of 2023

Month	MOPS kero prcs (Rp/liters)4	MOPS 100% SAF prcs (Rp/liters)5	80% × MOPS kero + 20 % × MOPS SAF
			$P_{Supply}^1$
January	10.341	43.360	16.944
February	9.588	40.490	15.768
March	8.880	40.577	15.219
April	8.703	41.366	15.235
Mei	8.800	38.226	14.685
June	8.927	37.342	14.610

Then, it can calculate the Qantity changes from MEMR 12/2015, using two scenarios. The first scenario is using the year 2020–2025 by adding 3% from the total supply and the second scenario is using after 2025 by adding 5% from the total supply (Table X).

Table X. Qantity Changes

Month	Production qty (kilo liters)1	Production qty + 3%	Production qty + 5%
		$Q_{Supply}^{1^{\prime }}$	$Q_{Supply}^{2^{\prime }}$
January	430.000	442.900	451.500
February	401.000	413.030	421.050
March	373.000	384.190	391.650
April	368.000	379.040	386.400
Mei	369.000	380.070	387.450
June	407.000	419.210	427.350

Then, new supply curves can be calculated as MEMR regulates the fuel supply to supply SAF. This paper will examine how demand response by regulating MEMR 12/2015 regulation. Using linear regression, we can determine the formula for each curve below:

$$\begin{array}{r}{Y}_{Supply}^{1^{\prime }}=0,0223x+6395\end{array}$$

$$\begin{array}{r}{Y}_{Supply}^{2^{\prime }}=0,0219x+6395\end{array}$$

where y is Prices (P) and x is Quantity (Q).

Then it can be calculated customer surplus and producer surplus.

It can be seen that implementing MEMR Regulation 12/2015, whether using the scheme for 2020–2025 or beyond 2025. Both Consumer surplus and producer surplus are reduced. Consumer surplus in both schemes is reduced by more than 50% while producer surplus is reduced by more than 34% for both schemes. All parameters used on Fig. 3 is explain on Table XI.

Fig. 3. Demand and supply curves for jet fuel after implementing MEMR 12/2015 by forcing SAF to the market (drawn as New Supply Curve).

Table XI. List of Parameters Used on Fig. 3

Parameter(s)	Explanations
P	Price where demand and supply meet
Q	Quantity where demand and supply meet
P1	Price where Quantity is changes due to 3% SAF adopted
P2	Price where Quantity is changes due to 5% SAF adopted
Q1	Quantity where 3% of SAF adopted and prices changes to P1
Q2	Quantity where 5% of SAF adopted and prices changes to P2

Marshallian consumer surplus as a welfare measure is equal to the area between the demand curve and the price line. Hicks developed a more general method to calculate changes in consumer welfare due to price changes. Marshallian and Hicksian demand functions coincide, and consumer surplus (CS) is an exact measure of welfare. However, even when preferences are not quasilinear, CS may be a reasonable approximation (Klophaus & Grosche, 2020).

STEP 3: Applying Price Ceiling to Ensure the Consumer’s Willingness to Buy Jet Fuel

Assume, the government will subsidize the jet fuel prices to ensure the prices are changing to previous prices before implementing MEMR 12/2015 regulations. Thus, the prices will be forced to 11.706 IDR by implementing a force ceiling. Without a price ceiling, implementing SAF will reduce benefits for customers and producers. After understanding the changes on supply and demand, the Consumer Surplus and Producer Surplus can be calculated and describe on Table XII.

Table XII. Consumer Surplus and Producer Surplus from Demand and Supply in Jet Fuel After Implementing MEMR 12/2015

	3% Addition SAF qty (IDR)	3% Addition SAF qty (IDR)
Consumer surplus	1.486.528.625	1.516.882.396
Producer surplus	1.991.059.827	1.978.295.410

The average (across routes) estimates of profit margins are in line with actual data sets provided for the overall U.S. air transport sector. For example, according to Airlines for America, the U.S. airline industry has profit margins ranging between 12.1% and 15.6% between 2015 and 2017 (Yilmazkuday, 2021). It can be assumed, that if fuel prices contribute to at least 28.7% (Hamdanet al., 2022b), then increasing in prices from 11.706 to 14.904 or 15.018 (avg. is increasing 36%). Hence, 28.7% of fuel in airlines’ financials will increase by 36% to 37.9%. Thus, in total it will reduce profit margins by 9.4%. If the profit margin is 12.1%, then the final profit margin after implementing MEMR 12/2015 regulation is 2.85%. This very small profit margin in a very big risk industry in air transport, will become a burden for the airlines or even become an entry barrier for new players to join the industry. It can be concluded that the government giving subsidies for jet fuel by ruling the ceiling floor is acceptable to sustain the industry. Supply and Demand of these condition are drawn on Fig. 4.

Fig. 4. Implementing ceiling prices to ensure buyers to buy jet fuel.

It can be assumed that jet fuel prices are inelastic. This condition appears because airlines have no other options or substitutes for Jet Fuel. Commercial aircraft fleets do not have other energy sources other than jet fuel. Thus, whether the prices increase or decrease, airlines keep buying jet fuel.

From the graph, it can be calculated the shortage, gain to customer, loss to producer, and deadweight loss in Table XIII.

Table XIII. Gain to Customer, Loss to Producer and Deadweight Loss by Implementing Ceiling Floor to SAF

Shortage1′ (3%)	A
	$551.173-237.463=313.709kL$
Shortage2′ (5%)	A
	$551.173-242.074=309.098kL$
Gain to	A − B
customer1′ (3%)	$(3.312\times 237.463)-\left(148.091\times 2.961/2\right)=\mathrm{219.312.284}\text{ IDR}/\text{kL}$
Gain to	A − B
customer2′ (5%)	$(3.312\times 237.463)-\left(147.397\times 3.040/2\right)=\mathrm{224.056.638}\text{ IDR}/\text{kL}$
Loss to	A − C
Producer1′ (3%)	$(3.312\times 237.463)-\left(148.091\times 6.278/2\right)=\mathrm{464.579.146}\text{ IDR}/\text{kL}$
Loss to	A − C
Producer2′ (5%)	$(3.312\times 237.463)-\left(148.091\times 6.181/2\right)=\mathrm{455.604.152}\text{ IDR}/\text{kL}$
Deadweight	B + C
Loss1′ (3%)	$\mathrm{219.312.284}+\mathrm{464.579.146}=\mathrm{683.891.429}IDR$
Deadweight	B + C
Loss2′ (5%)	$\mathrm{224.056.638}+\mathrm{455.604.152}=\mathrm{679.660.790}IDR$

Table XIII gives clear calculations on gain to the customer, loss to the producer, and deadweight loss by applying a ceiling price to meet MEMR 12/2015 regulation while ensuring the aviation industry keeps running and growing. It can be seen, the deadweight loss to implement 3% is 683.891.429 IDR, using kiloLiters unit. If we are covert to liters then it will 683.891.429.000 IDR. It only running for six months, to cover a year of about 1.367.782.858.000 IDR. Moreover, in another scheme to implement 5% for 2025 and beyond, it takes 1.359.321.580.000 IDR per year to keep Jet Fuel at the same price. It is a very big amount of money to spend to keep the aviation industry running and using SAF at the same time. Economic theory suggests one should expect the move to more cost-reflective prices to result in sizeable reductions in deadweight losses (Burke & Kurniawati, 2018).

Conclusion

There are several findings can be concluded in this study.

1. Implementing SAF will reduce consumer surplus and producer surplus. This means less welfare for fuel suppliers and airlines. If the government implements SAF without finding a solution for this problem, later it will lead to a drop in the aviation industry, and in the end, airlines will be burdened the higher prices to end consumers’ ticket prices. This will create an unfortunate domino effect on Indonesians.

2. Implementing a price ceiling will lead to a very high amount of deadweight loss. As economic theory suggests, the condition should expect a sizeable reduction in deadweight loss by moving to cost-reflective prices (Burke & Kurniawati, 2018). This means the government needs more solutions rather than only giving subsidies to reduce prices.

3. This paper aims to understand the shifting in supply by implementing MEMR 12/2015 regulation and what if a price ceiling is implemented to force jet fuel sold at the same prices, the calculation used is using regression model which might show inaccuracies.

4. Deadweight loss can be considered as subsidizing which reaches 1.35–1.37 trillion rupiah per year to meet the current jet fuel supply and demand balance to implement SAF. This needs to be considered carefully by Indonesia’s government.

5. Nowadays, industry players and the government are not yet on the same page on implementing SAF. In Indonesia, there is very low interest in academic research, especially in the energy economy sector that studies the implementation SAF and its effect. Many aspects of this paper can be improved in order to give a proper view of SAF implementation.