The Effect of Biodiesel to Pollutant Emission and External Cost

World wide numerous studies have proved that biodiesel is an environmentally friendly alternative diesel fuel. The maximum utilization of biodiesel in Indonesia could improve the air quality level in major cities especially in Jakarta. The most significant hurdle for broader commercialization of biodiesel in Indonesia is its cost. Thus acceptance of biodiesel in Indonesia is more influenced by pricing factor. The advantages of biodiesel such as a renewable energy, lower exhaust gas emission and effect to the longer engine life time are often ignored.The objective of this research was to assess the effect of biodiesel utilization in transportation sector to the air pollution level, health and economic impact which could be transferred into monetary values in the term of external-cost. The result showed that utilization of biodiesel could potentially improve air quality level in Jakarta. The implication of this finding suggests that the polluter (motorist) should be willing to pay additional fuel price depending on the biodiesel content in the diesel fuel blend.