One Step Forward, Two Steps Back: The Future of Indonesia’s Climate Security
Indonesia ranks among the world’s top carbon emitters, contributing significantly to global emissions. Simultaneously, Indonesia is among the countries most susceptible to the adverse effects of climate change. Like other Southeast Asian nations, Indonesia is vulnerable to multiple climate hazards, such as devastating flooding, landslides, and seasonal drought, which put an estimated 40% of Indonesia’s inhabitants at risk. Such exposure to climate hazards destabilizes economies and increases conflict risks by putting pressure on vulnerable communities. Despite this peril, Indonesia’s continued reliance on coal undermines its stated commitment to the green energy transition, which could mitigate some of climate change’s worst effects. Thus, Indonesia’s green energy transition can be described as a case of one step forward and two steps backward.
Indonesia’s Energy Transition Policies
In light of Indonesia’s current and future environmental challenges, the country has developed a long-term strategy to achieve low carbon emissions and climate resilience. A key pillar of this strategy is limiting coal dependency—one of Indonesia’s primary sources of greenhouse gas emissions. As part of this effort, the Indonesian government under President Joko Widodo took a significant step towards establishing the groundwork for Indonesia’s new energy policy by issuing government regulation No.79 in 2014. The policy aims to ensure that at least 23% of the nation’s energy mix comes from renewable energy sources by 2025. In 2016, the Indonesian government enacted law No. 16/2016, formally committing Indonesia to the Paris Agreement to reduce greenhouse gas emissions between 29% and 41% by 2030. Building on these domestic policy frameworks, Indonesia launched the Just Energy Transition Partnerships (JETP) at the 2022 G20 summit in Bali. This $20 billion international funding agreement represents a collaborative effort between developed nations and private institutions to help Indonesia cap and reduce emissions from its power sector by 2030, accelerate the adoption of renewable energy, and systematically retire coal power plants.
Despite these commitments, in early 2024, the Minister of Energy and Mineral Resources, Arifin Tasrif, announced that renewable sources account for only 13.1% of the country’s energy, falling 10% short of the 2025 target set by the 2014 National Energy Policy. A month later, Indonesia revised its National Energy Policy to lower its renewable energy target from 23% to between 17% and 19% by 2025. Such a move will prolong Indonesia’s high dependence on fossil fuels and suggest that the government is not fully committed to the energy transition.
These changes are consistent with Indonesia’s apparent tendency to walk back earlier environmental commitments. For instance, Indonesia revised its Mining Law in 2020 to favor coal companies by removing the requirement for companies to obtain environmental impact assessments (AMDAL) before starting operations. Additionally, the revised law removes limits on the size of mining operations, opening the door to larger-scale exploitation of natural resources. Similarly, when Indonesia introduces legislation to support the green energy transition, it often leaves substantial loopholes. Presidential Regulation No. 112/2022 was introduced to accelerate renewable energy development, featuring early retirement of coal power plants. However, the regulation falls short, as it does not address captive power plants (i.e., plants dedicated solely to powering industrial zones as part of national strategic projects), leaving them unaffected by the early retirement policy. These facilities form a large part of the industrial sector’s carbon footprint where large amounts of coal-fired power plants have been built next to industrial sites. Indonesia Morowali Industrial Park (IMIP) – a nickel smelting site, for instance, uses coal-fired power plants with 4560 MW capacity, while Jakarta has 5119 MW capacity in coal-fired power plants. While these captive plants reflect Indonesia’s prioritization of economic development, they nonetheless pose a major challenge in meeting its climate goals.
Indonesia’s green energy policy commitments highlight that it has the capacity to mobilize significant resources for its energy transition initiatives. In a strange dichotomy, the government both pursues renewable capacities while consistently undermining its own initiatives. These reversals are likely driven by underlying dynamics within the government that influence which interests are prioritized.
How Energy Security and Political Interests Shape Indonesia’s Energy Policy Decisions
Indonesia’s slow move to renewable energy is generally attributed to its preference for domestic energy sources, partially as a result of close ties between Indonesian politicians and domestic coal companies. For the Indonesian government, energy security is synonymous with energy independence. According to Indonesia’s Ministry of Defense, energy independence refers to the country’s ability to respond effectively to the dynamics of global energy changes and simultaneously ensure the availability of energy at home at reasonable prices. This emphasis on energy independence encourages the government to rely heavily on Indonesia’s substantial coal reserves. As of 2022, Indonesia is the second largest coal producer in the world, behind only the People’s Republic of China (PRC). Domestically produced coal provides 36.4% of Indonesia’s energy supply. This meets the country’s need for 35,000 tons of coal per day, which amounts to more than 12 million tons a year. Indonesia’s abundant natural resources have enabled the country to maintain relatively low electricity costs—at $0.092/kWh for residential consumption, the third-lowest among ASEAN member states—ensuring affordable energy access for its population of 270 million.
Indonesia’s abundance of coal has put the rock at the center of the country’s energy security strategy. To the extent that, despite decreasing demand for coal, the government set an ambitious target to boost coal production to over 900 million tonnes in 2024. This move aligns with former president Joko Widodo’s goal of procuring an additional 35,000 megawatts (MW) of electricity. Reliance on domestic coal also supports Indonesian coal companies, reducing dependence on foreign oil exporters and other foreign energy providers. A study on coal consumption and economic growth in Indonesia also found that rising GDP correlates with increased coal consumption. Domestic coal remains an essential energy resource for economic development in Indonesia.
Indonesia’s coal dependence is also a symptom of more profound governance challenges. Politics and the coal industry are tightly intertwined, with coal mining permits often serving as a source of revenue for politicians. This is exemplified by the East Kalimantan politician Rita Widyasari. She earned the nickname “Queen of Coal” due to the many coal mining permits she issued during her time in office. Investigations later discovered that Widyasari received $7.7 million in bribes for mining permits and gave mining concessions to companies connected to her family.
Widyasari’s case is not isolated. A small number of powerful family-run conglomerates with significant financial resources and strong political clout dominate the ownership of most Indonesian mines. As of 2020, Indonesia’s five largest coal companies were owned and managed by powerful companies whose owners also hold political positions. These private entities are larger than the state-owned enterprise Mining Industry Indonesia (MIND ID), which ranks sixth by production volume. These conglomerates hold political influence both directly and indirectly. This influence is consolidated through revolving door dynamics, as key political figures often transition into roles within the coal sector, further reinforcing policies that benefit the industry’s interests.
The Indonesian government also often overlooks its domestic coal industry’s adverse social and environmental impacts. Coal mining often occurs in direct opposition to community complaints, raising concerns whether the government can provide effective oversight of mining activities. For example, residents around villages in Morowali, South East Sulawesi, have been detained due to protests against mining operations, which they claim have disrupted their livelihoods, caused environmental damage, and encroached upon their land rights. In 2024, former President Joko Widodo allowed religious organizations to own and operate coal mining concessions, potentially as a way to reward groups that mobilized support for his apparent candidate of choice in the 2024 presidential election.
How Indonesia May Move Forward
Indonesia’s path to net-zero emissions demands structural reform of its energy infrastructure—a challenging yet achievable goal. Since democratizing in 1998, Indonesia has emerged as ASEAN’s largest economy with significant development in energy access. A particularly impressive milestone has been the electrification program, which increased electricity access from around 55% in the early 1990s to almost 100% in 2021. This milestone demonstrates how the government and private sector successfully mobilized resources to overcome Indonesia’s logistical and financial challenges across its 17,000 islands.
Moving forward, the same commitment is needed. There is no denying that the energy sector in Indonesia is tightly interwoven with politics and fossil fuel interests. However, energy transition cannot be achieved without the government addressing the roadblocks that have hampered the development of renewable energy. The government should ease its local content requirement, which mandates that over 40% of renewable project materials come from domestic manufacturers. This policy raises costs, and due to inconsistent demand, has failed to drive large-scale renewable equipment production.
Another avenue for change is energy subsidies. Subsidies for fuels reached a staggering IDR 551 trillion in 2022. The Prabowo administration plans to phase out these subsidies, aiming to redirect these subsidies toward renewable energy development that could better align with Indonesia’s climate goals. However, public backlash could hinder that attempt. After all, phasing out subsidies on fossil fuels would entail price hikes for most Indonesians.
Lastly, Indonesia could prioritize reskilling in regions highly dependent on the coal economy such as Kalimantan and Sumatra. This would help diversify the economy in those regions and slowly but steadily wean them off of coal, Indonesia’s existing Prakerja program could be enhanced with increased funding to drive participation and provide relevant skills for emerging industries. This expanded program could focus on sectors such as renewable energy, sustainable agriculture, and eco-tourism, aligning with each region’s economic diversification plans.
While there is no silver bullet for Indonesia’s energy policy reform, Indonesia’s new administration has already shown promise. Indonesia’s new government, under President Prabowo, has set ambitious goals of 8% economic growth while transitioning to cleaner energy to reach energy independence. At COP 29, Prabowo announced plans to phase out fossil fuels by 2040, aiming to add 75 GW of renewable capacity through hydropower (25 GW), solar (27 GW), wind (15 GW), geothermal (7 GW), and bioenergy (1 GW), while also hinting a potential for nuclear (5GW). This initiative requires an estimated $235 billion investment. Achieving these targets will hinge on Prabowo’s ability to marshal his administration and its resources to deliver on these promises. With 108 ministers and vice ministers, including representatives from nearly all political parties in Indonesia, he stands a decent chance to start his term with decisive action, taking more than one step forward.
Views expressed are the author’s own and do not represent the views of GSSR, Georgetown University, or any other entity. Image Credit: Mongabay