Inclusive Just Transition can Unlock Jobs, Economic Resilience, and Social Equity in Indonesia—New report

December 3, 2025, Jakarta — Indonesia’s coal phase-out requires strong support and commitment from the government to develop more inclusive just transition policies that protect vulnerable groups and support region-specific economic diversification to counter economic and social impacts, according to a new study.

The study, by the International Institute for Sustainable Development and Traction Energy Indonesia, highlights that Indonesia’s shift away from coal presents a powerful opportunity to meet its 2030 climate targets while strengthening local economies—provided the transition is managed carefully and inclusively.

In coal-dependent regions, where coal contributes up to 80% of GDP, and many residents work informally, qualitative research through focus group discussions, interviews, and community engagement revealed that people are deeply concerned about how they will sustain livelihoods beyond coal. These insights also surfaced gender-specific challenges and local priorities that modelling alone often misses. Many communities feel excluded from decision making and uncertain about their future: women see fewer re-employment opportunities, youth are anxious about education and jobs, and older residents worry about reduced welfare support.

The study also used economic modelling to examine the potential impacts of coal closures and identify pathways to safeguard jobs, local economies, and vulnerable groups across five coal-intensive regencies and five provinces in Indonesia. The effects of the energy transition varied widely across regencies. 
For example, potential job losses ranged from 5,000 in Sarolangun regency to 24,500 in Muara Enim. The employment impact did not always correspond directly with the magnitude of economic losses, reflecting structural differences in industrial composition and labour intensity across Indonesia’s coal-producing regions.

Unsurprisingly, the more diversified economies showed greater resilience against coal closures. These findings reinforce the need for region-specific just transition strategies, including economic diversification, worker retraining, welfare support, and investment in sustainable sectors tailored to the local economic structure.

“Accelerating the energy transition offers Indonesia a chance to build new industries and create more resilient, inclusive economies,” said Bathandwa Vazi, policy advisor, IISD. “If we prepare early, coal-dependent regions can transform risk into opportunity—protecting decades of development progress and driving new pathways for growth.”

At the provincial scale, East Kalimantan’s economy is currently highly dependent on coal, meaning the province faces significant exposure in a transition, including output losses of USD 42 billion, sectoral income decline of USD 5.5 billion, and over 490,000 jobs at risk.

Yet the modelling also shows a clear pathway forward: with targeted investment in dynamic sectors like food and beverage manufacturing and renewable energy, the region could not only offset projected losses—it could generate up to 2.5 million new jobs and build a more diverse, resilient economy.A just energy transition will also require targeted policies for informal workers, including retraining for green sectors, support for small to medium-sized enterprises, and robust social protection. Such measures are essential to ensure the transition promotes equitable outcomes for communities most at risk. Policies need to be developed with communities and workers to ensure their needs and priorities are addressed in the final package.

“Our findings show deep regional disparities in how the coal transition will impact communities. Transition planning can turn risks into opportunities for more stable, inclusive, and sustainable long-term growth, but communities need to be involved every step of the way,” says Refina Muthia Sundari, program manager at Traction Energy Asia. For policy-makers, the lesson is clear: to succeed, just transition policies must be locally informed, gender responsive, and rooted in inclusive, multi-level governance. By prioritizing green sector development, gender equality, disability and social inclusion (GEDSI), and institutional coordination, Indonesia can transition from a coal-dependent economy to a resilient, low-carbon, and inclusive future.

Media Contact

Bathandwa Vazi, policy advisor, IISD: [email protected]
Istu Septania, communications consultant: [email protected] 
Madhulika Verma, senior communications officer, IISD: [email protected]

About Traction Energy Asia

Traction Energy Asia is an independent think tank and strategic convenor leading Indonesia’s clean energy transition within a low-carbon economy. Our organization addresses the urgent need to mitigate the impacts of current energy choices on Indonesia’s unique biodiversity and ecosystems, while countering the growing threat of climate change.