Achieving a Just Energy Transition in Indonesia
Achieving a Fossil-Free Recovery in Indonesia | Brief 5
With the significant role of fossil fuels in Indonesia’s economy and society, the government needs to start thinking carefully about how it can achieve a just energy transition in a world where demand for fossil fuels will be shrinking dramatically over the coming decades.
Coal is still king in Indonesia—but it will not be forever. The government needs to acknowledge that there will be a future after coal and that the time may come sooner than current government projections, which foresee a massive coal industry well into the 2050s.
Early action is key to achieving a successful transition in fossil fuel-intensive economies. With the oil and gas sector already in decline, Indonesia needs to put in place contingency plans instead of continued public support for fossil fuels.
This brief—the fifth and final of the IISD’s series Achieving a Fossil-Free Recovery in Indonesia—examines why the principles of a just transition are important in an Indonesian context, how they have been applied in Indonesia as part of recovery from COVID-19, and how the country could strengthen its foundation for achieving a just energy transition going forward.
While the need to ensure a just energy transition is relevant in most parts of the world, it is particularly important for Indonesia. A net oil and gas exporter until 2007, Indonesia continues to be a notable oil producer globally, with around 746,800 barrels per day and more than 1 million barrels of oil equivalent per day of gas (International Trade Administration, 2022). Likewise, Indonesia continues to pay more subsidies to oil and gas than what the government gets in return from the sector. This underlines the need to start planning for a just oil and gas sector transition in order to avoid an even bigger problem in the future as the sector becomes increasingly dependent on public money for survival.
What's more, the coal sector is even more dominant in the Indonesian economy than oil and gas. The industry employed at least 100,000 people in 2018. Coal also plays a significant role in Indonesia's energy mix, with coal-fired power plants providing more than 60 percent of the country's total electricity demand.
The Government of Indonesia has announced energy transition as one of the main pillars of its G20 presidency in 2022. With the significant role of fossil fuels in Indonesia’s economy and society, the government needs to start thinking carefully about how it can achieve a just energy transition in a world where demand for fossil fuels will be shrinking dramatically over the coming decades.
The brief recommends the government to increase capacity on just transition and institutionalize principles across administration. The government should also acknowledge the calls from Indonesian unions and institutionalize tripartite social dialogue in order to have an established forum for discussing issues around just transition and climate change. And it will also be key for the government to acknowledge that there will be a future after coal and that the time may come sooner than current government projections, which foresee a massive coal industry well into the 2050s.
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