
Indonesia’s Energy Support Measures: An inventory of incentives impacting the energy transition
-
The Indonesian government support for fossil fuels remains substantially higher than for renewable energy, with as much as 94% allocated on average each year to support coal, oil and gas, and fossil fuel-based electricity and just 1% allocated to renewable energy.
-
Energy support measures in Indonesia rose by 38% from IDR 203 trillion in 2016 to IDR 279 trillion in 2020, disproportionately benefiting the fossil fuels sector.
-
Estimated fossil fuel incentives in Indonesia increased by 30% between 2016 and 2020 to at least IDR 246 trillion, while support for renewable energy dropped from IDR 3 trillion in 2016 to IDR 2 trillion in 2020.
The report serves as a starting point for the Government of Indonesia, as well as all stakeholders, concerned citizens, and the wider public to “follow the money”: to track the flow of public funding and to understand how public money is being spent on different types of energy. Through data visualization of the flow and allocation of the support measures throughout the period observed, this report also aims to shed light on government spending on fossil fuels vis-à-vis renewable energy and clean technology.
The Government of Indonesia provides a range of energy support measures, incentives, and interventions that stimulate energy production and consumption, some of which are directed to support and protect the vulnerable segments of the population (e.g., poor households and small businesses). There are also other measures aiming to promote a transition toward clean and renewable energy, although, at present, government support is still predominantly addressed to the fossil fuels sector.
Overall, 77% (60 measures out of 78) of the support measures identified in the report were for the benefit of energy producers. Only 20% of all measures were given to support consumers, and the rest of the measures were provided to benefit both producers and consumers.
Support for fossil fuels and fossil fuel-generated electricity also remains substantially higher than for renewable energy, undermining the effort to achieve 23% of renewable sources in the energy mix by 2025 and net-zero carbon emissions by 2060.
Fossil fuel support drains the public budget, particularly in the current context of high energy prices. Support for fossil fuels is coming at a high cost to Indonesia’s public finances, and it is slowing Indonesia’s energy transition in two ways: 1) it locks in fossil fuel production, leading to ongoing fossil fuel dependence; and 2) by lowering the price of fossil fuels and fossil-sourced electricity, it makes it harder for renewables to compete.
Given its nationally determined contribution to the United Nations Framework Convention on Climate Change as well as its renewable energy targets, it would be reasonable for Indonesia to focus more on creating effective incentive mechanisms to further promote the adoption and development of renewable energy. Shifting or reallocating support from fossil fuels to renewable energy would be a good start.
Notes:
- To select multiple categories, hold the Ctrl key and select the desired category.
- The fiscal year for the State Budget of the Government of Indonesia starts in January and ends in December.
- Type of support measure*: Based on SDG indicator 12.c.1 (Measuring Fossil Fuel Subsidies in the Context of the Sustainable Development Goals | UNEP - UN Environment Programme)
Participating experts
You might also be interested in
Indonesia’s Energy Support Measures Hit IDR 279 Trillion in FY 2020 Disproportionately Benefitting Fossil Fuels
Energy support measures in Indonesia hit IDR 279 trillion in FY 2020, of which a staggering 88% was allocated to fossil fuels, according to a new report from IISD.
Indonesia Must Quadruple its Annual Renewable Investment Target
Indonesia should quadruple its annual investment target for new and renewable energy to over USD 8 billion by 2025, according to a new brief by the International Institute for Sustainable Development (IISD)
Using Public Funding to Attract Private Investment in Renewable Energy in Indonesia
This brief provides options on how the Government of Indonesia (GoI) can leverage public funding to incentivize private investment in renewable energy.
Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector
Implementing an effective pricing mechanism is necessary for Indonesia to complete its landmark fuel subsidy reforms and prevent backsliding into expensive subsidy policies. The current pricing regime aims to deliver a public service but inadvertently contributes major social costs: air pollution and associated illness, greenhouse gas emissions and traffic congestion.