Lessons Learned from Indonesia's Attempts to Reform Fossil-Fuel Subsidies

This report, prepared by Christopher Beaton and Lucky Lontoh, examines Indonesia's attempts to reform fossil-fuel subsidies.

It reviews the history of fossil-fuel subsidies in the country and focuses on the performance of two policies that have been used to support reform. The first is the Bantuan Langsun Tunai, an unconditional cash transfer program used to help cushion low-income households from price increases in 2005 and 2008. The second program, begun in 2007, aims to make low-income households use liquified petroleum gas (LPG) instead of kerosene, as it is cheaper to subsdize, cleaner and more efficient. The report concludes that both these policies appear to have achieved the Indonesian government's objectives.