The development of the electric vehicle ecosystem needs to be accelerated. Fiscal incentives for electric two-wheelers and restrictions on conventional vehicles are key to successful EV development in Indonesia

Despite the Ministry of Industry targets to increase annual electric vehicles (EV) sales to 400,000 units (passenger cars) and 1,760,000 units (motorcycles) by 2025, the current EV adoption rate is still low, writes Idoan Marciano, one of the authors of the Indonesia Energy Transition Outlook (IETO) 2021. By 2020, electric cars only reached 0.15% (229 units) of the 150,000 units sales/production target while electric two-wheelers at 0.26% (1,947 units) of the 750,000 units sales/production target. Looking at this trend, “it would be very challenging to hit the targets”, says Idoan. 

In order to achieve the targets, it is important to build the electric vehicle ecosystem, which consists of five aspects: (a) charging infrastructure; (b) electric vehicle model availability and supply; (c) public awareness and acceptance; (d) supply chain for batteries and electric vehicle components; as well as (e) supporting policies (including incentives) from the government.

In 2020, derivative regulations of the Presidential Regulation 55/2019 were issued at both the national and municipal levels to provide fiscal incentives and support for charging infrastructure development. This is in line with what the author emphasizes in the report that to increase demand for EV, fiscal -as well as non-fiscal- incentives such as exemptions of VAT, income tax, and import duty or subsidies will be critical. Furthermore, financial incentives such as direct subsidies for developers of public charging stations (SPKLU) and public battery exchange stations (SPBKLU) are also needed to expand charging infrastructure networks in the country.

“Charging infrastructure development is paramount to overcome range anxiety issues. To date, the number of both SPKLU and SPBKLU is still limited, far from the targets. It is also worth noting that the current SPKLU target set on the roadmap will only give a 1:70 ratio (meaning 1 charger to serve 70 EV), much higher than what IEA recommends at 1:10 ratio (or lower when a country is still in its early stages of EV adoption). Responding to this, “the government should aim for a ratio lower than 1:25, emulating what has been applied in high-EV penetration countries such as China, the United States, and Norway”, says Idoan.  

In addition, the author also underlines that the development of the local supply chain is necessary to ensure a self-sustaining EV development. Specifically, local production of lithium-ion batteries -the main component of EV- will be vital to help lower production costs of EV in Indonesia. Currently, the country has been building several production facilities for raw materials extraction and refinement of lithium-ion battery precursors. These facilities are scheduled to start their operations in the next 1-3 years. However, slow progress has been made in the battery cells and packs segments with local companies (including MIND ID, PT Aneka Tambang, PLN, and Pertamina) are still planning the development.

 Production facilities of raw materials extraction and refining process to produce batteries

Located in the Morowali Industrial Area (IMIP)Located in Weda Bay Industrial Area (IWIP)
CompaniesPT. QMB New Energy Materials
A JV between China (GEM Co, Ltd. and Brunp Recycling Technology Co.,Ltd., Tsingshan, Indonesia (PT IMIP), and Japan (Hanwa)
PT. Huayue Nickel Cobalt
A JV between five Chine companies
ProductionNickel and cobalt compounds
Annual Production Capacity
150 kilotons nickel sulphate, 20 kilotons cobalt sulphate, 30 kilotons manganese sulphate, and 50 kiloton nickel hydroxide

60 kilotons nickel and 7.8 kilotons cobalt

240 kilotons of nickel sulphate and 30 kilotons of cobalt sulphate
Total InvestmentArround USD 1 billionArround USD 1.2 billionAround USD 1 billion

Meanwhile, despite the issue of a used battery shortage, the establishment of a local battery recycling facility should be appreciated. “The facility is expected to help bring about cost-efficient EV production while mitigating the environmental impacts that EV development may cause.” 

 

The author further stresses the importance of local EV production, considering that “currently, all electric cars in the Indonesian market are imported as no local automakers have started EV production.” Recent commitments made by some of the global automakers to investing in EV production in Indonesia, however, bring the hope of establishing the EV industry in the country.  

By contrast, at least there are 15 companies with a total production capacity of 877,000 units producing electric two-wheelers. However, demand for electric bikes is currently too low to match the supply. “The government, therefore, needs to provide necessary incentives to increase demand”, notes Idoan. 

Domestic electric vehicles manufacturers

Four Wheelers (or more)Two or Three Wheelers
Local Producer1 company15 companies
BrandMAB (e-bus)
Viar, Gesit, Selis, MIGO, United,
Tomara, ECGO, Volta, Unifly, Electro, Sunrace, Artas, Gelis, Benelli, Keeway, Kymco
Production Capacity1,200 unit/year877,000 unit/year

 

The report also underscores the importance of raising public awareness of EV, its advantages, available incentives, and other useful information such as charging locations to help increase demand for such a new technology. “Demonstration and promotion projects need to be increased through cooperation and partnerships between the government, automakers, transportation companies, and charging infrastructure developers”, says Idoan. 

Finally, outlooking the EV development from 2021 onwards, the report proposes three actionable recommendations for the government. First, “the government needs to prioritize the development of electric two-wheelers as their adoption will be relatively easy due to price compatibility with conventional two-wheeled vehicles.” Additional fiscal incentives or direct subsidies to consumers, and other operational incentives are then necessary to help lower the total cost of ownership.

Second, “to see a significant increase in EV adoption in the country, the government should start restricting the use of conventional cars and motorcycles in major cities”. Lastly, “seeing the growing appetite from international investors, the government needs to ensure technology transfer will take in place through tight collaborations with foreign automakers. At the same time, the government should facilitate cooperation between domestic EV manufacturers and R&D institutions for the commercialization of domestically-made electric vehicles”, he concludes. 

 

Read the full report:

Author: Idoan Marciano (IESR Energy and Electric Vehicles Technologies Specialist) 

Editor: Pamela Simamora 

Contact: idoan@iesr.or.id

The rising case of Climate Disaster Anomalies in 2020, Indonesian Climate Ambition Report is (Still) Red

Besides Covid-19, Extreme Weather Keeps Attacking 2020

In 2020, a massive climate disaster befalls due to an increase in the earth’s temperature. In just 6 (six) months, there have been more than 100 climate disasters with a total impact of more than 50 million. Compared to 2019, there were 237 natural disasters, with more than 94.6 million people affected. 

The global average temperature for 2020 (January to October) increased to 1.2 ± 0.1 ° C from 1850-1900. The World Meteorological Organization (WMO) assesses that 2020 is on course to be one of the three warmest on record. The proof is the warming of the north pole. 

The Arctic plays a significant role in keeping the earth’s temperature cool. The surface of the Arctic sea will reflect sunlight to stabilize the earth’s climate. However, Jeffrey R. Key, a scientist at the National Oceanic and Atmospheric Administration (NOAA), through satellite monitoring, showed the decreasing of the thickness of the Arctic sea ice, increasing plant growth, accelerating ice sheet loss, and the shifting of atmospheric circulation patterns.

It indicates that the world continues to experience a notable increase in temperature. The Climate Transparency Report 2020 summarizes some of the most unusual natural disaster phenomena in 2020. 

The Climate Transparency Report (previously known as “Brown to Green Report”) is the world’s most comprehensive annual review of G20 countries’ climate action and their transition to a net-zero emissions economy. Climate Transparency is a global partnership of 14 think tanks, including the Institute for Essential Services Reform (IESR) and NGOs from most G20 countries with support from the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).

This year’s report analyzes the performance of the G20 countries across 100 indicators of climate adaptation, mitigation, and the financial sector. It also includes the G20 government’s response to the Covid-19 crisis as well as the latest emission data and projections for 2020.

The Climate Transparency report revealed, for the first time in history, in 2020, South Korea experienced the longest monsoon season for 54 days. Dozens of deaths and economic losses for thousands of people from torrential rains, floods, and landslides. Argentina, in the same year, experienced its peatlands with its worst fires in over a decade. It was exacerbated by low water levels and some of the driest conditions since 2008. Brazil endured a similar event as well, precisely in Pantanal, the largest peatland in the world has encountered the worst drought and fire in the last 15 years. Of the most shocking phenomena, Siberia underwent a period of extremely high temperatures, including a record temperature of 38oC in the city of Verkhoyansk on June 20, causing wildfires, loss of ice sheets, and pest invasion.

In Indonesia, The National Agency for Disaster (BNPB) data shows that until 23rd December 2020, there were around 2,878 disasters in Indonesia. The majority were hydrometeorological disasters with the largest number of floods, followed by tornadoes and landslides. A total of 6.3 million people were displaced, 407 people died, and 532 were injured. 

In general, the world is experiencing increasing natural disasters. A report by The International Federation of Red Cross and Red Crescent Societies (IFRC) states that during the Covid-19 pandemic, as many as 51 million people were affected by drought, floods, and strong winds. Compare this with 2019,  with an estimated 41 million people experiencing losses due to floods and strong winds.

Unfortunately, amid a turbulent climate that has brought huge losses (estimated at around USD 139.8 billion), the leaders of countries in the world, especially the G20 or countries that represent 75% of global greenhouse gas emissions, are still detained to demonstrate its commitment to fulfilling the Paris Agreement.

Pitching Lip Services Promises on Climate Ambition Summit

Five years after the Paris Agreement was agreed upon, the United Nations hosted a Climate Ambition Summit (12/12), 75 countries that renewed their Nationally Determined Contribution (NDC) were allowed to speak at the event. However, only 3 (three) countries have drawn attention, such as China’s NDC-related commitment to lower its CO2 emissions per unit of gross domestic product (GDP) by over 65% by 2030, from 2005 levels; the European Union’s NDC-related pledge to reduce GHG emissions by at least 55% from 1990 levels by 2030; and the UK’s NDC-related target of reducing GHG emissions at least 68% below 1990 levels by 2030.

However, Alok Sharma, the expected COP 26 President, criticized that they were still insufficient to fulfill the Paris Agreement. For instance, while China has set bold targets for GHG reduction, Xi Jinping, the Chinese president, provided only small details of the strategy to achieve them.

At the same moment, António Guterres, Secretary-General of the United Nations, regretted the country’s lack of commitment in facing the threat of the climate crisis.

“We borrow trillions of dollars in stimulus to recover Covid-19 from future generations. However, we use the money to inherit a damaged planet, which is burdening future generations. This is unacceptable, “he said distinctly.

Moreover, based on the observation of the Climate Transparency Report, about 54 percent of the total stimulus of the G20 countries for post-Covid-19 recovery in the energy sector,  directed to support fossil energy (as of October). Furthermore, the Greenness of Stimulus Index (GSI) measurement found that 16 countries in the G20 chose not to reform their systems to accelerate the decarbonization process sustainably.

Indonesia’s Report is Still Red for Climate Ambition

Indonesia was not among the countries invited to the Climate Ambition Summit. It happened because Indonesia has decided to stick to the previous NDC (November 2016). Indonesia’s NDC target is to reduce emissions by 29% on its own and up to 41% if there is international support from business as usual conditions by 2030, through decarbonization in the forestry, energy, waste, industrial processes and product use sectors, and agriculture.

However, based on the modeling of the Climate Action Tracker (CAT), without updating the NDC more ambitiously, Indonesia’s score is still the same as the previous year, which is very insufficient. It is only one level below the worst value, critically insufficient.  It means that with climate mitigation efforts that only refer to its NDC, Indonesia failed to meet the Paris Agreement target of keeping the earth’s temperature below 1.5-20C, but instead allowed it to heat up to 40C by 2030.

The Climate Transparency Report 2020 highlights the fact that Indonesia is one of the countries that experienced a slight reduction in CO2 gas in 2020. The increase in carbon emissions has even occurred in the building sector by up to 14 percent.

On the other hand, Indonesia’s greenhouse gas (GHG) emissions (apart from emissions from land-use) increased by 140% between 1990 and 2017, with the largest increase in GHG coming from the energy sector. However, Indonesia still provides the largest subsidies to the fossil energy sector without making a clear road map and appropriate policy support to gradually move out of dependence on fossil energy. In 2019, Indonesia disbursed fossil fuel subsidies worth USD 8.6 billion compared to the previous year, namely USD 8.1 billion.

As the leader of the G20 in 2022, Indonesia Must Expose Progressive Efforts to Mitigate the Climate Crisis

In 2022, Indonesia will receive high trust from the international community to occupy several strategic roles, one of which is Indonesia exchanging positions with India in the leadership of the G20. Indonesia can use it to recover from the Covid-19 crisis and gather more support from the international community, especially developed countries, by preparing an energy transition road map that maintains decarbonization and development of renewable energy.

“At the G20, Indonesia can emphasize the urgency to accelerate decarbonization efforts and build collective initiatives from G20 countries to support countries that still use coal power plants predominantly to be able to phase out it gradually before 2030 and accelerate the development of clean energy infrastructure with the support of international funding mechanisms, “said Fabby Tumiwa, Executive Director of IESR.

Governments also still have the opportunity to direct stimulus spending and introduce complementary measures to ensure that public resources support equitable transitions to low-carbon GHG emissions and a climate-resilient future.

The Climate Transparency Report encourages all G20 countries to apply the five principles of green recovery to recover from the Covid-19 crisis and prevent the greatest potential crisis due to climate change.

First, invest in sustainable physical infrastructure. It is including renewable energy development such as solar, wind, biofuels, and hydrogen, as well as the use of carbon-neutral technology. In the transportation sector, the government needs to develop electric vehicle infrastructure based on renewable energy, applying energy-efficient and retrofit buildings (energy storage systems).

Second, invest in nature-based solutions & the environment. It will open up wider green job opportunities, such as land restoration, increasing green cover, fire prevention, and agriculture with an efficient irrigation system.

Third, invest in education, research, and development. These investments can support and advance industrial growth in renewable energy, infrastructure development to support low-carbon vehicles, and water-efficient agriculture.

Fourth, provide prerequisites for sectors that receive bailout funds to be in line with long-term commitments towards sustainability, inclusion, and low carbon.

Fifth, strengthen policies, regulations, and incentives for carbon-neutral development. The post-Covid-19 recovery moment is the right time for the government to support the implementation of an energy transition to low-carbon energy and sustainable development. The government can issue the policy of providing special tax or subsidies for renewable energy, carbon taxes, incentives for low-emission vehicles.

The government’s discipline to fulfill its commitment to low-carbon development will bring the Indonesian people to a better health condition. It also triggers the availability of more green jobs than the fossil fuel industry, more activities in green and agriculture, biodiversity protection, and financial resilience. It keeps the country staying away from stranded assets due to wasted development in the fossil industry.