Preparing the Workforce That Will Be Affected by Reduced Demand of Fossil Energy

Jakarta, July 6, 2022 – The global commitment to reduce the use of fossil energy, as well as the increasing climate ambitions of coal-using countries such as China, Japan, South Korea, the United States, the European Union and South Africa have caused global coal demand to fall significantly.

As one of the largest coal exporting countries in the world, Indonesia needs to pay close attention to this. Coal contributes a lot to national non-tax revenues (PNBP), for coal-producing regions, the role of coal commodities for regional income can be very large.

The Institute for Essential Services Reform (IESR) tries to see the implications of the policy of eliminating coal use and the global and domestic climate on the Indonesian economy, especially for workers in the sector through the study “Redefining Future Jobs: Implication of Coal Phase-Out to the Employment Sector and Economic Transformation in Indonesia’s Coal Region”.

This study also aims to see opportunities for economic transformation in coal-dependent areas and provide better welfare for workers. Julius Christian, the author of this study, explained that data from the Ministry of Energy and Mineral Resources showed that in 2020 there were 167,380 workers in the coal mining sector. Demographically, these workers are on average under 40 years old, so they will still be of productive age in the next 10 years.

“In terms of the workforce, because most of them are young, there is an opportunity to conduct training in preparation for entering other industries,” said Julius.

Preparing for economic transformation after the coal economy era is full of challenges but must be done. This is to anticipate the demand for coal which could drop more drastically. Fabby Tumiwa, Executive Director of IESR stated that if the countries of the world had more ambitious climate action to pursue the Paris agreement targets, there would be a 20% reduction in coal demand by 2030, 60% by 2040 and 90% by 2050.

“This decline in production must also be anticipated because it will definitely affect the absorption of labor in the coal sector,” Fabby reminded.

Hendra Sinadia, Executive Director of APBI ICMA (Indonesian Coal Miners Association), also added that to target workers who are potentially affected, it is necessary to map coal reserves by company.

“So that the transformation process is effective and efficient, we can map the reserves for each company so that we can see how long their operating life will be. For small companies, maybe in 2030-2040 their operational period will be finished so it can be prioritized for their workers to receive training,” explained Hendra who was present virtually at the focused group discussion launching the study “Redefining the Future Job”.

IESR: Indonesia Needs Economic Transformation in Coal-Produced Regions

press release

Jakarta, 11 July 2022 – The demand for coal as a long-term energy source is predicted to decrease significantly. This trend is affected by stronger climate commitment from coal-imported countries to shift into renewable energy. Institute for Essential Services Reform (IESR) in its study even said that if the government’s commitment to reducing emissions was following the Paris Agreement to achieve net-zero emission by 2050, then in 2045, coal would no longer be utilized in Indonesia’s energy system. It demands the government’s commitment to preparing the economic transformation and employment for regions whose income is dominated by the coal sector.

Fabby Tumiwa, Executive Director of IESR said that the enhancement of emissions target in Nationally Determined Contribution (NDC) from countries that utilize coal, such as China, Japan, South Korea, United States, Europe Union, South Africa, and other countries, will affect the reduction to fossil energy projects’ funding. Referring to the Paris Agreement, if whole countries adopt a more aggressive coal phase-out, then in 2030, coal production will drop by 20%, 30% in 2040, and 90% in 2050.

“This production reduction should be anticipated due to the impact on employment and will also affect the national and coal-produced regions’ income. This threat is quite serious considering coal-produced regions do not have many choices for their economic alternative while carrying out post-coal mining economic transformation will take a long time. Now is the time to make a transformation and prepare the foundation to conduct post-coal mining and post-coal power plant economic transformation. The failure to succeed in economic transformation will not only cause a higher unemployment rate but also the decline in economic competitiveness,” said Fabby.

He added that coal-produced regions need to be supported with a particular national policy. IESR even recommended this issue should be prioritized and included in forming RPJMN 2024-2029.

Julius Christian, the author of the IESR study titled Redefining Future Jobs: The implication of the coal phase-out to the employment sector and economic transformation in Indonesia’s coal regions urged the central and coal-produced regions in Indonesia to anticipate the possibility of income reduction and employment opportunities for the workers from the coal sector.

“Collaboration between the central and regional government will be an important note in preparing the long-term economic strategy to realize a more diverse economic structure and no longer depend on coal,” Julius explained.

In 2020, there were approximately 250.000 workers who directly worked in the mining sector. These workers, in general, are aged under 50 years old. Therefore they still could be prepared with various types of training to shift to other employment sectors. Besides, the government also needs to prepare the allowance and social safety net to anticipate the rapid decline in coal demand.

“Coal workers are one of the most impacted groups from this coal decline. However, currently, the workers have not realized the risk they will be facing and have not been included in all energy transition discourse,” added Julius.

Ronald Suryadi, a researcher at IESR who is also writing the report Redefining Future Job, also said that economic transformation needs to be addressed for Indonesia’s provinces that its Gross Regional Domestic Product (GRDP) is mainly gained from the coal sector, such as North Kalimantan that produces 48% national coal supply, South Kalimantan (32%), South Sumatra (9%), North Kalimantan (3%), and Central Kalimantan (3%).

“A gradual economic transformation is not only needed to mitigate the resulting impact, but also to achieve an economic structure that can keep up with the current development in the future,” said Ronald.

IESR pushes for an inclusive planning and strategy formulation process by involving the affected groups, especially the workers and the community around mining areas. The purpose is that economic transformation will be carried out sustainably and correspond to people’s needs. For instance, economic transformation in the coal area can be carried out by modernizing the agricultural sector. Besides, the government also needs to strengthen the existing main industries with a high multiplier effect, such as the food and chemical industries. In addition, the preparation to establish an economy that is centralized on services can be implemented by building infrastructure, restoring the environment, and intensifying human resources.

The IESR study ‘Redefining Future Jobs’ can be downloaded at https://s.id/FutureJobs. ***