Understanding the Context of Just Transition in Coal Region

Jakarta, 10 May 2023 – the global effort to move away from fossil-based power resources will lead to a transition away from coal. This transition not only brings a drastic change to coal production, but also the livelihoods and economic activity in the coal producing regions. 

Srestha Banerjee, director of the Just Transition program iForest India, during the webinar called “The Just Transition Toolbox for Coal Regions — Knowledge needs in the South-East-Asian context” emphasized that the transition issue is more of a political issue rather than a technical one. 

“India has appointed a task force to design a people centric solution for coal transition. Besides digging up community needs through dialogue and discussion, we need an example of good transition practices to boost people’s confidence,” Srestha explained.

Indonesia, the biggest coal exporter, experiences uncertainties in the coal transition supporting the just energy transition agenda. As the global price of coal soared last year, Indonesia faced a dilemma of whether to reduce coal production or stay in business as usual. 

Marlistya Citraningrum, program manager of Sustainable Energy Access, Institute for Essential Services Reform said that since last year, the Indonesian government has started to rely more on renewable energy in the PLN electricity planning, yet the implementation still faces challenges.

“Leaving coal altogether is seen as a much more difficult option as it directly impacts the economic situation and income of the region,” she said.

Citra, as she has always been called, added that during the planning phase, the government needs to understand the context of the transitions and its impact on the social economic aspect. Active listening is necessary to gain a more comprehensive understanding. 

Chalie Charoenlarpnopparut, associate professor, Sirindhorn International Institute of Technology, Thammasat University Thailand agreed that dialogue will be the key to bridging the gap between the needs to reach the emission reduction target and the social economic impact of leaving coal.

“We need to tell the communities that the disruption is going to happen no matter what, and we need to be prepared or else we will experience the more negative impact of the coal transition,” Charlie said.

Realizing that energy transition and coal transition in particular is a technically heavy and technocratic issue, gender mainstreaming during the process becomes more noteworthy. Chalie added that in Thailand, women’s involvement in the transition has started to be seen.

“Women have more of a sense of sustainability, so they are more eager to be involved during some action. While men are more involved in the research and academic side of the transition,” he said.

Incentives Needed to Drive the Electric Vehicle Market

Jakarta, May 11,  2023 – Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, stated the Government of Indonesia provided electric vehicle incentives as one of the strategies to open or develop the electric vehicle industry itself. However, Fabby stressed that there are better solutions than incentivizing electric vehicles to overcome the congestion problem. This was said by Fabby Tumiwa when he was a guest speaker on the Mining Zone program, CNBC Indonesia TV, on Thursday (11/5/2023).

“We already have a downstream policy; we cannot export nickel ore. For this reason, nickel must be produced in Indonesia, and we already know that nickel is processed in smelters to become batteries. With this policy, several global companies are currently investing in Indonesia, including Korea and China. Well, the next stage is building an electric vehicle. For example, the type of battery is like Nickel-metal hydride (NiMH),” explained Fabby Tumiwa.

Furthermore, Fabby said to attract investment in electric vehicles, it is necessary to create market demand (demand). It is considering that the need for electric cars in Indonesia is still small. According to Fabby, sales of electric vehicles have remained within 25 thousand units since the issuance of Presidential Regulation (Perpes) No 55 of 2019. Reflecting on this, the government needs to set a strategy to grow demand for electric vehicles.

“With the demand, it is hoped that electric vehicle manufacturers can invest in Indonesia. However, it should be remembered that if we want to encourage investment on the upstream side, the incentives will differ. On the other hand, if we build a market from the product, the incentives are also different. Hence, the existing incentives cannot be wrong because we need to look at the context,” mentioned Fabby Tumiwa.

In addition, Fabby stated that in the context of energy use, there is a need to substitute fuel oil imports (BBM). As is known, Indonesia’s oil production continues to decline every year. Under these conditions, said Fabby, if there were no efforts to reduce fuel consumption, more than 60% of fuel needs would be imported. This is a severe problem because it threatens the security of the national energy supply.

“Under such conditions, incentives for electric vehicles are also part of a strategy to reduce growing demand for fuel by shifting vehicle technology. Remembering that electricity can come from anywhere, including renewable energy, “said Fabby Tumiwa.

Not only that, in the context of the energy transition, said Fabby, the automotive industry will sooner or later experience changes. If Indonesia is prosperous in electric vehicles, the production of conventional cars will decrease, which can impact reducing employment opportunities. As market interest in conventional vehicles declines, green jobs will be created.

Preparing Human Capital for The Energy Transition

Jakarta, May 2023 – The world is moving to a low-carbon economy. Consequently, the energy supply for the economy also shifts from fossil fuel to renewable energy. Last year, for the first time, global investment in low-carbon energy technologies (including non-energy production technologies such as electrified transportation, electrified heat, and sustainable materials) surpassed USD 1 trillion and matched the investment level in fossil fuel. The increased investment in low-carbon technologies resulted in rising employment in the field. Globally, employment in renewable energy production has been constantly growing from 7.3 million in 2012 to 12.7 million in 2021.

Although visibly slower than the global pace, Indonesia is no exception to this trend. Particularly over the past year, Indonesia has shown an improved energy transition commitment. The president issued a regulation that put a moratorium on coal-fired power plants (although with some exceptions) and overhaul the unattractive pricing regulation that had been hindering renewables investment since 2017. Two months later, a major landmark in Indonesia’s energy transition journey was announced in the form of the Just Energy Transition Partnership (JETP) during the G20 summit in Bali. The JETP commitment is not sufficient to keep the global temperature rise below 1.5oC, but significantly more ambitious than the NDC. It committed to mobilizing USD 20 billion worth of investment for the next 3-5 years to accelerate the energy transition in Indonesia.

All the investments made for energy transition will translate to human capital requirements. It is especially true for renewable energy investments that generally are more labor-intensive than the fossil industry. IESR estimated that investment for achieving net-zero emission by 2050 will bring about 800,000 new jobs in 2030 in the power sector only (excluding jobs in electric vehicles, sustainable materials, etc.). The employment will increase to 3.2 million jobs in 2050. These numbers are much higher compared to the current employment in the power sector that is around 270,000.

However, Indonesia seems to be rather unprepared for the transition in the workforce. The government has no clear strategy for developing the workforce capacity needed and research on renewable energy has been in a declining trend. The government agencies responsible for workforce planning, such as the Ministry of Manpower, have so far been excluded in the energy transition discussions. This unpreparedness is even more crucial for the hundred of thousands that currently are working in the fossil fuel supply industry. Not all of them have transferable skills that could be used in the renewable energy sectors, for example, the operators of heavy-duty equipment which comprise a large proportion of the employment in the fossil industry. A more comprehensive policy set and better coordination among the policymakers, especially to include the agencies responsible for workforce development, is indispensable. Otherwise, Indonesia might miss the economic (employment) benefits of the energy transition.

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