Jakarta, December 5, 2025 – The Institute for Essential Services Reform (IESR) notes that the world is rapidly shifting toward a low-emission economic system. In 2025, global investment in renewable energy, electricity grids, and batteries reached USD 2.2 trillion, double the amount invested in fossil fuels. Beginning January 2026, the European Union will also enforce the Carbon Border Adjustment Mechanism (CBAM), requiring all industries exporting goods to the region to report their emissions. IESR anticipates that similar policies will spread globally as more countries adopt emission reduction targets to achieve Net Zero Emissions (NZE).
Given this trend, Indonesia must urgently reduce its dependence on a coal-based economy. Doing so will help prevent the national economy from becoming locked into an outdated fossil energy system that increases transition costs and reduces competitiveness due to the high carbon footprint of its products and services. Continued reliance on coal will also make it harder for Indonesia to meet the expectations of multinational companies, which increasingly require access to renewable energy to support their operations and to consider further investments in the country.
IESR’s analysis shows that coal-fired power plants within the PLN network, amounting to 85 GW of capacity, have driven an average annual emissions increase of 8 percent in the electricity sector over the past five years, with total emissions reaching 352 million tons of carbon dioxide equivalent in 2024. Meanwhile, captive coal-fired power plants serving industry, with a capacity of 31.1 GW, are projected to generate 131 million tons of CO₂e in 2024 and account for 37 percent of total electricity sector emissions. These findings were presented at the Brown to Green Conference: Unlocking Enabling Environments for Indonesia to Transition Beyond Coal (3/12), organized by IESR and supported by the British Embassy Jakarta (BEJ) through the Green Energy Transition Indonesia (GETI) project.
Deon Arinaldo, IESR’s Energy Transformation System Program Manager, emphasized that accelerating the energy transition through large-scale adoption of renewable energy must go hand-in-hand with the early retirement of coal-fired power plants. He noted that existing policies, such as Presidential Regulation 112/2022, need to be strengthened by imposing a strict ban on new coal-fired power plant development. In addition, all coal plants should be required to reduce emissions after their first 10 years of operation, with complete phase-out by 2050.
“This policy is essential to demonstrate the government’s commitment and to send a clear signal to industry players, both coal and renewable energy, so they can prepare their transition strategies. Industry, workers, and local governments need certainty to begin developing and implementing transition plans,” said Deon.
He added that lessons from the United Kingdom show that moving away from a coal-based economy requires early planning and may take decades to fully diversify economic activities. Therefore, Indonesia must start taking action now to avoid being left behind as the world shifts away from coal.
As an initial step in the transition, IESR underscores the importance of operating coal-fired power plants more flexibly while preparing for their earlier phase-out. This approach is crucial for creating space in the national electricity system for greater integration of renewable energy generation.
IESR also recommends that, in the short term, the Ministry of Energy and Mineral Resources develop a roadmap for electricity system flexibility at both the national and island levels, accompanied by revisions to coal-fired power plant Power Purchase Agreements (PPAs) to allow for more flexible operation. In addition, the government must immediately initiate pilot projects for battery energy storage systems (BESS) and pumped hydro energy storage (PHES).
In the medium term, the government needs to strengthen the electricity system’s capability to manage renewable energy variability by implementing demand response programs and supporting incentives, accelerating the development of energy storage facilities, and enhancing interconnections and smart grid infrastructure. Meanwhile, to ensure long-term system reliability, Indonesia must develop an ancillary services market, establish inter-island, and even cross-border, interconnections, and conduct periodic evaluations of the flexibility roadmap.
In line with efforts to enhance system flexibility, IESR also urges concrete measures to address the dominance of captive coal-fired power plants in the industrial sector. These measures include opening access to green electricity through the Transmission Network Sharing mechanism or power wheeling, removing cost barriers to the installation of solar power plants and BESS, simplifying licensing processes, providing incentives, and offering affordable financing and risk guarantees for renewable energy projects.
Furthermore, preparing for a full transition to renewable energy requires credible and transparent data on the coal industry. To support this need, IESR launched Coalradar.id, an interactive data platform that provides comprehensive information on coal production, coal-fired power plants, fiscal flows such as non-tax state revenue, and various regional indicators down to the district and city levels. Equipped with interactive maps and regularly updated datasets, the platform helps inform evidence-based regional development planning and policy dialogue.
Coalradar.id also features assessments of provincial vulnerability to the coal industry’s decline, based on trends from 2010 to 2022. This tool helps identify the areas most at risk, compare each region’s strengths and vulnerabilities, and establish a baseline for future transition planning.