Jakarta, 30 July 2021 – Despite targeting carbon neutrality by 2060 or earlier in the Nationally Determined Contribution (Updated NDC) and Long-term Strategy on Low Carbon and Climate Resilience (LTS-LCCR 2050) documents submitted to the UNFCCC, the Institute for Essential Services Reform (IESR) views that the emission reduction target is still not in line with the objectives of the Paris Agreement.

The Indonesian government has just released the NDC (Updated NDC) and LTS-LCCR 2050 update documents, which will be presented at the COP26 meeting in Glasgow on 31 October – 12 November 2021. The government, through the Ministry of Environment and Forestry, said that these two documents were prepared based on the conditions of the slumping economic reality due to the Covid-19 pandemic. It made the government focus more on economic recovery efforts to achieve Indonesia’s Vision 2045 to become an advanced economy country.

However, according to IESR, post-COVID-19 economic recovery can be carried out together with building strong climate resilience.

“To become a developed country, Indonesia must be able to have rapid economic growth and must be supported by solid climate resilience. The climate crisis needs serious attention because it can harm human development, economic progress, and social equity,” said Lisa Wijayani, Program Manager for the Green Economy.

Disasters due to the climate crisis are increasingly widespread throughout the world, including Indonesia. One of them is the increasing frequency and intensity of hydrometeorological disasters. BNPB analysis shows that 90-95% of disasters that have occurred since early 2021 are hydrometeorological disasters. These various disasters bring loss of life, social, and economic. The central government spent between US$90 million and US$500 million per year on disaster response and recovery from 2014 to 2018. Local governments are estimated to have spent US$250 million over the same period. This number is predicted to increase in line with the high intensity of natural disaster events. 3 The Ministry of Environment and Forestry also stated that the impact of climate change on the food, energy, water, and health sectors will decrease Indonesia’s GDP by 0.66% – 3.54% in 2030.

Furthermore, judging from the LTS-LCCR 2050 document, the government is still sticking with coal as a source of electricity. This can be seen from the still large portion of coal-fired power plants (CFPP), and relying on CCS/CCUS technology to reduce emissions. Particularly, this technology is still expensive with a capital expenditure greater than $4200/kW. Moreover, there are technical and economic factors so that its feasibility is questioned compared to renewable energy generation options. In addition, the use of CCS/CCUS technology in CFPP will make investment costs in CFPP increase by 74% which affects the increase in electricity generation costs.

The study of Deep decarbonization of Indonesia’s energy system: A pathway to zero emissions by IESR found that Indonesia could even achieve zero emissions in the electricity system by 2045 and the energy system by 2050 by utilizing 100 percent renewable energy.

“This decade is a critical phase to kickstart energy transformation and ensure the Paris Agreement targets are met. In the next 10 years, we must massively increase renewable energy, limit the addition of coal-fired power plants and reduce thermal generation, and promote energy efficiency. Unfortunately, Indonesia’s NDC, on the other hand, failed to adopt the vision of transforming the energy system so that the emission reduction target remains at the level of 29%-41%, lower than it should be” said IESR Executive Director, Fabby Tumiwa.

Coal power plants are also no longer competitive compared to renewable energy power plants. Some countries, such as South Korea and Japan, and more than 100 financial institutions in the world have decided to stop providing CFPP project funding. The IEA (International Energy Agency) projection in the World Energy Outlook 2020 study shows, in 2040 alone, the Levelized Cost Of Electricity (LCOE) of CFPP in the world will be 5.5 – 22.5 Cent/kWh, much larger than solar PV, which is only 1.3 – 3 Cent/kWh. This trend indicates a high risk for CFPPs to become stranded assets and high electricity prices.

Besides the power sector, the transportation sector is also important to decarbonize. Emissions from the transportation sector reached 157 million tons of CO2 in 2019, the second largest after the industrial sector. In the NDC document, the government encourages the implementation of biofuels (46%) and 30% electrification in the transportation sector. The IESR study shows there is a greater opportunity for decarbonizing the transportation sector by conducting more massive electrification of road passenger transport while rapidly increasing the renewable energy mix in the electricity sector to reduce emission intensity on the grid. For this reason, the development of clean fuels, namely hydrogen and synthetic fuels, needs to start soon.

Based on the results of IESR modeling in the Deep Decarbonization study with the best scenario, at least 49% of the transportation sector must have been electrified by 2050, said Deon Arinaldo, Program Manager of IESR Energy Transformation.

IESR appreciates the government’s inclusion of elements of a just energy transition by including issues of gender, equitable energy, and vulnerable groups. The updated NDC has also begun to

show the government’s awareness of the potential for stranded assets and migration to green jobs as a result of the energy transition.

“We urge the government to prepare a coal transition roadmap to anticipate the social and economic impacts that occur from declining coal demand in the future. The strategy of economic diversification in coal-producing areas must be immediately compiled and included in the national development plan,” said Fabby Tumiwa.**

1. World Bank, “Strengthening Indonesia’s Fiscal Resilience to Natural Disasters and Health-Related

2. Shocks”. KLHK (2020). Roadmap NDC Adaptasi Perubahan Iklim, Kementerian LHK, Jakarta.