Indonesia Needs to Increase its Efforts to Transition Towards Green Economy to Achieve NZE

press release

Jakarta, 18 August 2023 – The President of the Republic of Indonesia (RI) Joko Widodo (Jokowi), in his state address for the 78th Indonesian Independence Day, which also served as an introduction to the 2024 state budget bill and 2024 financial note stated that the 2024 state budget is directed toward accelerating economic transformation that is inclusive and sustainable. In his speech, the president mentioned the potential crisis due to climate change. For this reason, the transformation of the economic sector that is sustainable and environmentally friendly is crucial. The president emphasized that the transition to the use of green energy needs to be carried out progressively but remains fair and affordable.

The Institute for Essential Services Reform (IESR) appreciates the direction of the 2024 state budget. It encourages the government to accelerate the development of a green economy and the utilization of renewable energy so that Indonesia can gradually reduce the portion of fossil energy while simultaneously reducing greenhouse gas emissions, which are the cause of global boiling. boiling) and climate change.

Fabby Tumiwa, Executive Director of IESR, stated that to achieve the 23% renewable energy target in 2025, the president must direct his staff to increase the renewable energy mix by 2024. This would require the construction of 11 GW of renewable energy generators in the next 2.5 years. The progressive penetration of renewable energy would necessitate the cessation of coal-fired power plant operations, which are old and inefficient, even under conditions where the PLN electricity system is still overcapacity.

The 2024 state budget should support renewable energy use outside Java-Bali, reform policies hindering its acceleration, prepare for the coal-fired power plant’s early retirement, and offer large-scale renewable energy projects to investors.

Indonesia needs to take more aggressive steps to avoid the climate crisis by showing a more substantial political commitment to reducing the use of coal and confirming the termination of coal-fired power plant operations in 2050. According to Fabby, amid Indonesia’s independence celebrations, the National Capital, Jakarta, was covered in severe air pollution. IESR notes that one of the sources of pollution comes from burning coal in power plants and industries around Jabodetabek.

“Last year, the government and IPG agreed on the Just Energy Transition Partnership (JETP). This agreement is Indonesia’s opportunity to accelerate the transition to increasing green energy before 2030, which is fair and affordable. For this reason, the 2024 State Budget must also be allocated to support the implementation of the Comprehensive Investment and Policy Plan (CIPP),” said Fabby.

During preparing the JETP Comprehensive Investment and Policy Plan (CIPP) until October, Deon Arinaldo, Manager of the Energy Transformation Program, IESR, emphasized the importance of identifying policy changes to accelerate the energy transition. He suggested that policy change should focus on integrating implementation between various ministries and agencies.

“There must be a priority in policy directions, for example ending fossil energy subsidies, especially the coal DMO price policy, building massive solar PV, and developing the solar manufacturing industry. Determining the main strategy is important so that execution can be carried out smoothly in the next 3-5 years or even faster with implementation support from various ministries and agencies. Implementation of this integrated strategy can support achieving the vision of Indonesia Gold 2045,” explained Deon.

IESR hopes that the preparation of state budget (APBN) spending will also include efforts to reduce fossil energy subsidies and anticipate the impact of the energy transition on society. The budget from reducing fossil energy can be used to develop renewable energy, early termination of coal-fired power plant operations, and structured programs to anticipate the impact of the energy transition on communities, workers, and coal-producing areas.

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. ***