Dialogue on Equitable Transition: Identifying the Role of the Private Sector in Socio-Economic Empowerment of Communities

Replay Event


Background

Indonesia is the third largest coal producing country after India and China in 2022. According to the Ministry of Energy and Mineral Resources, Indonesia targets coal production of 694.5 million tons in 2023, 0.47% higher than the previous year’s target. As of October 2023, Indonesia’s coal production has reached 567.2 tons or 81.67% of this year’s production target. Coal in Indonesia will mostly be sold to the export market (75%-80%) and consumed domestically (20%-25%). However, with the trend of energy transition, Indonesia’s coal demand seems to be declining, one of which is from India. India decreased its coal demand from Indonesia from 8.43 million tons to 6.11 million tons as of June 2023.

In addition to the downward trend in coal demand from abroad, the Indonesian government has endorsed several commitments that will affect the use of coal going forward in line with the energy transition agenda towards renewable energy. In 2022, the Government of Indonesia passed Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Generation, which explicitly stipulates a ban on the construction of coal-fired power plants starting in 2030. This commitment was supported through the signing of the Just Energy Transition Partnership (JETP) agreement between Indonesia and IPG and GFANZ. Through the CIPP document, the Government of Indonesia intends to achieve peak emissions in the power sector at 290 MT CO2 and a renewable energy mix of 34% by 2030. In addition, the document also states that Indonesia should strive for an equitable energy transition process where social, economic and environmental impacts are also a concern for policy makers. The existence of national and global policies also has the potential to affect the company’s business and also the socio-economic structure of communities around mining areas.

Extractive industry activities are often the main source of local revenue, but they also cause economic, socio-community and environmental losses. With the energy transition agenda, the government plans to limit coal consumption, which will lead to faster closure of coal mines and affect local community activities. In Law No.4/2009 on Mineral and Coal Mining, post-mining activities require business actors to restore the natural environment to its original state. This is also stipulated in Law No.40/2007 which requires companies in the natural resources sector to carry out Social Responsibility activities which are widely associated with community empowerment. By integrating activities that suit the economic needs of the community with the company’s plans, it is hoped that the community can independently develop their economic activities and can be free from dependence on the company. Thus, the role of the company and local government is important for post-mining activities.

Therefore, IESR intends to invite business actors to provide information and strategies for planning successful community and environmental empowerment programs in preparation for post-mining activities. This event is also expected to strengthen post-mining planning between the government and business owners in the fair energy transition agenda.

Objective

This activity has several objectives, namely:

  1. To obtain and disseminate information related to post-mining reclamation programs both in terms of planning and implementation as well as the challenges faced towards an equitable transition;
  2. Obtain and disseminate information on the role of businesses or industries in preparing for the impact of the energy transition on the community and the surrounding environment;
  3. Identify collaborative forms of post-mining activities to develop based on economic potential, natural resources, and people through the implementation of a just transition;

Presentation

Reclamation and Post-Mining, Koordinator PPNS Minerba – Dr. Y. Sulistiyohadi

Reklamasi-dan-Pascatambang-Koordinator-PPNS-Minerba

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Reclamation and Post-Mining Ombilin1 – Yulfaizon

Reklamasi-Pasca-Tambang-Ombilin1-IESR

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Tirto | Uncovering the Causes of Low Carbon Trading in Indonesia

Indonesia’s carbon trading initiative is yet to gain momentum. Despite its launch by President Joko Widodo on September 26, 2023, the total trading value on the Indonesian carbon exchange has only reached Rp30.7 billion. The trading volume so far has been 490,716 tons of carbon dioxide equivalent (CO2e) until November 30, 2023. Additionally, 71.95 percent of the available carbon still needs to be sold.

Read more on Tirto.

Webinar The Importance of Energy Transition for Children and Young People

Background

Indonesia is the fourth country with the highest number of children in the world. About one-third of Indonesia’s population is made up of children. According to BPS Interim Population Projection 2020–2023 data, in 2022, the number of children aged 0–17 years was 29.15%, or 79,486,424 people. Meanwhile, young people aged 15–34 are approximately 89 million people. According to a study conducted by Save the Children in 2020, it was found that children born in 2020 will experience disasters 3.4 times more often than the generation born in 1960. These disasters caused by climate change include heat waves, floods, forest fires, droughts, and crop failures. According to a UNICEF study, climate change poses the greatest threat to the health, nutrition, education, and future of children and young people.

Climate mitigation is one of the most important things to consider, especially in the energy sector. Currently, global warming is caused by emissions produced by burning fossil energy. Indonesia is one of the countries that relies heavily on fossil energy, especially coal. With this condition, Indonesia still cannot have ambitious climate ambitions. On the other hand, according to the book Start Here: Understanding Indonesia’s Energy Transition (2023), fossil fuel-based power plants cause negative impacts on the climate. For example, they emit carbon dioxide (CO2), methane, and other gases. These emissions lead to acid rain, an increased greenhouse effect, and global warming, which contribute to the current climate change phenomenon.

The energy transition process will not only change the existing energy system but also have the potential to change the socio-economic system of the surrounding community. Therefore, the energy transition must involve all parties, including the community, to reduce the potential social, economic, and environmental impacts. The involvement of children and young people is one of the important parties in this transition process. According to IESR’s “Just Transition in Indonesia’s Coal Producing Regions” study, the mining sector is one of the most attractive sectors for young people in Paser District and Muara Enim District. However, with the trend of energy transition, it is estimated that in the future, the coal industry will begin to decline due to a decrease in global coal demand.

Therefore, IESR intends to organize a webinar on the importance of energy transitions for children and young people. This event is part of the pre-Youth Climate Conference, a conference for children and young people to voice the issue of the climate crisis to Indonesian leaders. It is hoped that through this webinar, IESR can provide a deeper perspective and understanding of the importance of the energy transition issue for the future of children and young people.

Objectives

This webinar activity has several objectives, namely:

  1. Raising awareness about the importance of energy transition among children and young people, especially on the issue of electricity and equitable transition;
  2. Provide a forum for discussion on the impact of the energy transition on children and young people.

 

Implementing the Energy Transition: Policies in Colombia, Germany, India, Indonesia and South Africa

Background

The Global Stocktake is clear: All countries need to raise their ambition to curb their emissions effectively, to a degree that is fair to their development status.

But ambitious targets are not sufficient on their own; policies need to be in place and be implemented effectively. Climate Transparency’s new Climate Policy Implementation Check has been designed to assess, rate, and monitor the implementation status of policy instruments along four categories: legal status, institutions and governance, resourcing, and oversight.

Facilitated by the Climate Emergency Collaboration Group, we analyze the implementation of a variety of climate policies in the power sector of India, South Africa, Indonesia, Colombia, and Germany.

Ahead of COP28, we want to discuss possibilities and implications for international cooperation to effectively implement the energy transition away from coal and towards a renewable energy future. With their strong interlinkages in coal production and consumption, the countries we analyze exemplify the possibilities and challenges of successful transformations, and they will be key to the debate on how to change long-standing international relationships from brown to green.

Agenda

  1. Selected Energy Transition Policies in India, South Africa, Indonesia, Colombia, and Germany: Implementation status and outlook
  2. International implications of domestic energy transitions

Language

This event uses the English language

Stocktaking the Climate Action in Southeast Asia

Johor Bahru, 15 November 2023 – In achieving the agenda of global energy transition, the Southeast Asia region is taking measures to climate action including its non-state actors. Meaningful participation from non-state actors is crucial in observing the currently running policies and providing input for future improvements.

Stocktaking becomes a crucial activity to track the current progress of climate mitigation and action. The results of the assessment then can be utilized to design robust policy recommendations. Non-state actors can enrich the nuance of the global stocktake  by convening and aligning climate action with the interest of the global community. 

Wira Agung Swadana, the green economy program manager at the Institute for Essentials Services Reform (IESR) highlighted the key takeaways from the first global stocktake during the Asia Pacific Climate Week 2023 in the session “Integrating the role of NSAs focused on the thematic areas–Adaptation, Finance, and Mitigation”. The imbalance in growth of global emissions compared to the climate mitigation plan leads to issues such as the urgency to have systemic transformation.

“We need more ambition in action and support during the implementation of the mitigative action in the region,” he said.

Wira added that achieving net-zero emissions requires systemic transformation across all sectors, and we need to tap into every opportunity to achieve higher output. The business and commercial sector is an important factor in accelerating energy transition as they consume massive amounts of energy. Besides, some of the industries (especially those involved in multinational-scale supply chains), have the obligation to green their business process.

“What the government can do for business (to decarbonize their operations) is to provide an enabling environment if they want to shift to more sustainable business process. For instance, the government can give incentive and disincentive based on the choice of energy resource used to power the businesses,” Wira concluded.

Jingjing Gao, from the UNEP Copenhagen Climate Centre, added that the private sector-led initiative is worth noting. Yet, there is still a gap in data incorporation from the private sector.

Capacity Building for Sub National Government in the Era of Just Transition

Jakarta, 26 October 2023 – The energy transition currently being discussed will have a significant impact on the use of fossil fuels such as coal. Various countries have committed to reducing the use of fossil fuels as one of the key actions in their energy transition. Fossil producing countries such as Indonesia need to be aware of this, because there will be a decrease in demand from the global market.

South Sumatra and East Kalimantan are the largest coal producing areas in Indonesia. Coal has become a key component in the economic growth of both provinces. In 2022, coal will contribute 30-35% to East Kalimantan’s GRDP and 15% in South Sumatra. These two provinces need a special strategy to get rid of economic dependence on coal. Stefan Boessner, a researcher at the Stockholm Environmental Institute (SEI) in the “National Workshop on a Just Transition: Building Government Capacity for a Sustainable Coal Transition in Indonesia” said that economic alternatives are available and can be developed.

“There have been examples of a region successfully diversifying its economy. The government will need capacity building support from the central government,” he said.

Stefan added that the Indonesian government has started to create a policy framework that will become the legal basis for the energy transition in Indonesia, such as a net zero emission target, regulations on the economic value of carbon, as well as a roadmap for early retirement for coal-fired power plants.

In preparing for this transition, development, economic and energy planning are very important. Involvement of various elements that will be affected by the transition become crucial.

Martha Jessica, Social and Economic Analyst at the Institute for Essential Services Reform (IESR) explained that one of the initial findings of the study currently being conducted by IESR is that there is a capacity gap between the central government and regional governments so that this transition planning is not considered optimal.

“To have a proper planning process, various superior/adequate capacities are needed by the government as the initiator (early actor) and catalyst of the energy transition,” said Martha.

Elisa Arond, SEI researcher, added that regional governments can play a crucial role in supporting a just transition agenda. To do all this, of course local governments will need a certain amount of support from the central government.

“They (sub-national governments-ed) need financial support from both the central government and international institutions, inclusive dialogue involving actors with diverse backgrounds, funding strategies, and transparent access to information about mine closure plans,” explained Elisa.

Tavip Rubiyanto, Associate Expert Policy Analyst as Coordinator of Energy and Mineral Resources, Directorate General of Regional Development, Ministry of Home Affairs, explained why currently the energy transition is not yet underway in the regions because regional authority is still limited.

“For this reason, the Ministry of Home Affairs has initiated the preparation of Presidential Decree no. 11 of 2023 to strengthen regional authority in carrying out government affairs in the ESDM sector, especially in the renewable energy sub-sector,” he said.

Brilian Faisal, representative of the South Sumatra Province Planning Office Bappeda, expressed the hope that the concept of a just energy transition must be related to access and infrastructure.

“In our regions we have not yet made derivative regulations from various regulations related to the energy transition because to make them we need to revise the RUED, which most of the authority is mostly in the MEMR sector,” said Brilian.

Wira Agung Swadana, IESR Green Economy Program Manager stated that this workshop was the right moment to prepare the RPJMN and RPJMD which must include the coal transition agenda.

“This transition requires several things such as planning and funding and must be included in the regional development agenda so that it can receive funding from the government,” said Wira.

Realizing Energy Democratization through Solar Energy

Jakarta, 5 October 2023 – Energy is a basic human need not only to support daily activities but more importantly to increase productive activities. Solar energy is a renewable energy source that can realize energy democratization.

Solar energy fulfills several aspects for the democratization of energy such as the availability of resources throughout the year, and the flexibility of the scale of installation. For a nobler goal, by installing solar panels, users contribute to reducing emissions from the energy sector. These various reasons show that motivations for using solar PV can vary.

This is in line with the findings of a market survey conducted by the Institute for Essential Services Reform (IESR), one of which explored respondents’ motivations for using solar PV. Marlistya Citraningrum, IESR Sustainable Energy Access Program Manager, in the Seminar ‘Solar Energy Policy and Action Plan as a Form of NRE Commitment towards Indonesia’, Thursday 5 October 2023, explained that motivations can vary from one region to another.

“MSMEs in Central Java choose rooftop PV because they are interested in the savings so that their electricity bill money can be allocated to other things. Meanwhile, business people in Bali have a high awareness of maintaining harmony with nature. “Apart from that, they will get positive branding as an environmentally friendly business entity,” said Marlistya.

To increase public interest in using solar energy, several things need to be done by stakeholders, including the government, in creating an ecosystem that supports the growth of renewable energy.

Three things that must be pursued to encourage participation by more parties are first, regulations that are clear and supportive and well communicated so that the public gets information about rooftop PV regulations easily and without confusion. Second, there are examples of users and easy access to service providers; third, provide incentives and increase access to financing.

In the same forum, Dedi Rustandi, Intermediate Expert Planner Coordinator for NRE at the Ministry of Bappenas stated that solar energy achievements were still below RUPTL target.

“There are a number of main causes, including the pandemic which has prevented electricity demand from growing significantly, there is uncertainty in the investment climate for the business, as well as delays in project procurement (related to governance),” said Dedi.

Dedi admitted that there are still a number of inefficient policies, resulting in the use of solar energy not being optimal in Indonesia.

IESR: Indonesia Needs Comprehensive Package Policy for Energy Transition

Jakarta, 27 June 2023 – The urgency to shift energy transition into a cleaner, more sustainable one has become increasingly crucial, as highlighted by the IPCC synthesis reports, which states that global temperature has already increased 1.1 degree Celsius. Energy, as the driver of economic growth, has been a key factor in economic activities since the very beginning of fossil minerals mining. However, transitioning to cleaner energy systems brings consequences of decreased coal demand, posing a serious threat to regions heavily reliant on the coal economy.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform during the panel discussion of the ASEAN Sustainable Energy Finance on Tuesday, 27 June 2023, emphasized the situation in several provinces in Indonesia which need to consider alternative economic streams, as their local revenue currently comes from coal mining-related activity.

“We need to pay attention to some provinces such as East Kalimantan, which produces 40% of Indonesian coal, and South Sumatera which produces 15%. We need to build local capacity to generate revenue from sectors other than coal,” Fabby said.

Fabby added that the government needs to prepare a comprehensive package of transition finance. The funding should cover not only the technical costs, such as retiring coal fleet, development of renewable energy, improving the grid, but also preparing the community, particularly those employed in the coal mining industry, to adapt into the new labor market. It includes the reskilling and retraining to align their skill with market demand.

“The national government must provide special assistance for regions heavily reliant on coal economics,” Fabby emphasized.

Eunjoo Park-Minc, Senior Advisor on Financial Institutions Southeast Asia of Financial Futures Centre (FFC), agreed on the significant role of government during the transition, especially in designing a supportive policy framework which enables the private sector to participate.

“The role of the investors during this transition time is to develop innovative financing mechanisms. To make it more catalytic, we need a supportive policy framework to make it work,” she said.

Besides that, Eunjoo pointed out the need for international cooperation, as most of the (transition) projects are taking place in the developing countries while the financing primarily comes from the developed countries. 

The Asian Development Bank (ADB), as one of the multilateral banks financing the energy transition emphasized the importance of justness aspects. This is explained by Veronica Joffre, Senior Gender and Social Development Specialist at ADB. 

“One of the aspects of ETM (Energy Transition Mechanisms) is the justness. It means potential social impact should be assessed and managed, including employment, supply chains, and the environment,” said Veronica.

She added that as achieving net-zero emissions is the path for the future, the transition towards that direction should be consciously designed.