Jakarta, May 2023 – Indonesia has made important commitments to achieve climate and development targets, and it has begun to pay attention to reducing carbon emissions while at the same time strengthening economic and social resilience. As a developing country, committing to decarbonized development while maintaining economic growth is critical, particularly for Indonesia, which has set a target of 5.7% annual economic growth in its long-term plan, Visi Maju 2045. No country has transitioned to high-income status while also reducing emissions, despite the fact that this is the implicit challenge of the low-carbon transition (World Bank, 2023). Decoupling economic growth from carbon emissions will necessitate significant and sustained improvements in many aspects beyond environmental matters, encompassing economic, social, innovation, and fiscal policies, to drive transformational change (Fankhauser & Jotzo, 2017; OECD, 2022). Indonesia’s employment conditions, as one of its socio-economic and welfare indicators, will also be affected by numerous changes brought about by decarbonization, including the increased use of renewable energy and the reduction of the use of fossil fuels. These changes will shift the demand for employment towards cleaner economic activities and energy sources.
How is the future employment of the energy and related sectors?
Globally, in 2019, over 65 million people were employed in the energy and related sectors, accounting for almost 2% of formal employment worldwide, where half of the energy workforce is employed in clean energy technologies (IEA, 2019). The number of workers employed in the energy sector by 2030 globally could rise to 139 million under the 1.5°C scenario, including more than 74 million in energy efficiency, electric vehicles, power systems/flexibility and hydrogen; while currently the worldwide employment in renewable energy is up to 12.7 million in 2021 (IRENA & ILO, 2022). Thus, there are still many potential jobs in renewables globally, including in Indonesia, where losses in fossil fuel sectors would be more than compensated by gains in renewables and other energy transition technologies.
Indonesia can expect to see both changes in potential new green jobs and changes in the nature of the existing jobs – in which not all green-related jobs in Indonesia have high skill requirements, yet trends in high-income countries suggest that the demand for advanced green skills will grow, thus requiring a commensurate shift in training and education (World Bank, 2023). Approximately 40 percent of existing Indonesian firms reported having a green strategy; 58 percent of firms reported having dedicated energy teams or personnel, and, while about 37 percent of surveyed firms indicated that they monitor emissions from energy use, only 15 percent set energy and emissions targets (IRENA & ILO, 2022), while the new green job opportunity is also emerging with the increasing number of renewable energy and energy efficiency related firms in Indonesia. Renewable energy jobs in Indonesia are expected to increase throughout the transition, from 0.63 million currently to 0.74 million in 2030 and 1.07 million in 2050, with bioenergy and solar technologies dominating renewable energy jobs in Indonesia in this first decade of transition (IRENA, 2023). However, on the human capital preparation front in 2022, there has been no notable improvement from last year, and the government has not established any clear strategy for preparing the workforce required in the energy transition, let alone preparing the existing workforce to shift from fossil-based generation to renewable ones (IESR, 2022a).
What can we do to improve employment readiness?
As the renewables sector expands and evolves, a skilled renewable energy workforce will need to emerge, and to close the skill gap, a set of well-designed labour market policies and forward-looking education and training programs will be needed (IRENA, 2023). Especially in Indonesia, there will be no one strategy fit for all in order to improve human capital readiness; thus, a general approach with local understanding and action will be more powerful in this context because employment and demographic conditions vary. Policy considerations based on geographic or specific areas of impact and potential need to be carefully considered in the energy transition in Indonesia, with some matters in policies for greening including industrial and enterprise policies, skill development policies, active labour market policies, occupational safety and health policies, and social protection policies (ILO, 2023). In the bigger picture, employment readiness is one of the important aspects that determine successful economic transformations in low-carbon development. Furthermore, government interventions, transformation approaches, community revitalization, and comparative advantages are needed to ensure more sustainable economic development in transition impacted areas (IESR, 2022b).