The Decline of Indonesia’s Climate Policy and Action Rating in 2023

Delima Ramadhani, Climate Policy Project Coordinator, IESR presents the results of the CAT assessment of Indonesia’s climate policies, targets and actions

Jakarta, January 31, 2024 – According to the Climate Action Tracker (CAT) report, the climate policies, actions, and targets outlined in Indonesia’s 2023 Nationally Determined Contribution (NDC) document as “critically insufficient” to limit global temperatures  to below 1.5 degrees Celsius. This represents a decline from 2022 when Indonesia was rated as “highly insufficient.”

The Institute for Essential Services Reform (IESR), a collaborator with CAT, has disclosed that Indonesia, rated as “critically insufficient” under the Enhanced NDC target, could potentially release greenhouse gas emissions of 1,800 million tons of carbon dioxide equivalent for the unconditional target and 1,700 million tons of carbon dioxide equivalent for the conditional target by 2030. This estimation excludes emissions from the forestry and land sectors.

Fabby Tumiwa, Executive Director of IESR, attributed Indonesia’s downgrade to “critically insufficient” to the escalating use of coal in downstream mining. He stressed that the lowest CAT rating implies that the existing climate targets and policies would result in global emissions surges surpassing 4 degrees Celsius.

“Indonesia requires concrete and measurable actions to transition from fossil energy and expedite the shift to renewable energy in the coming decade,” Fabby stated during his remarks at the launch of the Climate Action Tracker Assessment Indonesia and Climate Transparency Implementation Check reports, organized by IESR on January 30. 

Throughout the 2022-2023 period, the Indonesian government has made progress in climate mitigation actions, notably by promoting the development of renewable energy through Presidential Regulation (Perpres) No. 112/2022 concerning the Acceleration of Renewable Energy Development for Electricity Supply. Additionally, the government has made positive commitments to achieving the 2030 net zero and FOLU net sink targets. Ambitious policies are needed to realize them.

The rise in emissions in 2022 amounts to approximately 200 million tons of carbon dioxide equivalent, with increased coal consumption being a contributing factor. Emissions from captive power plants, those operated by utility companies outside of PLN, are anticipated to contribute to a further increase of around 100 million tons by 2030. Indonesia’s current climate policy would result in the country reaching an emissions level of 1,487-1,628 MtCO2e (excluding the forest and land sector) by 2030.

Moreover, Indonesia has committed to the Just Energy Transition Partnership (JETP), aiming for a renewable energy mix exceeding 34% by 2030. However, it is noted that the JETP falls short of aligning Indonesia with the targets set in the Paris Agreement.

Delima Ramadhani, Climate Policy Project Coordinator at IESR, explained that to meet the Paris Agreement standards, emissions from the electricity sector must decrease to 140-150 million tons of carbon dioxide equivalent by 2030, ultimately reaching zero emissions by 2040.

“Indonesia needs to adopt key reforms as outlined in the comprehensive investment planning and policy (CIPP) document of the Just Energy Transition Partnership (JETP) and formulate and implement an ambitious decarbonization pathway for off-grid (captive) power plants,” explained Delima.

Considering the significance of the electricity sector and its potential for strategic decarbonization, IESR also assessed the implementation of the National Electricity General Plan (RUKN) policy. This policy serves as Indonesia’s primary reference for domestic electricity development and can be utilized for monitoring and evaluating renewable energy progress. Akbar Bagaskara, IESR’s Electricity System Analyst, explained that the overall assessment of the RUKN is “medium,” indicating that while it has a clear legal basis, namely MEMR Regulation No. 143/2019, there are numerous implementation challenges, including the consistent failure to achieve the annual renewable energy mix target.

“Indonesia’s challenges in meeting the annual targets for the renewable energy mix should prompt the government to conduct a thorough evaluation and address this issue with a sense of urgency. It is crucial for the government to formulate progressive strategies and innovations aligned with the Paris Agreement,” stated Akbar.

He elaborated on several actions the government should take to enhance the implementation of renewable energy development in Indonesia. Firstly, there is a need to increase the presence of supportive laws to foster a more conducive environment. Secondly, clear and comprehensive instruments should be provided, covering the entire spectrum from planning and procurement to reporting processes, especially for entities beyond PLN. Thirdly, a new revenue model for PLN should be established. Lastly, there is a necessity to refine PLN’s sustainable finance framework to attract a broader range of financing sources.

Webinar: Sunset of Coal-Fired Power Plants and the Coal Industry – Reviewing Direction and Multisectoral Impacts in a Just Energy Transition

Background

Indonesia has ratified its commitment to keeping global temperatures below 1.5 degrees Celsius, in line with the Paris Agreement, through Law No. 16 of 2016. The Indonesian government has set climate commitment targets through its enhanced Nationally Determined Contributions (NDCs): a 31.89% reduction in greenhouse gas emissions compared to business-as-usual scenarios and a 43.20% reduction with international assistance by 2030. However, these targets are still insufficient to meet the goals of the Paris Agreement. Based on business-as-usual scenarios, the energy sector is projected to dominate Indonesia’s emissions in the future. The electricity sector can be the first sector to be decarbonized considering the availability of low-emission technologies, such as renewable energy, which are becoming increasingly competitive. However, the Indonesian electricity system is currently dominated by coal-fired power plants.

On November 15, 2022, at the peak of the G20 High-Level Conference, President Joko Widodo and the International Partner Groups (IPG) led by the USA and Japan, including Canada, Denmark, the European Union, France, Germany, Italy, Norway, and the United Kingdom, agreed to the Just Energy Transition Partnership (JETP) agreement. As a follow-up to this agreement, the Indonesian government needs to prepare a Comprehensive Investment and Policy Plan (CIPP) to achieve the target of peak emissions in 2030 and a 34% renewable energy mix in the electricity sector by 2030, as well as support for affected communities. The targets to be achieved are a peak emission of 290 million tons of CO2 in the electricity sector by 2030, net zero by 2050, and a 34% renewable energy mix in the electricity system. As a concrete step, the Indonesian government is currently preparing the CIPP investment plan document, which was originally scheduled to be launched on August 16, 2023, but has been postponed to the end of 2023. This delay is due to the unclear funding framework of the JETP from the IPG countries and the need for further refinement of some analyses in the document. In addition, the government also expects a more inclusive document and opens the opportunity for public consultation in the coming months.

Energy transition in various funding schemes, both JETP and Energy Transition Mechanism (ETM), is expected to prioritize justice aspects, especially for vulnerable and affected groups. The energy transition process should be seen as a comprehensive process that includes the creation of environmentally friendly jobs, social protection for vulnerable groups, as well as skills enhancement and retraining driven by employer programs to address these issues.One of the focuses of JETP is the effort to early retire coal-fired power plants (CFPP) which still contribute about 60% of the overall electricity generation. JETP also recognizes the importance of a fair transition principle for workers and communities affected by the early retirement of PLTU, including the domestic coal industry which will weaken and have an impact on the economy, especially in coal-rich areas. The JETP program in Indonesia must develop a fair transition roadmap that includes the creation of environmentally friendly jobs, social protection for vulnerable groups, as well as skills enhancement and retraining driven by employer programs to address these issues.

The impacts of this coal transition are identified and analyzed in several scenarios to study the relevant outcomes under various future conditions. These outcomes are presented so that stakeholders can make policies that anticipate the impacts that will occur. Therefore, the Institute for Essential Services Reform (IESR) will hold a public discussion to discuss the financing and investment scheme strategies, particularly in relation to the plans and anticipation of the multi-sectoral impacts of the early retirement of coal-fired power plants (PLTU) in efforts to achieve a just energy transition.

Objective:

To present and discuss the impacts resulting from the coal transition process in Indonesia.

To discuss how CIPP JETP supports a just energy transition.

To discuss the role of stakeholders in anticipating these impacts.

Low Carbon Development Acceleration Requires Target and Strategy Synergy

press release

Jakarta, August 10, 2023 – Sustainable development with minimal emissions is believed to be the key to lifting Indonesia out of the middle-income trap it has been in for 30 years (1993-2022) and transitioning towards a developed country. The Institute for Essential Services Reform (IESR) urges the Indonesian government to set ambitious, measurable emissions reduction targets and include them in the Nationally Determined Contribution (NDC).

Fabby Tumiwa, Executive Director of IESR, in his remarks at the seminar “Bridging the Cross-Sectoral Gap in Pursuing More Ambitious Climate Targets in Indonesia” organized by IESR, mentioned that based on global action Climate Action Tracker (CAT) data, as measured by the current policy base, would lead to a global temperature increase of 2.7°C. However, Indonesia’s latest emission reduction target is categorized as critically insufficient, which means it is far from enough to reduce global boiling. There is a gap between current policies and emission levels compatible with the Paris Agreement. Based on Indonesia’s climate policy and action, emissions will reach 111.4-132.0 GtCO2e/year by 2030 (excluding LULUCF), 351-415% over 1990 levels. To be compatible with the Paris Agreement, emissions must fall to 0.56-0.86 GtCO2e/year in 2030 (excluding LULUCF).

“In addition, we need to look at Indonesia’s NDC shows a gap in action towards meeting the net zero target. The transportation and industrial sectors need to take action, while the energy sector already has a clear strategy to reduce greenhouse gas emissions. A transparent and measurable strategy and plan is needed to achieve the target of the Paris Agreement,” he said.

Furthermore, he alluded to the delivery of different signals from policymakers who adjust the priorities of each sector regarding climate crisis mitigation. This has slowed progress toward achieving emission reduction targets per the Paris Agreement.

“The lack of a clear strategy leads to inconsistent climate action and policymaking across sectors and inadequate budget allocations for adaptation and mitigation. It is crucial to integrate climate action into the National Long‐Term Development Plan (RPJPN) and National Medium Term Development Plan (RPJMN) planning processes,” he said. 

He also emphasized that Indonesia’s chairmanship in ASEAN should be seen as an opportunity to encourage other ASEAN countries to adopt more ambitious climate policies and actions. Indonesia’s climate policies are considered among the most ambitious in ASEAN.

Medrilzam, Director of the Environment for the Ministry of National Development Planning/Bappenas, on the same occasion, explained that his party had completed the 2025-2045 National Long-Term Development Plan (RPJPN) document, which prioritized the principles of sustainable development. One of the main targets is reducing greenhouse gas (GHG) emissions by up to 95% in 2045. He says lowering emissions is closely related to developing a greener economy. In particular, in Indonesia in 2025-2045, RPJPN targets Indonesia’s per capita income to be equivalent to developed countries of around US$30,300 and enter the 5 (five) most significant economies globally.

“Reducing emissions should not be seen as just reducing emissions, and must consider economic development. Green economic interventions with low-carbon development will increase the environment’s carrying capacity and reduce GHG emissions while encouraging Indonesia’s average GDP growth in 2022-2045 to reach 6-7%,” said Medrilzam.

However, Medrilzam highlighted the amount of investment required on average of IDR 2.377 trillion per year from 2025-2045 to implement green economic policies.

“To meet this need, policies are needed to strengthen green innovative financing, such as blended finance, impact investment, carbon taxes, and others. The green investment will also provide job creation benefits of up to 1.66 million jobs/year in 2045,” he said.

Ferike Indah Arika, Young Expert Policy Analysis Center for Climate Change and Multilateral Financing Policy, Fiscal Policy Agency, Ministry of Finance, explained it is crucial to have innovative financing to support climate mitigation and adaptation beyond the State Budget. He compared the accumulated funding for climate change mitigation needed in the 2018-2030 range to reach IDR 4.002 trillion, which is still far less than the investment required for green economy policies.

“The state revenue and expenditure budget (APBN), whose allocation is monitored for mitigation and adaptation activities, is still far between what we have and what is needed. This huge disparity in funding needs, of course, cannot only be met by the limited state budget,” said Ferike.

Nurcahyanto, Associate Policy Analyst, Directorate of Energy Conservation, Ministry of Energy and Mineral Resources of the Republic of Indonesia, explained that from the energy sector, to encourage the acceleration of GHG emission reduction, the termination of coal-fired power plants operation is one of the main contributions in reducing emissions in the power generation sector. Nurcahyanto emphasized that the draft roadmap for the early termination of coal-fired power plant operations with a target of retiring a total capacity of 4.8 GW of coal-fired power plants in 2030 has been completed and submitted to the Coordinating Ministry for Maritime Affairs and Fisheries, the Ministry of Finance, the Ministry of State Owned Enterprises (BUMN), and PT PLN (Persero) for comments.