The Alliance of Independent Journalists (AJI) Palembang together with the Institute for Essential Services Reform (IESR) and the Society of Indonesian Environmental Journalists (SIEJ) took the initiative to form the South Sumatra Energy Transition Journalist Network (JTE).
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Indonesia and other countries signed the Paris Agreement in 2015 in an effort to reduce greenhouse gas emissions and protect our Earth. This agreement has established a strong foundation for fighting climate change, with one of the main focuses being the energy transition, which refers to the transition from using fossil energy, which is limited and damages the environment, to renewable energy which is clean and environmentally friendly. Indonesia has a big responsibility to lead this change. In facing global climate change, energy transition is the key to ensuring the sustainability of Indonesia’s natural resources and economy.
In connection with this, the Institute for Essential Services Reform (IESR) held a Media Briefing event entitled “Energy Transition and IESR Study in Muara Enim Regency” on September 26, 2023. The Media Briefing event was attended by 18 journalists from various printed and online media in South Sumatra. IESR gave a presentation on the results of a study in Muara Enim Regency to provide a comprehensive picture of the impact of the energy transition in social and economic sectors.
Representative of the IESR Sustainable Energy Access program, Reananda Permono, explained that the Media Briefing activity was held to increase the insight of journalists in South Sumatra regarding the energy transition issue. Apart from that, IESR wants to bring journalists closer to competent sources regarding renewable energy issues by presenting four panelists from various backgrounds, namely the provincial government (ESDM Sumsel), district government (Bappeda Muara Enim), academics (Unsri), and CSO (HaKI).
“The energy transition cannot happen alone, but also needs to involve the active participation of society and various parties, such as journalists. By conveying accurate information, voicing diverse perspectives, and maintaining accountability, they help shape society’s views on energy and provide the necessary encouragement for stakeholders to move towards a cleaner and more sustainable future,” explained Reananda.
Social and Economic Analyst from IESR, Martha Jessica Mendrofa, explained that the global energy transition carried out by countries that import coal from Indonesia, such as China, India and Vietnam, will have an impact on the national economy since more than 70% of Indonesian coal production is exported. The economy of South Sumatra, with the second highest coal reserves in Indonesia at 9,345.57 million tons, will also be affected considering that the coal and lignite mining sector contributes 15.78% of the province’s GRDP in 2022. In this regard, IESR has conducted a study of the impact of the energy transition and economy in Muara Enim during 2021-2023. Muara Enim was the target of the study because it has become the top two coal producers in South Sumatra in the last five years, with production of more than 20 million tons per year.
“Based on IESR analysis, the mining sector in Muara Enim Regency does not have the highest multiplier impact in terms of income and employment, whereas the service, trade and agriculture sectors still have a higher impact on the economy. “Apart from that, the coal industry does not provide high added value to labor wages because companies capture a larger portion of income, the ratio is around 20% versus 78%,” he explained.
Head of the Energy Division of the South Sumatra Energy and Mineral Resources (ESDM) Department Dr. Aryansyah explained that the world energy transition trend would have an impact on domestic conditions. For this reason, his party has done several things to perpetuate the energy transition, such as issuing a special regional regulation for the development of the renewable energy sector, a gubernatorial regulation on electric-based vehicles, and a study of renewable energy in all districts/cities of South Sumatra.
“Currently, South Sumatra is an energy reservoir. We have an electricity surplus of 1,000 MW and that electricity is exported to other provinces such as Jambi and Bengkulu. There must be a generating source to replace that. We are ready for the energy transition. “For example, we have a mini hydro power plant for Pagar Alam’s electricity supply,” explained Aryansyah.
Representative of the Muara Enim Regency Bappeda, Fajrin Ulinnuha, said that his party had prepared the Muara Enim Industrial Area (KITE), to face the reduction in coal production in the future, the development of which had reached 80% as of June 2023. This industrial area covers the CPO (crude palm oil) business. or palm oil) and the coal downstream industry. Muara Enim also has a PLTP (Geothermal Power Plant) owned by Supreme and Pertamina.
“We need to ensure the availability of access to clean energy for all groups, especially in the electrification sector because the majority of electricity sources come from coal. Sources of funding are also an important issue as the energy transition continues.
There are many new projects, so large funds are needed. “Regional governments also need research and technology support from other institutions, as well as training for reliable human resources to be ready to face the energy transition,” said Fajrin.
Sriwijaya University development economics lecturer Dr. Muhammad Subardin reminded that the goal of development is to reduce unemployment and poverty. So, it is necessary to ascertain whether an industrial sector can lift the economy of a region or not. Subardin introduced the term Dutch Disease, where areas with high natural wealth tend to have low economic levels. Through his own research, Subardin succeeded in proving this condition in South Sumatra by comparing the economic conditions in “mineral districts” and “non-mineral districts”.
“I identified eight mineral districts in South Sumatra, including Muara Enim. Almost the entire Muara Enim area is included in the coal concession area. Based on research I conducted, it is proven that the economic level of mineral districts is no better than non-mineral districts in South Sumatra. “This proves that the mining industry cannot improve the welfare of a region because this industry is capital intensive, not labor intensive,” explained Subardin.
Executive Director of the Kita Forest Association Institute (HaKI) Deddy Permana stated that apart from economic problems, knowledge and information gaps are important in energy transition activities. This is where journalists can play a role in disseminating information to the wider community.
“There is often a gap in information between local communities and the elite because people only know the conditions that occur on the ground. For example, companies actually understand this energy transition trend because some of them are already focused on developing businesses outside of coal. “Another problem is that sometimes CSR funds are not channeled to posts that can support energy transition activities,” explained Deddy.
To achieve the ambitious target of reducing Greenhouse Gas (GHG) emissions in accordance with the Paris Agreement, Indonesia released the Enhanced Nationally Determined Contribution (NDC) document which states the emission reduction target is 31.89% (with its own efforts) and 43.2% (with support internationally) in 2030. In more detail, the National Medium Term Development Plan Document (RPJMN) also supports this target by stating that Indonesia can achieve a 27.3% reduction in GHG emissions by 2024.
As a province that uses and uses large-scale coal, and is able to export electricity to surrounding provinces, South Sumatra is one of the largest GHG contributors nationally. In connection with this, the Institute for Essential Services Reform (IESR) held a capacity building event entitled Workshop on Calculating GHG Emissions and Budget Tagging with the Provincial and Regency/City Regional Planning Agencies (Bappeda) in South Sumatra on September 25 2023.
In the workshop which was attended by around 25 representatives of Provincial and Regency/City Bappeda in South Sumatra, IESR presented two speakers from the Fiscal Policy Agency and the National Research and Innovation Agency (BRIN). Representing the IESR Sustainable Energy Access team, Reananda Permono explained that IESR is committed to holding four workshop events in the context of capacity building for the South Sumatra Bappeda in dealing with the issue of a just energy transition and economic transformation in South Sumatra. In the regional context, this capacity building activity is needed because Bappeda is an important stakeholder in energy transition activities.
In his speech at the opening of the event, Hari Wibawa, Head of the Economic and Development Funding Division of Bappeda for South Sumatra Province, reminded Bappeda colleagues of the importance of insight into GHG emissions and budget tagging. Moreover, South Sumatra’s economy is largely supported by the mining industry, as evidenced by the many districts in South Sumatra that depend on their GRDP from the coal mining sector.
Policy Analyst from the Fiscal Policy Agency, M. Zainul Abidin, who was the first resource person, explained the importance of Budget Tagging in monitoring the impact of climate change in Indonesia. Budget marking activities are directly connected to the APBN, so that they can support the development agenda and national fiscal policy. Zainul also mentioned three functions of the APBN as an economic stimulus instrument, namely as a shock absorber (stabilization function), development agent (allocation function), and solution for people’s welfare (distribution function).
“The results of budget marking are used in the NDC (Nationally Determined Contribution) achievement monitoring system in the Ministry of Environment and Forestry’s National Registry System (SRN), and efforts are made to support the low carbon development monitoring system in the AKSARA Bappenas system. “There are quite a lot of uses for budget tagging, for example as a basis for forming cooperation in climate change action and as a basis for local governments to obtain innovative financing,” explained Zainul.
The second resource person, researcher from BRIN Rohmadi Ridlo, stated the importance of developing climate change mitigation and adaptation strategies to reduce GHG emissions in South Sumatra Province. Information regarding GHGs can then be used in identifying climate change mitigation and adaptation strategies, formulating sustainable environmental policies, and even as a basis for preparing special budgets to reduce GHGs at the provincial level.
“In general, there are five sectors that produce GHG emissions, namely energy, waste, IPPU (Industrial Process and Product Uses), agriculture, and FOLU (Forestry and Other Land Uses). The energy sector is still the largest source of GHG emissions nationally with 453.2 Mton CO2. “For the case of South Sumatra, one example of a strategy to reduce GHG emissions in the energy sector is biomass co-firing technology to produce electricity in coal-fired power plants,” explained Ridlo.
Jakarta, September 1, 2023 – The Institute for Essential Services Reform (IESR), a leading energy and environmental think tank based in Jakarta, Indonesia, released a report on the potential impact of the energy transition on coal-producing regions in Indonesia. This report, entitled Just Transition in Indonesia’s Coal Producing Regions, Case Study Paser and Muara Enim, finds that economic diversification and transformation must be immediately planned to anticipate the social and economic impacts of the decline in the coal industry along with plans to end coal-fired power plants (CFPP) operations and increased commitments to energy transition and emissions mitigation, from countries that have become coal export destinations so far.
IESR recommends that the central and regional governments realize the potential impact of the energy transition on the economy and development of coal-producing areas and start planning for economic transformation as soon as possible in these coal-producing areas.
A recent study conducted in Paser Regency, East Kalimantan Province, and Muara Enim Regency, South Sumatra Province, has recommended the utilization of coal’s revenue sharing (dana bagi hasil, DBH) CFPP and corporate social responsibility (CSR) programs to plan and support economic transformation. The study also highlighted the importance of expanding public access and participation to ensure a just transition. In 2023, Coals’ revenue sharing fund (DBH) is projected to account for 20% of the total revenue budget of the Muara Enim government. Similarly, between 2013-2020, it accounted for 27% of the total revenue of the Paser government.
“The importance of prioritizing economic activities that benefit local communities and have a greater multiplier effect towards post-coal mining economic transformation. It is equally important to factor in the potential impact of a decrease in coal production on the informal economy sector, which has not yet been included in macroeconomic analysis,” mentioned Executive Director of IESR, Fabby Tumiwa.
According to a recent study, the coal mining industry has contributed 50% to 70% of GRDP in Muara Enim and Paser over the last ten years. However, despite this significant economic contribution, coal industry workers earn little. Only around 20% of the added value is allocated to workers, while as much as 78% becomes company surplus. This means that the enormous economic value generated by the coal mining industry contributes little to the income of its workers.
“The coal mining industry has also caused significant social and environmental impacts on the surrounding communities. These impacts include degradation of air and water quality, changes in people’s livelihoods, economic inequality, and increased consumerism and rent-seeking,” stated Julius Christian, the leading author of this study and also the Research Manager of IESR.
According to him, different parties in the region are responding to the trend of energy transition in various ways based on their interests, knowledge, and access to information. Coal companies are more aware of the energy transition risks posed to their businesses than governments and ordinary citizens.
“Both companies and local governments are starting to carry out various economic transformation initiatives. However, local people are more skeptical about the potential decline in coal because they have seen increased production recently,” said Martha Jesica, Social and Economic Analyst at IESR.
However, according to her, changes in perspective are occurring in both society and coal industry companies. The local community has called for economic diversification, and coal companies have started branching into other fields. She hopes that various stakeholders and the government can work towards raising awareness and implementing structural changes to drive economic transformation efforts.
The report “Just Transition in Indonesia’s Coal Producing Regions: Case Studies Paser and Muara Enim” by IESR suggests that to achieve sustainable development in coal-producing regions, firstly, there needs to be a comprehensive plan for economic diversification and transformation that involves stakeholders and community participation. Secondly, utilizing DBH funds and CSR programs to finance the financial transformation process, which can attract more investment into sustainable economic sectors. Thirdly expanding access to education and training to prepare a competitive workforce in the sustainable industry and increasing financial literacy for the community. Fourthly, expanding the participation of all elements of society, especially vulnerable groups, in regional planning and development.
“All matters related to the transition in coal-producing areas should be included in the respective central and provincial governments’ Medium Term Development Plan (RPJM). This will provide clear support and direction for local governments,” said Ilham Surya, Environmental Policy Analyst IESR.
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