Leveraging fiscal stimulus to improve energy transition: Case of South Korea and Indonesia

The report examines the impact of COVID-19 on the energy sectors of South Korea and Indonesia and evaluates their fiscal recovery programs. South Korea's Green New Deal (GND) explicitly integrates climate goals with economic recovery, focusing on green infrastructure and low-carbon energy. In contrast, Indonesia's National Economic Recovery (PEN) program primarily targets short-term health and social stability, with only 0.9% of its budget allocated to energy transition. The study identifies structural barriers in both nations—such as South Korea's centralized market and Indonesia's high financing costs—and recommends that future stimulus include specific emission targets and incentives to attract private investment.

• COVID-19 caused a similar decline in electricity consumption in both countries during the first half of 2020, with South Korea dropping by 2.8% and Indonesia by 7.06%, primarily driven by industrial and commercial sectors.
• South Korea's fiscal response included the Green New Deal (GND), a package of USD 145.5 billion to be implemented by 2025, which aims to create 1.9 million jobs through green infrastructure, low-carbon energy expansion, and industrial innovation.
• Indonesia's National Economic Recovery (PEN) program, totaling USD 47.7 billion, focuses on social protection and business incentives, with only 0.9% of the total budget allocated to energy transition programs.
• South Korea's energy transition is hindered by a heavily centralized market structure dominated by the South Korean Electricity Power Company (KEPCO), which limits the development of a private power purchase (PPP) market.
• The South Korean GND lacks the specific emission reduction targets, timelines, and monitoring plans found in frameworks like the European Green Deal, focusing instead on fiscal investment and job creation.
• Private investment in Indonesia's clean energy sector is obstructed by four primary barriers: high financing costs, limited long-term debt funding, inefficient policy frameworks, and risk aversion within the financial sector.
• Indonesia's energy transition is further complicated by local content requirements in the Omnibus Law and Draft Law of RE, which may lower project bankability as local materials are often more expensive and of lower quality.
• Despite the pandemic, Indonesia's state power company (PLN) continues to rely heavily on coal, with cleaner coal plants remaining a significant part of the RUPTL 2020-2029 plan.
• South Korea aims to increase its share of renewable electricity production to 20% by 2030 and 30-35% by 2040, while Indonesia targets a 23% national renewable energy mix by 2025.

APA

Wijaya, M. E., Hong, J. H., Brurce, M. Z., Mecca, M., Rabinsa, A., Haesra, Kim, K., Lee, S., Rosidah, R., & Uhm, S. (2021). Leveraging fiscal stimulus to improve energy transition: Case of South Korea and Indonesia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Leveraging-fiscal-stimulus-to-improve-energy-transition_Case-of-South-Korea-and-Indonesia-1.pdf

Chicago

Wijaya, Muhammad Ery, Jong Ho Hong, Muhammad Zeki Brurce, Muhammad Mecca, Alke Rabinsa, Haesra, Keewon Kim, et al. Leveraging fiscal stimulus to improve energy transition: Case of South Korea and Indonesia. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Leveraging-fiscal-stimulus-to-improve-energy-transition_Case-of-South-Korea-and-Indonesia-1.pdf.

Wikipedia

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BibTeX

@techreport{wijaya2021leveraging, author = {Wijaya, Muhammad Ery and Hong, Jong Ho and Brurce, Muhammad Zeki and Mecca, Muhammad and Rabinsa, Alke and Haesra and Kim, Keewon and Lee, Soosuk and Rosidah, Rahmahwati and Uhm, Sangwon}, title = {{Leveraging fiscal stimulus to improve energy transition: Case of South Korea and Indonesia}}, institution = {Climate Policy Initiative}, year = {2021}, month = may, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/05/Leveraging-fiscal-stimulus-to-improve-energy-transition_Case-of-South-Korea-and-Indonesia-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }