Indonesia’s Energy Support Measures

This report by the International Institute for Sustainable Development (IISD) analyzes energy support measures in Indonesia from 2016 to 2024, highlighting a heavy fiscal reliance on fossil fuel subsidies that undermines the country's energy transition and carbon pricing efforts.

• Energy subsidies in Indonesia reached a peak of IDR 886.1 trillion (USD 59.7 billion) in FY 2022, later moderating to IDR 713.5 trillion (USD 45 billion) in 2024. Support for fossil fuels remains dominant, accounting for 88.9% of total energy support in 2024, while electric vehicle (EV) subsidies represented only 1.5% of the total in the same year.
• Three specific measures create the largest fiscal burdens: compensation for below-market-priced electricity, subsidies for 3-kg LPG, and fuel compensation payments. Electricity compensation for the state utility PLN rose from IDR 24.6 trillion (USD 1.8 billion) in 2021 to over IDR 100 trillion (USD 6.3 billion) in 2024. Fuel compensation payments to Pertamina peaked in 2022 at IDR 275.3 trillion (USD 18.5 billion).
• The 3-kg LPG subsidy, intended for low-income households, suffers from significant leakage to wealthier groups. More than 68% of households across all income groups consume subsidized LPG, with the richest 10% using nearly as much as the poorest 10%. This regressive system costs IDR 80.2 trillion (USD 5.1 billion) in 2024 and relies on imports for three-quarters of its LPG.
• Fossil fuel subsidies effectively act as a negative carbon price, counteracting Indonesia's carbon pricing scheme (Nilai Ekonomi Karbon). In 2023, these subsidies created a net negative carbon price of USD 7.8 per tonne of carbon, far outweighing the impact of the national carbon pricing scheme, where emission allowances were priced at IDR 47,681 (USD 3).
• Electricity support is driven by tariff freezes since 2017 and the Domestic Market Obligation (DMO) for coal. The DMO requires coal producers to sell 25% of production to PLN at a fixed price of USD 70 per tonne, which provided implicit support exceeding IDR 200 trillion (USD 13.5 billion) in FY 22. Combined consumer-side subsidies in 2024 totaled over IDR 176 trillion (USD 11.1 billion).
• EV incentives rose to over IDR 22 trillion (USD 1.4 billion) in 2024, driving four-wheeler sales from 125 units in 2020 to over 43,000 in 2024. However, support for two-wheelers lags, with a budget of IDR 1.75 trillion (USD 0.11 billion) failing to meet the target of 200,000 units per year. Furthermore, transport fuel and biofuel support (IDR 17.1 trillion and IDR 25.8 trillion respectively in 2024) significantly exceeds EV support.

APA

Maulidia,, A. S. B. W. (2026). Indonesia’s Energy Support Measures. International Institute for Sustainable Development. https://www.iisd.org/publications/digital-story/indonesia-energy-support-measures

Chicago

Maulidia,, Anissa Suharsono,Richard Bridle,Arzalia Wahida,Martha. Indonesia’s Energy Support Measures. International Institute for Sustainable Development, 2026. https://www.iisd.org/publications/digital-story/indonesia-energy-support-measures.

Wikipedia

{{cite report |last1=Maulidia, |first1=Anissa Suharsono,Richard Bridle,Arzalia Wahida,Martha |title=Indonesia’s Energy Support Measures |publisher=International Institute for Sustainable Development |date=9 February 2026 |url=https://www.iisd.org/publications/digital-story/indonesia-energy-support-measures |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{maulidia2026indonesias, author = {Maulidia,, Anissa Suharsono,Richard Bridle,Arzalia Wahida,Martha}, title = {{Indonesia’s Energy Support Measures}}, institution = {International Institute for Sustainable Development}, year = {2026}, month = feb, url = {https://www.iisd.org/publications/digital-story/indonesia-energy-support-measures}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }