Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector

The policy brief argues that Indonesia must implement a robust pricing mechanism to prevent a return to expensive fuel subsidies, which contribute to air pollution and greenhouse gas emissions. It recommends pricing models such as smoothing, ratcheting, or price caps and floors to reduce price fluctuations while phasing out subsidies for polluting fuels. The brief suggests redirecting subsidy savings toward low-emission infrastructure, including public transport and electric vehicle charging stations, and improving biofuel governance. It notes that while 2015 reforms saved over USD 15 billion, subsidies have persisted and pricing has remained stagnant despite rising international oil prices.

• Indonesia's current fuel pricing regime, while intended as a public service, creates significant social costs including greenhouse gas emissions, traffic congestion, and air pollution and related illnesses.
• To reduce subsidies and market price volatility, the document proposes three specific pricing options: ratcheting, smoothing, and the use of price floors and caps.
• The 2015 transport fuel subsidy reforms led to savings exceeding USD 15 billion in that year, involving the removal of budgetary support for 'Premium' gasoline and capping diesel subsidies at IDR 1,000 per litre (USD 7.5 cents).
• Despite previous reforms, fuel subsidies persist; for example, Premium prices remained steady until April 2018 even as international oil prices nearly doubled.
• The document recommends redirecting funds from fuel subsidies toward low-emission transport infrastructure, such as electric vehicle charging stations, public transport, and roads for pedestrians and bicycles, as well as transitioning from coal to renewables.

APA

McCulloch,, T. L. (2019). Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector. International Institute for Sustainable Development. https://www.iisd.org/publications/energy-transition-indonesia-transport-sector

Chicago

McCulloch,, Tara Laan,Neil. Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector. International Institute for Sustainable Development, 2019. https://www.iisd.org/publications/energy-transition-indonesia-transport-sector.

Wikipedia

{{cite report |last1=McCulloch, |first1=Tara Laan,Neil |title=Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector |publisher=International Institute for Sustainable Development |date=23 October 2019 |url=https://www.iisd.org/publications/energy-transition-indonesia-transport-sector |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mcculloch2019energy, author = {McCulloch,, Tara Laan,Neil}, title = {{Energy Transition in Support of the Low-Carbon Development Initiative in Indonesia: Transport sector}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = oct, url = {https://www.iisd.org/publications/energy-transition-indonesia-transport-sector}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }