ACHIEVING A FOSSIL-FREE RECOVERY IN INDONESIA

This policy brief analyzes Indonesia's COVID-19 recovery spending, arguing that the National Economic Recovery (PEN) program is not aligned with the country's net-zero emissions targets due to significant continued support for fossil fuels. The authors recommend reforming fossil fuel subsidies and directing fiscal support toward renewable energy to achieve climate goals and create jobs.

• Indonesia's 2020 COVID-19 recovery spending significantly increased financial support for the fossil fuel sector, more than doubling existing subsidies. The government committed IDR 108.5 trillion (USD 7.5 billion) in 2020 to support various energy types through the National Economic Recovery (PEN) program, with IDR 95.3 trillion (USD 6.6 billion) going directly to fossil fuel-related state-owned enterprises (SOEs) including PT PLN, PT Pertamina, PT Garuda Indonesia, and PT Kereta Api Indonesia.
• In 2020, total quantified government support to fossil fuels—combining yearly subsidies and COVID-19 recovery packages—amounted to IDR 205.8 trillion (USD 14.3 billion), representing 8% of Indonesia's total budget. Yearly subsidies alone totaled IDR 97.4 trillion (USD 6.8 billion), covering electricity, LPG, and fuel (BBM).
• Indonesia is falling short of its renewable energy targets. While the country pledged to make new and renewable energy 23% of its primary energy mix by 2025, it only reached 11.2% (10.5 GW) in 2020, missing its 2020 target of 13.4%.
• The development of renewable energy in Indonesia is hindered by fossil fuel subsidies that keep electricity prices artificially low, making renewables less cost-competitive. Additionally, technical and pricing issues make renewable energy more expensive in Indonesia than in regions like the Middle East or India.
• Transitioning to renewable energy offers significant economic opportunities for Indonesia. The renewable energy sector created approximately 0.5 million jobs in Indonesia in 2019, and the authors suggest that dedicating recovery funds to this industry would create a "double win" of job creation and climate alignment.
• To align recovery with climate targets, the authors recommend that Indonesia avoid direct fiscal support to the fossil fuel sector unless conditioned on a transition to clean energy. They further suggest reforming fossil fuel subsidies to reallocate funds toward renewables and the poor, and increasing revenue from the fossil fuel production sector through royalties and taxes.

APA

Sumarno, T. B., & Sanchez, L. (2021). ACHIEVING A FOSSIL-FREE RECOVERY IN INDONESIA. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-10/indonesia-achieve-covid-19-recovery-climate-targets.pdf

Chicago

Sumarno, Theresia Betty, and Lourdes Sanchez. ACHIEVING A FOSSIL-FREE RECOVERY IN INDONESIA. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-10/indonesia-achieve-covid-19-recovery-climate-targets.pdf.

Wikipedia

{{cite report |last1=Sumarno |first1=Theresia Betty |last2=Sanchez |first2=Lourdes |title=ACHIEVING A FOSSIL-FREE RECOVERY IN INDONESIA |publisher=International Institute for Sustainable Development |date=September 2021 |url=https://www.iisd.org/system/files/2021-10/indonesia-achieve-covid-19-recovery-climate-targets.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sumarno2021achieving, author = {Sumarno, Theresia Betty and Sanchez, Lourdes}, title = {{ACHIEVING A FOSSIL-FREE RECOVERY IN INDONESIA}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = sep, url = {https://www.iisd.org/system/files/2021-10/indonesia-achieve-covid-19-recovery-climate-targets.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }