Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery

The document argues that Indonesia can accelerate its energy transition by redirecting fossil fuel subsidies and taxes—potentially raising up to IDR 166 trillion annually—into renewable energy, grid modernization, energy efficiency, and remote energy access.

• Indonesia could raise up to IDR 166 trillion (USD 11.5 billion) annually by reforming subsidies for coal and transport fuels and implementing a modest tax on them. When combined with existing taxes on these fuels, the total potential revenue reaches IDR 261 trillion (USD 18.1 billion), which is more than half of the estimated investment needed to reach the 23% renewable energy target by 2025.
• The current feed-in tariff (FiT) regime is a major barrier to renewable energy deployment because price caps for wind and geothermal projects are often significantly lower than the actual cost of construction for developers.
• Land acquisition and infrastructure costs are significant risks for developers. The brief suggests Indonesia could adapt a 'Solar Park Scheme' similar to India's, where regional governments provide land and statutory clearances, and utilize the existing Land Funding Scheme (LMAN) to support clean energy projects.
• PT PLN requires substantial investment for its 2060 climate neutrality goal, including approximately IDR 400 trillion (USD 27.8 billion) by 2024 for smart grid implementation and USD 3 billion between 2021 and 2024 for distribution upgrades.
• Despite a 99.40% electrification rate in 2021, energy access remains unreliable in remote areas, with some regions only having electricity for 6 hours. The brief recommends using reallocated funds to support off-grid renewable solutions and the '1,000 Islands Programme'.
• Energy efficiency is hindered by a lack of bankable projects and high perceived risks by financial institutions. The government could use reallocated funds to provide guarantees for larger projects or expand LED-based street lighting, which has already saved up to 50% in costs in Batang and Semarang.

APA

Christensen, L. T., Suharsono, A., & Sumarno, T. B. (2022). Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-07/switching-fossil-fuel-subsidies-indonesia-green-recovery.pdf

Chicago

Christensen, Lasse Toft, Anissa Suharsono, and Theresia Betty Sumarno. Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery. International Institute for Sustainable Development, 2022. https://www.iisd.org/system/files/2022-07/switching-fossil-fuel-subsidies-indonesia-green-recovery.pdf.

Wikipedia

{{cite report |last1=Christensen |first1=Lasse Toft |last2=Suharsono |first2=Anissa |last3=Sumarno |first3=Theresia Betty |title=Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery |publisher=International Institute for Sustainable Development |date=July 2022 |url=https://www.iisd.org/system/files/2022-07/switching-fossil-fuel-subsidies-indonesia-green-recovery.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{christensen2022switching, author = {Christensen, Lasse Toft and Suharsono, Anissa and Sumarno, Theresia Betty}, title = {{Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = jul, url = {https://www.iisd.org/system/files/2022-07/switching-fossil-fuel-subsidies-indonesia-green-recovery.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }