Switching Fossil Fuel Subsidies in Indonesia to Support a Green Recovery

This policy brief by the International Institute for Sustainable Development (IISD) examines how Indonesia can reallocate fossil fuel subsidies and taxes to fund a green recovery and accelerate its energy transition. It proposes redirecting these funds toward renewable energy deployment, grid modernization, energy access in remote areas, and energy efficiency measures to meet national climate targets.

• Indonesia could generate significant revenue by reforming fossil fuel subsidies. Specifically, reforming subsidies for coal and transport fuels, combined with a modest tax on these fuels, could raise up to IDR 166 trillion (USD 11.5 billion) annually. When including existing taxes, the total potential revenue reaches IDR 261 trillion (USD 18.1 billion), which represents more than half of the estimated investment needed to reach the 23% renewable energy target by 2025.
• The current feed-in tariff (FiT) system is a major barrier to renewable energy deployment in Indonesia. Under Permen ESDM no. 4/2020, tariffs are negotiated between PT PLN and developers, often resulting in price caps for wind and geothermal projects that are significantly lower than construction costs. While a new presidential regulation is being drafted to set more competitive reference prices, the brief suggests that reinvesting fossil fuel subsidies and coal taxes into the FiT regime would be an effective way to attract investment.

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} }