Search Climate Insights Directory

The report identifies a 'political equilibrium' in Indonesia where the priorities of maintaining low electricity tariffs and low government subsidies outweigh the commitment to renewable energy targets. Key roadblocks include power purchase price caps (BPP) that make projects unviable, policy instability, and the dominant influence of the state-owned utility PLN and the coal industry. Experts interviewed for the study unanimously believe the 2025 target will be missed unless significant policy shifts occur.

This report examines the intersection of gender and LPG subsidy reform in Indonesia, finding that current subsidies are regressive and fail to reach many poor women. It highlights that women are more vulnerable to price increases due to their primary role in cooking and household management, and that switching back to biomass fuels poses significant health risks through indoor air pollution.

The document examines the 'true cost' of coal-fired power in Central Java, Indonesia, contrasting the financial and social costs of planned coal expansion against the potential of renewable energy. It argues that current capacity plans may lead to unnecessary overcapacity and that the inclusion of health and climate externalities makes renewables a cheaper alternative.

The document evaluates Indonesia's transition from fixed fuel subsidies to market-aligned pricing, specifically for gasoline, diesel, and liquefied petroleum gas (LPG). It argues that while the 2015 reforms for gasoline and diesel saved approximately USD 15.6 billion, the system remains vulnerable to international price volatility. The brief proposes several price adjustment models—including smoothing, ratcheting, and cap-and-floor systems—to balance the government's need for fiscal sustainability with the necessity of protecting low-income consumers from sudden price spikes. It concludes with recommendations for a transparent, frequently updated pricing formula managed by an independent agency.

Indonesia faces imminent energy security challenges, with demand for electricity and transport fuel expected to grow rapidly by 2030. While the government has set ambitious targets for renewable energy (23% by 2025) and emission reductions (29-41% by 2030), current investments follow a 'business as usual' fossil fuel path. Structural barriers include policy inconsistency, limited fiscal space, and a political culture of transactional politics and decentralisation that often favours the exploitation of domestic coal. However, opportunities exist in geothermal energy, waste-to-energy, and energy efficiency, alongside governance reforms like the 'One Map' initiative and increased foreign direct investment to mitigate the financial risks of transitioning to a low-carbon economy.

The report evaluates the Indonesian power sector using the Financial Sustainability Electricity Sector (FSES) framework. It finds that while generation capacity and reliability are improving, the sector remains heavily dependent on government subsidies and coal, with renewable energy deployment lagging behind official targets.

The report analyzes Indonesia's land-use revenue systems, finding that 93.5% of revenue is based on production rather than land size, which fails to disincentivize land expansion. It identifies high-potential areas for reform, including the Land and Building Tax, Forestry Non-Tax Revenue, and the use of Adjustment Funds for earmarking sustainable land use activities. The analysis also highlights how current central-to-regional revenue sharing may perversely encourage local governments to grant more land permits to increase their budgets.

The document reports that the Indonesian economy remained resilient following fuel subsidy reforms in late 2014, including a shift to a 'managed floating rate' pricing system. While these reforms improved Indonesia's credit outlook and shifted consumption toward non-subsidized fuels, the briefing warns that political intervention in pricing continues to cause financial losses for PT Pertamina and risks undermining the new system's stability.

The report analyzes Indonesia's transition from ad hoc fuel subsidies to a new pricing system introduced in January 2015, which aims to reduce wasteful spending by passing through international price changes. It evaluates 'good practice' across four dimensions—subsidies, pass-through, transparency, and enforcement—and examines case studies from China, Mexico, India, the Philippines, South Africa, and Thailand. The document argues that while full deregulation is the international benchmark for fiscal sustainability, Indonesia's constitutional constraints necessitate a robust, government-led mechanism. It recommends adopting variable taxes, improving real-time monitoring, and investing in non-pricing measures such as energy efficiency and targeted social safety nets to protect vulnerable groups from price volatility.

The Indonesian government implemented significant energy subsidy reforms starting in November 2014, transitioning from fixed prices to a more market-responsive pricing mechanism. While initial price hikes in November 2014 led to inflation and public protests, a sharp decline in global oil prices allowed the government to lower fuel prices in January 2015 while simultaneously removing subsidies on Premium gasoline in the Java-Madura-Bali region. The government aims to reallocate an estimated IDR 194.2 trillion in savings toward productive sectors, including infrastructure and state-owned enterprises. Additional reforms targeted LPG and electricity tariffs, supported by social assistance programs like the Indonesia Smart Card to mitigate impacts on vulnerable populations.

The document examines Indonesia's energy subsidy regime, which in 2013 cost the government IDR 299.8 trillion (US$ 27.0 billion), representing 2.5% of GDP. It details the 2013 price increases for gasoline and diesel, the subsequent social compensation packages, and the challenges of LPG and electricity subsidy reforms. The report argues that these subsidies are regressive, encourage wasteful consumption, and crowd out critical infrastructure and social welfare spending. It provides recommendations for transitioning toward targeted assistance and renewable energy to ensure macroeconomic stability and sustainable growth.

The report examines Indonesia's renewable energy landscape, focusing on the institutional and regulatory frameworks governing geothermal, hydro, biomass, and biofuels. It identifies a wide array of financial, fiscal, and market-based incentives, such as the Geothermal Fund Facility and feed-in tariffs, but notes that their impact is undermined by conflicting government policies, including heavy fossil fuel subsidies and inter-ministerial disagreements.

The report analyzes Indonesia's fuel subsidy regime, highlighting the fiscal burden of spending IDR 164.7 trillion (US$ 18.1 billion) in 2011. It evaluates the government's 2012 plans to restrict 'Premium' gasoline use and deploy CNG and LGV alternatives, while recommending a transition toward market-based pricing and improved public communication to mitigate social unrest.

The document assesses how Indonesia's shift from a protected to an open economy has affected its SMEs, which constitute over 90% of all firms. Despite facing significant institutional constraints—such as lack of capital, technology, and skilled labor—the author finds no evidence that trade liberalization has negatively impacted the overall number or GDP contribution of Indonesian SMEs. While most SMEs remain domestically focused or export indirectly through intermediaries, the paper argues that a free-trade regime generally provides more long-term benefits than protectionism, provided that supporting policies for human resource and technological upgrading are implemented.

The report analyzes Indonesia's long-term struggle to reform fossil-fuel subsidies, focusing on the period from 1998 to 2010. It examines the rationale for reform—primarily relieving budgetary pressure and improving social welfare efficiency—and evaluates two specific strategies: the Bantuan Langsung Tunai (BLT) unconditional cash transfer program and the Kerosene to LPG Conversion Program. The document concludes that while targeted cash transfers and fuel-switching programs can effectively reduce political opposition and budgetary burdens, they require rigorous preparation and monitoring to avoid social conflict and implementation failures.

The report examines food insecurity in Indonesia, specifically in the provinces of East Nusa Tenggara, West Nusa Tenggara, and Yogyakarta. It argues that while national food supplies were generally sufficient during the 2007/08 global food crisis, poor infrastructure and low incomes hindered access to affordable food. The author criticizes the 'Swasembada Pangan' (food self-sufficiency) approach for ignoring the dimensions of accessibility and affordability, recommending a shift toward improving transportation infrastructure and creating sustainable employment in the agro-industry.

The document investigates how decentralization in Indonesia has interacted with existing social power structures and histories of violence to create new conflicts over resource control. It argues that decentralization is not a neutral administrative shift but a process that can normalize violence, empower new ethnic elites, and facilitate illegal resource extraction when not accompanied by effective law enforcement and reinvestment guidelines. The author highlights the role of 'preman' (thugs) and the continued involvement of the military in illegal logging, suggesting that the shift from a centralized 'preman state' to a decentralized system has often merely replaced one set of elites with another.

The report examines the tensions between Indonesia's ambitious water, energy, and food security targets and its climate and conservation commitments. Using a WEF nexus framework, it identifies how competition for land and water resources can lead to deforestation and undermine emissions targets. The analysis highlights gaps in cross-sectoral and multi-scale coordination, particularly between national mandates and local government priorities. Key recommendations include accelerating the One Map Initiative to resolve data inconsistencies, prioritizing Strategic Environmental Assessments (SEA) in spatial planning, and aligning fiscal incentives to support local governments in transitioning to sustainable development models.

The document argues that Indonesia's economic growth is threatened by environmental degradation, specifically deforestation and peatland fires. While water security is prioritised across sectors, the energy and agriculture sectors focus on built infrastructure rather than forest conservation. The report highlights that ambitious food and bioenergy targets risk further deforestation unless productivity is increased or degraded land is prioritised. Governance is complicated by a complex legal framework and a disconnect between national plans and local government implementation. A case study in Aceh demonstrates that increasing oil palm yields to national averages could meet production targets without further land conversion, whereas 'business-as-usual' scenarios would require converting 220,000 hectares of land.

The report finds that while a majority of Indonesians are worried about global warming, deforestation, and forest fires, there is a significant lack of basic knowledge regarding the definition and causes of climate change. Most respondents feel a strong moral obligation to protect the environment and believe in collective efficacy, yet very few engage in active environmental or political activism.