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This policy briefing by the International Institute for Sustainable Development (IISD) examines energy policy developments in Indonesia as of February 2021, focusing on the impact of the COVID-19 pandemic on macroeconomic indicators, fuel subsidies, the coal sector, and renewable energy progress.

This policy brief argues that Indonesia must implement effective fuel pricing mechanisms—such as smoothing, ratcheting, or price caps and floors—to complete its fuel subsidy reforms and avoid returning to expensive subsidy policies. While 2015 reforms saved over USD 15 billion by capping diesel subsidies and removing support for 'Premium' gasoline, subsidies persist. IISD recommends phasing out polluting fuels and redirecting funds toward low-emission infrastructure, renewable energy, and stricter emission standards to reduce social costs like air pollution and greenhouse gas emissions.

This policy brief examines Indonesia's transition from fixed fuel subsidies to market-based pricing. It highlights the fiscal success of gasoline and diesel reforms—which saved over USD 15 billion—while noting the ongoing challenges of LPG subsidies. The authors propose using smoothing, ratcheting, or cap-and-floor formulas to manage international price volatility and recommend that price adjustments be handled by an independent agency with high transparency and frequency.

This February 2021 briefing by the International Institute for Sustainable Development (IISD) examines Indonesia's energy policy landscape during the COVID-19 pandemic. It details the fluctuations in fuel and LPG subsidies, the government's strategic push for coal derivatives to reduce imports, and the challenges facing the renewable energy transition, including regulatory uncertainty and project delays.