Country Snapshot: Indonesia

The Indonesian government submitted its Intended Nationally Determined Contribution (INDC) on 24 September 2015. Indonesia’s previous commitment to greenhouse gas (GHG) emission reduction was 26% by 2020 and in its most recent INDC submission the reduction of GHG emissions has been increased to 29% of the business as usual scenario by 2030. However, Indonesia has stated that it could extend its commitment to a 41% cut in GHG emissions if it gets international support.

‘For 2020 and beyond, Indonesia envisions achieving archipelagic climate resilience as a result of comprehensive adaptation and mitigation programs and disaster risk reduction strategies.’

The conditional reduction of 41% is subject to the support of the global community. This could be through bilateral agreements covering technology development and transfer, technical cooperation, and access to financial resources.

Due to Indonesia’s geographical nature it is particularly vulnerable to the adverse impacts of climate change. Indonesia has already suffered from extreme climate events such as flooding and drought. Therefore, the Indonesian government has put a particular emphasis in its INDC on climate mitigation and adaptation efforts as an integrated concept that is essential for building resilience in safeguarding food, water and energy resources.

Indonesia’s INDC will be reviewed and adjusted, as necessary, up to the time of Indonesia’s ratification of the legal instrument to be agreed at COP21.

The full text Indonesia’s INDC submission can be accessed here.

In 2007, the government established a specific legal basis for national energy management, with the adoption of Energy Law No. 30/2007 (EL7). The Law spells out general principles for the management of energy resources and the government’s basic targets for the future development of the energy mix. This Law recognises energy security as a critical national issue, and sets out to reduce dependence on imported refined oil while boosting the use of other energy sources, including natural gas, biofuels and geothermal resources. It is a comprehensive law that stresses the importance of sustainable development, environmental preservation and energy resilience in national energy management; it has laid the foundation for regulations on the development of renewable energy and energy conservation.

The Indonesian government has made significant efforts towards developing and implementing a National Action Plan on Climate Change Adaptation (RAN –API) which provides a framework for adaptation initiatives that has been mainstreamed into the National Development Plan. The goal of the climate change adaptation strategy is to reduce risks on all development sectors (agriculture, water, energy security, forestry, maritime and fisheries, health, public service, infrastructure and urban system) by 2030 through local capacity strengthening, improved knowledge management, convergent policy on climate change adaptation and disaster reduction, and application of adaptive technology.

National Energy Policy (Government Regulation No. 79/2014) (NEP14) introduces a number of important changes to energy policy planning. It focuses on re-establishing Indonesia’s energy independence by re-directing energy resources from export to the domestic market, and aims to rebalance the energy mix towards renewable energy supplies. This translates into minimising oil consumption, increasing the exploitation and consumption of renewables and coal, optimising gas production and consumption, and consideration of nuclear energy as the option of last resort.

NEP14 sets out the ambition to transform the energy mix by 2025 as follows: 30% coal, 22% oil, 23% renewable resources and 25% natural gas. The International Energy Agency points out that ‘the sheer challenge of this target becomes even more striking when translated into absolute figures. Use of gas is to more than double, use of coal is to more than triple, and renewables are to grow more than eleven-fold by 2025.’

Currently fossil fuels dominate the country’s energy supply and the current share of renewable energy in Indonesia’s total energy stands at around 5%. However, Indonesia has embarked on a mixed energy use policy, with at least 23% coming from new and renewable energy by 2025. Indonesia has also established the development of clean energy sources as a national policy directive. As stated in the INDC, ‘collectively, these policies will put Indonesia on the path to de-carbonisation.’

Indonesia’s Minister of Energy and Mineral Resources recently announced that the government is mulling several incentives to bring large investments into its renewable energy sector, one of which could reduce the import duty on equipment used in the development of renewable energy projects. The planned incentives would play a critical role in Indonesia’s endeavor to boost the share of renewable energy sources.

The Jakarta post reported in June 2015 that the budget allocated for the development of renewable energy sources is forecast to increase to five times the current amount next year, underlining the government’s commitment to shift toward new energies amid depleting fossil fuel resources. The Energy and Mineral Resources Ministry said on June 12 2015 that the budget for the directorate general for new renewable energy and energy conservation may soar to Rp 11 trillion (US$824.9 million) next year, up from Rp 2.2 trillion this year. “There’s [...] an indication that the budget for my division will go up five times next year,” said Maritje Hutapea, the director for energy conservation.

According to Perusahaan Listrik Negara (PLN), the government-owned electricity distribution company in Indonesia, the country has 75 GW of hydro power potential, 27.5 GW (equivalent to about 40% of the world’s total geothermal reserves) of geothermal energy potential, 50 GW of biomass energy potential, and 9 GW of wind energy potential.

The development of the country’s first large scale wind energy project has started in Bantul, Yogyakarta. The 50 MW project is expected to be commissioned in 2019 and will have 33 wind turbines, each with a capacity of 1.5 to two megawatts which will cost, according to the Jakarta Post, US$134 million. The power will be sold to PLN.

Indonesia has one of the lowest rates of energy efficiency of any manufacturing country in the world. Given the size of both the population and the manufacturing sector there are substantial opportunities to reduce cost and save energy through improving energy efficiency.

The government has passed various regulations to improve energy efficiency and some examples are listed below:

• Jakarta regulation No. 38/2012 on Green Buildings – which focuses on energy efficiency, water efficiency, indoor air quality, waste and soil treatment, and construction activities.
• Clean Technology Fund - promotes energy efficiency and renewable energy. The $400 million plan, endorsed by the Trust Fund Committee of the Clean Technology Fund (CTF), will help transform Indonesia's use of renewable energy and ultimately support the government to meet its long-term goal of reducing greenhouse gas emissions by 26% in 2020.
• Energy Efficiency Labelling Program.
• Government regulation 70/2009 on Energy Conservation - introduces requirements on companies with energy consumption above 6000 Tonne of Oil Equivalent (TOE) such as a requirement to appoint energy managers and design an energy conservation strategy.