Indonesia has officially launched its Energy Compact, marking a significant milestone towards its green energy transition.[1] Joining other UN Member States and non-state actors, Indonesia has made a further commitment towards the realization of Sustainable Development Goal 7 and global and national net-zero goals. Each Compact is a voluntary and trackable High-Impact Initiative and has been adopted by various nations since its inception in September 2021.

Under this Compact, Indonesia will spend in excess of USD $122 billion to increase its use of renewable energy, with a specific focus on solar and wind power and grid connectivity. Through this, Indonesia aims to have renewables constitute 17-19% of Indonesian energy by 2025, with an additional USD $5 billion worth of investments planned to expand the capacity of renewable energy technologies by 2030. It is worthy of note, however, that this target is a revision of a previous 23% benchmark, which was dismissed as unrealistic by Energy and Mineral Resources Minister Arifin Tasrif and the broader Indonesian Government in a recent reassessment of Indonesia’s capabilities.[2]

IMPLICATIONS:

Aligning with Indonesia’s Just Energy Transition Partnership (JETP), the Compact signals an intent to drastically improve and accelerate Indonesia’s energy transition. But Indonesia faces a number of challenges in doing so. Indonesia still prioritizes carbon capture and storage (CCS) in its renewable approach; however, the practice has a high level of carbon intensity, and its environmental benefit is potentially limited by its emissions.[3] Indonesia’s carbon-intensive practices also extend to its nickel extraction process. Although nickel is a major component of many of the batteries used in electric vehicles, nickel mining and the refining process have a high environmental cost, contributing to deforestation, water pollution, and ecosystem damage.[4] Additionally, the process has a high human cost, with potentially unsafe work practices. Indonesian coal exports, moreover, hit record levels in 2023, exporting 518 million megatons, an 11% increase on 2022’s output.[5] As such, Indonesia’s position as the world’s largest coal exporter further damages the credibility of its energy transition. Indeed, though it had planned to retire many of its coal mines under the JETP, a loophole in the agreement allows the country to continue to build new mines.[6] Naturally, coal also powers nickel smelters and is integral to the CCS process. As such, whilst the Compact indicates an intention to amplify Indonesia’s energy transition, the nation’s reliance on coal, alongside the carbon intensity of its green transformation processes and industries, will likely pose a significant challenge to the realization of its sustainable development goals.

[1] SE For All, (2024), “Indonesia Joins UN-Led Energy Compacts, Commits USD 122 Billion to SDG7 and Net Zero,” Sustainable Energy For All, January 23. Retrieved: https://www.seforall.org/news/indonesia-joins-un-led-energy-compacts-commits-usd-122-billion-to-sdg7-and-net-zero

[2] Karyza, Divya, (2024), “Indonesia to Abandon 23% Renewable Energy Target by 2025,” The Jakarta Post, January 16. Retrieved: https://www.thejakartapost.com/business/2024/01/16/indonesia-to-abandon-23-renewable-energy-target-by-2025.html

[3] Serin, Esin, (2023), “What is Carbon Capture, Usage and Storage (CCUS) and What Role Can it Play in Tackling Climate Change?” Grantham Institute, March. Retrieved: https://www.lse.ac.uk/granthaminstitute/explainers/what-is-carbon-capture-and-storage-and-what-role-can-it-play-in-tackling-climate-change/#:~:text=CCUS%20facilities%20are%20capital%2Dintensive,performance%EF%BB%BF%20of%20CCUS%20operations.

[4] IESR, (2023), “Spurring the Electric Vehicle Battery Industry Sustainability,” Institute for Essential Services Reform, December 19. Retrieved: https://iesr.or.id/en/tag/nickel-industry#:~:text=Nickel%20mining%20and%20refining%20processes,(AMDAL)%20and%20environmental%20standards.

[5] Interesse, Giulia, (2024), “Coal Production Goals vs. Environmental Responsibility: Indonesia’s Dilemma in 2024,” ASEAN Briefing, January 19. Retrieved: https://www.aseanbriefing.com/news/coal-production-goals-vs-environmental-responsibility-indonesias-dilemma-in-2024/

[6] Simon, Julia, (2023), “Despite Billions to Get Off Coal, Why is Indonesia Still Building New Coal Plants?” NPR, February 5. Retrieved: https://www.npr.org/2023/02/05/1152823939/despite-billions-to-get-off-coal-why-is-indonesia-still-building-new-coal-plants