Indonesia

The CAT rates Indonesia’s policies and actions “Critically Insufficient when compared to their fair share contribution to climate change mitigation. The “Critically insufficient” rating indicates that Indonesia’s policies and action in 2030 currently reflect minimal to no action and are not at all consistent with limiting warming to 1.5°C.

If all countries were to follow Indonesia’s approach, warming would exceed 4°C. In the 2023 assessment, current policy projections increased by around 300 MtCO₂e in 2030 compared to the previous 2022 assessment, driven by a huge increase in 2022 emissions and quantification of emissions from Indonesia’s off-grid coal power pipeline. This figure remains unchanged in this update, as no quantitative adjustments were made in this round.

Further information on how the CAT rates countries (against modelled domestic pathways and fair share) can be found here.

Indonesia, under the new administration of President Prabowo Subianto, is placing a strong emphasis on continuing the economic and infrastructure development of his predecessor, former President Joko Widodo, and self-sufficiency in food, water, and energy. However, this approach raises significant environmental concerns, particularly regarding the future trajectory of energy and climate policy.

Recent developments in Indonesia's energy sector highlight the conflict between increasing support for renewables and the continued expansion of fossil fuel capacity, mainly coal. On a positive note, Indonesia signed the Just Energy Transition Partnership (JETP) with the International Partner Group (IPG), with an overall commitment of USD 21.6 bn. The JETP Comprehensive Investment and Policy Plan (CIPP) outlines several key investment focus areas targeting the on-grid power system: peaking emissions by 2030, capping them at 250 MtCO₂, increasing the share of on-grid renewable power to 44% in 2030, and reaching net-zero by 2050.

On the other hand, progress in renewable energy progress has been slow, comprising only 13% of the energy mix in 2023. As a result, the government intends to lower its 2025 renewables target from 23% to 17-19%, which is at odds with the more ambitious JETP goals. Meeting these goals remains challenging due to difficulty attracting large investments, ongoing electricity oversupply issues, and policies that artificially lower coal prices.

On the carbon pricing front, Indonesia launched Southeast Asia's first Emissions Trading System (ETS) in 2023, with plans for it to evolve into a hybrid cap-tax-and-trade system by 2025, eventually covering all fossil fuel-based power plants. A carbon tax, delayed until 2025, will start at around USD 2/tCO₂e, with plans to increase the rate and expand coverage to other sectors.

The New and Renewable Energy Bill, intended to support renewable energy, has faced repeated delays, partly due to debates over power wheeling provisions. The Bill also includes controversial definitions like “new energy”, which encompasses nuclear and coal-derived products. The country is also considering nuclear power as part of its strategy to achieve net-zero emissions by 2060, although the CAT does not view this as a solution.

In the transport sector, Indonesia has policies in place to support biofuels and electric vehicles, but current outcomes fall short of national targets. The biodiesel mandate programme has progressively increased blending levels, reaching 35% (B35) by 2023, with plans to increase to 40% (B40) by 2025 and 50% (B50) by 2029. However, concerns remain about the link between biofuel development and deforestation. Electric vehicle adoption faces barriers such as high local content requirements and insufficient charging infrastructure, despite government incentives and targets.

Public transport usage remains low in most Indonesian cities, with the exception of Jakarta. The development of public transport primarily focuses on major cities, with ongoing projects like the expansion of Jakarta Mass Rapid Transit (MRT) system and plans for Light Rail Transit (LRT) in Bali. Bus Rapid Transit (BRT) systems are being developed in six pilot cities, with TransJakarta leading the way in electrifying public transport. However, financing remains a significant barrier to accelerating the electrification of BRT systems and long-haul buses.

Deforestation remains a critical issue in Indonesia, with the forestry sector accounting for almost half of the country’s total emissions over the last 20 years, reaching around 1 GtCO₂e per year. Indonesia aims to reach a net negative 140 MtCO₂e in GHG emissions by 2030 under its FOLU Net Sink programme. However, given current LULUCF emission trends and policy projections estimated to result in emissions of around 920 MtCO₂e per year in 2030, it is uncertain how Indonesia will achieve such steep emission reductions within this short timeframe.

In the agriculture sector, the food estate programme, launched to enhance food self-sufficiency, has failed to address food security and poses significant environmental and social risks. The conversion of biodiverse habitats threatens endangered species and violates indigenous land rights. The initiatives neglect core issues like food distribution inefficiencies and access to affordable, nutritious food. To improve food resilience, Indonesia should diversify its agriculture to include a wider array of nutritious crops, invest in sustainable practices, and improve its food supply chain and infrastructure.

Indonesia has implemented policies to promote energy efficiency in the buildings sector, targeting a 15% reduction in energy consumption by 2025. The government is also progressing green buildings through regulation and certification efforts, with initiatives like the Indonesia Green Affordable Housing Programme aiming to build and retrofit green housing units. Challenges remain, particularly in the residential sector, which accounts for a significant portion of building energy demand and has limited adoption of green building standards. The growing digital economy has also driven demand for green data centres.

In October 2024, Indonesia inaugurated President Prabowo Subianto and Vice President Gibran Rakabuming Raka. Building upon the foundations laid by former President Joko Widodo (Jokowi), the Prabowo-Gibran administration emphasises continuity in economic development, with a strong focus on infrastructure and achieving national self-sufficiency in food, water, and energy (Edelman Global Advisory, 2024; The Diplomat, 2024a). However, this approach raises significant environmental concerns, particularly regarding the future trajectory of energy and climate policy.

A central pillar of the administration's strategy is the emphasis on self-sufficiency, which, while aiming to bolster national security and economic independence, if not well-planned and executed poses threats to Indonesia's rich forests. The food estate programme, intended to convert millions of hectares of land into agricultural estates for crops like rice, corn, cassava, soy, and sugarcane, risks extensive deforestation and habitat loss (Tempo, 2024f). Historically, such initiatives have been controversial and have met with limited success, often leading to the displacement of local and indigenous communities and posing threats to biodiversity (see Agriculture section).

In pursuit of energy self-sufficiency, the administration plans to boost the production of biofuels, including biodiesel and bio-jet fuel from palm oil, as well as bioethanol from sugarcane and cassava (The Straits Times, 2024). While biofuels offer a renewable alternative to fossil fuels, large-scale production can exacerbate deforestation, particularly in regions like Kalimantan, Sumatra, and Papua, where palm oil plantations have already led to significant loss of rainforest cover.

The administration also aims to foster its domestic processing industry, especially in nickel production, which is crucial for the rapidly expanding electric vehicle (EV) battery market. By maintaining the ban on raw nickel exports, the government seeks to add value domestically and position Indonesia as a key player in the global energy transition. However, this industrial downstreaming has led to increased deforestation in Sulawesi and Maluku, where mining activities are expanding (Yale Environment 360, 2024). The nickel processing industry also relies heavily on "captive" coal-fired power plants, increasing emissions by a large margin and prolonging coal dependence.

Adding to these environmental challenges is the continuation of the USD 33 bn relocation of the national capital from Jakarta to Nusantara in Kalimantan (Channel News Asia, 2024). While intended to alleviate overcrowding and economic inequality on Java Island, the project risks further deforestation in the forest-dense, biodiversity-rich Borneo region and may marginalise indigenous peoples through displacement.

In November 2022, the Government of Indonesia signed a Joint Statement, agreeing terms of a Just Energy Transition Partnership (JETP) with the International Partner Group, consisting of the Governments of Japan, the US, Canada, Denmark, the EU, Germany, France, Norway, Italy, and the UK. The statement includes headline targets to boost renewables to 34% of the power mix by 2030, accelerate the early retirement of coal plants, and to peak power sector emissions at a cap of 290 MtCO₂ in 2030, thereafter reducing them to net zero by 2050, with an overall commitment of USD 21.6 bn.

One year after signing the Joint Statement, the JETP Secretariat published the Comprehensive Investment and Policy Plan (CIPP). The Secretariat introduced new targets, focusing only on the on-grid power system: (1) peaking on-grid power emissions by 2030 and capping on-grid power emissions at 250 MtCO₂ in 2030, (2) increasing the share of on-grid renewable power to 44% in 2030, and (3) reaching net zero in the on-grid power system by 2050 (JETP Secretariat, 2023).

The change of focus to only the on-grid power system is due to new insights on the huge pipeline of "captive" coal plants (defined as off-grid coal plants connected to industrial facilities), mainly to accommodate the booming domestic metals industry.

Off-grid emissions from these plants could reach 30 GW in 2030 and result in an additional 150 MtCO₂, meaning total power sector emissions under the JETP scenario could reach 400 MtCO₂ in 2030 – more than twice the level needed to align with the Paris Agreement’s 1.5°C temperature limit (150 MtCO₂) (IEA, 2022; Climate Action Tracker, 2023).

An independent analysis identifies pathways to decarbonise both on-grid and off-grid coal plants (Center for Global Sustainability - University of Maryland and IESR, 2024), which could inform the JETP technical working group as it develops the technical modelling and decarbonisation plan for off-grid coal plants in the next iteration of the CIPP.

JETP CIPP 2023 identified five key Investment Focus Areas (IFAs):

• development of the transmission network,
• early retirement and managed phase-out of coal plants,
• acceleration of dispatchable renewable energy, acceleration of variable renewable energy (VRE), and
• development of the renewable energy supply chain.

Essentially, these IFAs revolve around two main strategies: early retirement and managed phase-out of coal plants, and supporting the upscaling of renewable power.

The first key pillar of JETP is the managed phase-out of coal plants, which involves early retirement and flexible operation through repurposing and retrofitting to meet emission reduction targets. The main JETP pathway includes early retirement of on-grid coal plants after 2030.

It envisions 1.7 GW in early retirement between 2035 and 2040, funded by Indonesia’s Energy Transition Mechanism (ETM) (IEEFA, 2022). After 2040, an increasing number of fossil fuel-based power plants (both coal and gas) are scheduled either for full retirement or for retrofitting to run entirely on bioenergy or ammonia (for coal) and hydrogen (for gas).

The JETP CIPP specifically plans to accelerate the retiring and retrofitting of around 10 GW of coal plants between 2045 and 2050, which is more ambitious than the latest RUKN draft, where coal plants are retired only when they reach their natural retirement age during the 2050s. However, retrofitting carries significant risks: bioenergy is not fully CO₂ neutral, and ammonia and hydrogen could be prohibitively costly compared to direct electricity use from wind and solar (NewClimate Institute, 2024). Moreover, repurposing coal and gas plants would require average annual investments of over USD 7 billion.

The second key pillar is scaling up dispatchable and variable energy infrastructure. In the initial phase, the government prioritises increasing the capacity of dispatchable renewables. Plans include adding 4 GW of geothermal, 9 GW of hydropower, and 3 GW of bioenergy by 2030, totalling 16 GW. These sources are projected to reach almost 30% of electricity generation by 2030.

For variable renewable energy sources, Indonesia aims to increase solar PV capacity from just 0.1 GW in 2022 to around 29 GW by 2030 and 256 GW by 2050. Wind power capacity is expected to reach 8 GW by 2030. The share of VRE in the power mix is projected to reach 14% by 2030 and 36% by 2050. Achieving these targets requires overcoming key challenges related to grid integration, cost reduction, and land availability.

To facilitate this transition, the JETP Secretariat is proposing several policy measures. These include:

• priority dispatch of renewable power
• minimum renewables share for power producers (renewable portfolio standards),
• reforming Local Content Requirements,
• aligning renewables power purchase agreements procurement with market standards, and
• increasing the coal price above the domestic market obligation (DMO) of USD 70 per tonne.

While the JETP can be considered a landmark achievement in international cooperation on climate change, three key concerns have emerged:

• Targets not aligned with Paris Agreement: the targets outlined in the CIPP are not aligned with the 1.5°C temperature limit, for which coal-fired power in Indonesia would need to be phased out by 2040 and total power sector emissions would need to be capped at around 150 MtCO₂e (IEA, 2022; IPCC, 2022; Climate Action Tracker, 2023). The managed phase-out plan also includes repurposing coal and gas plants to run on bioenergy, ammonia, or hydrogen; a costly approach that does not ensure substantial emissions reductions compared to direct renewable energy use.
• Insufficient funds: the JETP highlights persisting shortcomings from wealthy countries to put sufficient levels of finance on the table to support ambitious Paris Agreement-compatible emissions pathways. The CIPP shows that around USD 96 bn is required for the implementation of the JETP pathway by 2030 and USD 580 bn by 2050. While it is mentioned the initial USD 20 bn is intended to act as a catalyst over the next three to five years, there is insufficient clarity on how the remaining investment needs will be met. In addition, just 1.4% of the pledged USD 21.6 bn will be in the form of grants, while the majority will be in the form of concessional and private sector market loans, posing debt risks for recipient countries.
• Missing the “justice” in “Just Energy Transition Partnership”: the CIPP lacks a real plan and associated policies and finance to support workers and communities most affected by the transition away from reliance on coal. There is no funding allocated for upskilling or reskilling affected workers, nor for community consultations to ensure their participation in the transition process. Failing to address these social dimensions undermines the credibility of the JETP and its stated commitment to equity and justice.

The JETP Secretariat is currently formulating the 2024 version of the CIPP, which is expected to include Energy Efficiency and Electrification (E3) after mobilising a fifth working group on E3. This can be considered a positive development, as energy efficiency has been largely overlooked in Indonesia's efforts to reduce carbon emissions from the power sector. Experts point to artificially low electricity prices, ineffective or non-existent regulations, lack of financing, and insufficient energy conservation guidelines as key barriers (Asian Development Bank, 2020; The Jakarta Post, 2024e).

The 2024 CIPP draft will also demonstrate promising advancements in financing and project approvals, along with updates on policy and regulatory reforms that have been implemented or are forthcoming. Notably, this includes the Ministry of Finance (MoF/Kemenkeu: Kementerian Keuangan) Regulation No. 103 of 2023 on the provision of fiscal support through funding and financing frameworks to accelerate the energy transition in the electricity sector, as well as a set of regulations reforming the Local Content Requirements passed in 2024 (see Renewables section).

Indonesia's energy landscape is characterised by a complex interplay between the growing support for renewable energy and the continued expansion of fossil fuel capacity, particularly coal, locking in Indonesia’s long-term fossil fuel dependency.

The energy sector is primarily governed by two overarching laws: Law No. 30 of 2007 on Energy and Law No. 30 of 2009 on Electricity. These laws are supplemented by various implementing regulations from the central government, the President, ministries, and local governments. The National Energy Policy (KEN), outlined in Government Regulation No. 79 of 2014, sets targets for the minimum share of new and renewable energy (23%), coal (30%), and gas (22%) in the energy mix by 2025.

The General Plan for National Energy (RUEN: Rencana Umum Energi Nasional) (or Presidential Regulation No. 22 of 2017, which is in effect) and National Electricity Master Plan (RUKN: Rencana Umum Kelistrikan Nasional) (or MEMR Decree No. 143 of 2019, which is in effect) formulate a pathway for the sector to achieve the targets set out in the National Energy Policy.

In 2023, Indonesia published an updated draft of the RUKN 2023-2060 which envisages several scenarios for the electricity sector aligned with meeting the national goals of becoming a developed country by 2045 and reaching net zero GHG emissions by no later than 2060. An annual electricity supply business plan from PLN (RUPTL) is formulated to achieve the goals of the RUKN. Since PLN is currently finalising an updated RUPTL 2024-2040, we are considering the 2021-2030 RUPTL in our current policy projections.

The draft RUKN plans to implement two scenarios based on the government's GDP growth targets: a low economic growth scenario with an average GDP growth rate of 5.5% and a high economic growth scenario with a rate of 6.3%. Both scenarios aim for CO₂ emissions to peak by 2035, with the energy sector still producing emissions of 129 MtCO₂e by 2060 (MEMR, 2023a). Fossil fuel use is projected to decline in the 2030s but not completely approach zero by 2060. By 2060, power generation capacity is expected to be dominated by solar and hydropower. Plans also include interconnecting power transmission between major islands (Java, Sumatera, Kalimantan, Lombok, and Sumba) to maximise the utilisation of renewable energy potential.

The draft also highlights the potential role of nuclear power, supporting the country's goals for energy security. While the current KEN designates nuclear energy as a "last option", the new draft includes nuclear generation for clean hydrogen and ammonia production. The RUKN draft will be adjusted based on changes to the National Energy Policy (KEN), which is currently being revised through a draft Government Regulation (RPP) to reflect Indonesia's evolving energy system and development trajectory.

Coal

Coal phase-out

Coal phase-out remains one of the most important avenues for Indonesia’s decarbonisation. Coal-fired power plants accounted for 55% of the electricity mix in 2023 (MEMR, 2024b). In the first half of 2024, Indonesia had 52 GW operating coal-fired power plants and a further 9.8 GW under construction (Global Energy Monitor, 2024). This pipeline is part of the government’s 2015–2019 35 GW Plan initiated to increase the electrification ratio while meeting the forecast growth in energy demand. The current electricity sector plan (RUPTL 2021–2030) includes coal accounting for 64% of the power mix by 2030. Current plans are not aligned with the 1.5°C temperature limit, for which coal power in Indonesia would need to be capped at 10% of generation in 2030 and phased out by 2040 (see Figure 1).

Indonesia set a 2050 phase-out date for unabated coal power generation in the Presidential Regulation 112 of 2022 (Government of Indonesia, 2022). The regulation also introduces a moratorium on new coal-fired power plants (with some exceptions and related conditions) and mandates the formulation of a coal phase-out plan. No new additional coal plants are expected beyond 2030, and new coal plants (not planned in RUPTL 2021-2030) are only allowed for industrial users with the purpose of generating value from natural resources, and with the condition that emissions need to be reduced by 35% after 10 years and retired latest by 2050.

Indonesia is advancing at least five energy transition initiatives to accelerate its coal phase-out efforts. These include the Climate Investment Funds' Accelerating Coal Transition (CIF-ACT) programme, which works in tandem with the Asian Development Bank's Energy Transition Mechanism (ETM) and the World Bank Group; the G7 International Partners Group's Just Energy Transition Partnership (JETP); Indonesia's own Energy Transition Mechanism Country Platform (ETMCP); state utility Perusahaan Listrik Negara’s (PLN) ETM; and the Indonesian Investment Authority’s (INA) ETM (IEEFA, 2022). Among these, the JETP stands out as one of the biggest climate deals ever reached. For further details, see the JETP section.

A phase-out of coal-fired power generation before 2045 would bring significant environmental, social, and economic benefits — the avoided costs from health care and coal subsidies outweigh the cost of stranded assets, decommissioning, employment transition, and revenue loss by 2–4 times (IESR, 2022a). By phasing out coal-fired power plants over 20 years old and re-evaluating its coal pipeline, Indonesia could avoid over 45,000 premature deaths over the next decade (Climate Action Tracker, 2021).

Coal-derived products

In contrast to the discussions around phasing out coal-fired power, Indonesia is moving forward with plans to expand its downstream coal industry with the aim of producing coal-based chemicals to replace oil and gas fuels and feedstocks. This is supported by the inclusion of coal-derived fuels in the 2022 New and Renewable Energy Bill draft. The revised Coal and Mineral Law 2020 and supporting regulations set the legal basis for this, while the MEMR outlines the development plan in its Grand Strategy for Coal and Development and Utilisation of Coal Roadmap (MEMR, 2022b, 2022a). Indonesia plans to produce 4.6 Mt dimethyl ether (DME) and 7.9 Mt of coal-based methanol by 2025, increasing to 6.1 Mt and 14.1 Mt by 2045, respectively.

Coal is also Indonesia’s biggest export product, making Indonesia one of the largest global fossil fuel exporters with respect to related greenhouse gas emission. With major export markets beginning to reduce their consumption and price embedded carbon in traded goods, there is a clear need for Indonesia to both diversify its economy away from fossil fuel exports and to invest in reducing the carbon intensity of its exports. International efforts to price embedded carbon, such as the EU’s Carbon Border Adjustment Mechanism (CBAM), will significantly reduce the competitiveness of carbon-intense goods, like coal-derived fuels.

Carbon pricing

Indonesia launched the first Emissions Trading System (ETS) in Southeast Asia in February 2023, and the government expects to transform it into a hybrid ‘cap-tax-and-trade’ system by 2025.

• The first operational phase (2023-2024) covers on-grid coal plants of 100 MW or larger.
• In the second phase (2025-2027), it will expand to on-grid coal plants with capacity below 25 MW, off-grid coal plants, gas-fired power plants, and combined cycled power plants.
• In the third phase (2028-2030), it will encompass all fossil-based power plants, including diesel power plants with capacity of 2 MW or greater (ICAP, 2023).
• The Indonesia Carbon Exchange (IDXCarbon) was officially launched in September 2023, which will support the expansion of Indonesia’s ETS to 99 coal plants in 2023, up to 146 coal plants in the first semester of 2024 (Kompas, 2024).

A carbon tax was introduced into Indonesia’s tax law as part of the carbon pricing implementation stipulated in Presidential Regulation No. 98 of 2021 (President of the Republic of Indonesia, 2021). The carbon tax has faced repeated delays and is now expected in 2025, starting at around 2 USD/tCO₂, covering around 86% of the coal plants (IESR, 2023b). The government plans to gradually increase the tax and expand the coverage to other sectors (IESR, 2022c).

Renewables

In 2022, renewables accounted for only 12% of Indonesia’s primary energy mix. In 2023, this share had risen marginally to 13%, falling short of the RUEN target of 18% for that year (MEMR, 2024b). In 2023, fossil-based power plants dominated Indonesia’s 91 GW of total installed power capacity, comprising 85%, with renewables contributing only 15%.

Variable renewables like solar and wind still accounted for less than 1% of Indonesia’s power generation in 2023 (MEMR, 2024b). Indonesia can make better use of its renewable energy potential – the MEMR estimates that Indonesia has 3,294 GW of solar potential, 95 GW of hydropower, 155 GW of wind power (on and offshore), 57 GW of bioenergy, 24 GW of geothermal, and 63 GW of wave power (MEMR, 2023a, 2024b).

Due to slow progress in renewable energy development, the Indonesian government announced plans to lower its renewable energy targets to 17-19% by 2025, 25-26% by 2030, 38-41% by 2040, and 70-72% by 2060 (CNBC Indonesia, 2024; The Jakarta Post, 2024c, 2024b). This backsliding of ambition is at odds with the more ambitious goals in of the JETP, which aims for 44% renewable on-grid power generation by 2030 and 92% by 2050, and a net-zero on-grid power system by 2050.

Similarly, it is inconsistent with the Accelerated Renewable Energy Scenario in the upcoming Electricity Supply Business Plan (RUPTL) and National Electricity Master Plan (RUKN) drafts stipulating 25% renewables share by 2030 and up to 73% by 2050, with the on-grid power system achieving net zero by 2060 (JETP Secretariat, 2023).

Meeting these goals remains challenging due to the country’s difficulty attracting large investments, ongoing electricity oversupply issues, and policies that artificially lower coal prices, such as the Domestic Market Obligation (DMO) and price cap, making coal-fired electricity cheaper than renewables. Although the recently passed Presidential Regulation No. 112 of 2022 provides a legal framework with key reforms – introducing a new electricity tariff regime, a streamlined procurement process for dispatchable renewables, and a moratorium on new coal power plants (with some exceptions and conditions) – other regulatory barriers persist. Several key policies affecting the energy landscape are examined in detail below.

New and Renewable Energy Bill

The New and Renewable Energy Bill, intended to support renewable energy through fiscal incentives, land access, and government guarantees, has experienced repeated delays and is likely to be deferred to the next administration (Reuters, 2022; Bisnis.com, 2024). The latest draft from May 2022 outlines measures like revising renewable pricing, establishing a renewable energy fund, and offering developer incentives. Controversially, it includes "new energy" sources like nuclear and coal derivatives (coal bed methane, liquefied and gasified coal), raising concerns of catering to the coal industry and risking fossil infrastructure lock-in. Additionally, reliance on carbon capture and storage (CCS) technology to justify coal-based sources has been criticised for its high costs and potential risks (Energy Tracker Asia, 2024; Publish What You Pay Indonesia, 2024).

A major issue delaying the bill's passage is the power wheeling provision (PJBT: Pemanfaatan Bersama Jaringan Transmisi) in Articles 29A and 47A, with ongoing disagreements between the Parliament and the government. Power wheeling would allow IPPs to use PLN’s transmission networks to deliver electricity directly to consumers through a leasing or payment-based system. Critics, including the PLN Workers Union, fear it may reduce PLN’s revenue, strain networks, and weaken state control over electricity (ANTARA News, 2024; Tempo, 2024b). However, the Director General of New, Renewable Energy, and Energy Conservation (DGNREEC or EBTKE: Energi Baru Terbarukan dan Konservasi Energi) argues that with appropriate regulation, power wheeling could boost efficiency, accelerate the energy transition, and support industry interests like RE100 (ANTARA News, 2024; Tempo, 2024a, 2024d; The Jakarta Post, 2024a).

Local Content Requirements

Local Content Requirements (LCR) have been a significant barrier to the expansion of solar PV in Indonesia. The Ministry of Industry (MOI) initially set the minimum LCR at 40% in 2017, raised it to 50% in 2018 and 60% in 2019, but later relaxed it back to 40% until 2024 due to industry constraints, as outlined in the MoI Regulation No. 23 of 2023. High LCRs have imposed higher costs and lower returns for utility-scale PV projects, especially considering PLN's requirement to prioritise least-cost power generation (JETP Secretariat, 2023).

In response to these challenges, the government issued new regulations in 2024 to revise the LCR framework: MOI Regulation No. 33 and 34 of 2024, MEMR Regulation No. 11 of 2024, MEMR Decree No. 191 of 2024 and DGNREEC Decree No. 150 of 2024. The changes include the bifurcation of regulatory responsibilities between the MOI and MEMR, a reduction in the minimum LCR threshold to 20%, and LCR relaxations under certain circumstances. These reforms align with 2023 JETP CIPP’s recommendations to phase in policy interventions to allow for demands to grow while supporting domestic supply chains, enabling developers to balance imported and locally sourced components (The Jakarta Post, 2024d).

Net Metering Scheme Removal

This year, MEMR issued Regulation No. 2 of 2024, replacing MEMR Regulation No. 26 of 2021 and introducing significant changes to the net metering policy for rooftop solar installations in Indonesia. Under the previous regulation, excess electricity generated from rooftop solar systems and exported to the grid could be deducted from customers' electricity bills, allowing consumers to offset their electricity costs.

To address concerns about electricity oversupply and the financial constraints on PLN, the new regulation eliminates this mechanism (PV Magazine, 2024). Additionally, the regulation introduces a development quota system. While the permitting process has been simplified with a first-in, first-served approach, approval timelines remain unclear (Soemadipradja & Taher, 2024). Renewable energy advocates criticised this policy change as a setback for Indonesia's energy transition, as eliminating net metering disincentivises the adoption of rooftop solar for households and industries (Tempo, 2024e).

Nuclear

The National Long-Term Development Plan 2025-2045 (RPJPN: Rencana Pembangunan Jangka Panjang Nasional), which serves as Indonesia’s long-term strategic direction, mentions the plan to integrate nuclear power (Small Modular Reactors/SMRs) into its energy mix, partly to power the production of clean hydrogen and ammonia by a state-owned chemical manufacturer Pupuk Kaltim in Bontang (Hydrogen Insight, 2023).

This endorsement to nuclear led to the inclusion of nuclear into the MEMR’s roadmap, which plans to start the operations of nuclear power plant by 2033 to achieve net zero emissions by 2060 (MEMR, 2024a), which the CAT does not see as a solution. These choices risk emissions lock-in and divert resources away from genuine emissions reductions in critical sectors.

Although nuclear electricity generation does not emit CO₂, the CAT doesn’t consider nuclear as a solution to the climate crisis, due to its risks such as nuclear accidents and proliferation, high and increasing costs compared to alternatives such as renewables, long construction times, incompatibility with flexible supply of electricity from wind and solar and its vulnerability to heat waves.

In 2022, industry accounted for 42% of national energy demand, reaching an estimated 430 MtCO₂e (MEMR, 2023b). The sector saw a huge increase in energy demand, fuelled by the growth of the domestic iron, steel and metallurgy sector, which accounted for almost 60% of coal demand in 2022 (MEMR, 2023b). A large share of the demand is from smelters for the rapidly expanding nickel industry that aims to support the development of Indonesia’s battery supply chain. Indonesia is the world's largest producer of nickel, and as such, will play a key role in the global energy transition.

Recognising the need to address industrial emissions, Indonesia aims to reduce emissions from industrial processes by up to 9 MtCO₂e and from industrial waste by up to 28 MtCO₂e by 2030 in its ENDC. Close collaboration among key ministries, including the Ministry of Industry, the Ministry of Energy and Mineral Resources, and the Ministry of Environment and Forestry, would be crucial to implement effective emission reduction measures.

Progress has been made in some areas. The cement industry, for example, has reduced its carbon emissions intensity by nearly 13% between 2010 and 2022, dropping from 725 kgCO₂ to 631.7 kgCO₂ per tonne of cement produced. This achievement is the result of using alternative fuels like biomass and waste materials instead of coal, as well as improvements in energy efficiency. The industry's Thermal Substitution Rate, which measures the proportion of energy from alternative fuels, increased to 7.8% in 2022 and is expected to reach 19.82% by 2030 (IESR, 2023a, 2024).

The iron and steel industry, however, faces greater challenges. It emits approximately 3.07 tonnes of CO₂ equivalent per tonne of steel, more than twice the global average of 1.41 tonnes. This high emission rate is largely due to outdated, coal-intensive production methods like blast oxygen furnaces.

Transitioning to electric arc furnaces, which use electricity and can incorporate renewable energy, could significantly reduce emissions. Currently, electric arc furnaces represent 36% of production capacity, while blast oxygen furnaces account for 64%. Shifting toward electric arc technology and integrating renewable energy sources are essential steps for the industry to reduce its carbon footprint (IESR, 2023a, 2024).

The ammonia industry presents significant opportunities for low-carbon transition. Indonesia is one of the world's largest ammonia producers, generating about 7.2 million tonnes annually, primarily for fertiliser production. There is growing interest in "green ammonia," produced using renewable energy. However, production costs are currently high, approximately USD 730 per tonne for green ammonia compared to USD 470 per tonne for conventional methods. Efforts are underway to improve energy efficiency and adopt cleaner technologies, such as utilising renewable energy sources and implementing carbon capture and storage (CCS) (IESR, 2023a, 2024).

Encouragingly, several initiatives aim to promote cleaner industrial processes. Green industrial zones are being developed through programmes like the Global Eco-Industrial Parks Programme (GEIPP) Indonesia in Bekasi and Medan, funded by the Swiss government. And as of November 2023, at least 22 low-carbon ammonia projects have been identified in Indonesia, utilising renewable energy sources like hydropower and geothermal energy. Companies like Pupuk Indonesia, which accounts for over 85% of national ammonia production, are investing in low-carbon technologies with goals to reduce CO₂ emissions by 4.8 MtCO₂e by 2030 and 20 MtCO₂e by 2050 (IESR, 2023a, 2024).

Despite these positive developments, significant challenges remain. The reliance on coal is a major barrier to reducing emissions, and transitioning to renewable energy sources requires substantial investment and infrastructure development. Technological modernisation is essential, but industries need support to upgrade equipment and adopt new processes.

Effective government policies, incentives, and enforcement are critical to drive this transformation (IESR, 2023a, 2024). Industrial and fossil-based power emissions contribute to poor air quality, with Jakarta ranked as one of the most polluted cities globally in 2023 (Jong, 2023), highlighting the urgency of addressing industrial pollution for public health. The Ministry of Industry has been recently tasked with investigating and controlling industrial emissions (Ministry of Industry, 2023). Measures include periodic checks of company reports in the National Industrial Information System (SIINas) and conducting audits to ensure compliance with national regulations.

The expansion of zero emission fuels in the transport sector is crucial for meeting the 1.5°C temperature limit. Indonesia has strategies to support biofuels and electric vehicles, but current outcomes fall short of national targets. The Ministry of Transport (MOT) published Ministerial Decree No. 8 of 2023 outlining 34 key actions for land, water, and air transport, including public transit improvements and EV infrastructure (Ministry of Transport, 2023).

Biofuels

Biofuels are key to achieving Indonesia's renewable energy targets. RUEN states that biofuel consumption should reach 13.9 billion litres by 2025, 20.8 billion litres by 2030, and 52.3 billion litres by 2050 (Republic of Indonesia, 2017). The national biofuel mandate is one of the main instruments used to achieve these targets.

Biodiesel

Indonesia's biodiesel mandate programme is one of the most ambitious globally. Blending levels have progressively increased from 15% (B15) in 2015, 20% (B20) in 2016, 30% (B30) in 2020, to 35% (B35) by 2023 (Coordinating Ministry for Economic Affairs, 2023). The government subsidises the price difference between biodiesel and conventional through palm oil export levies, with total incentives reaching approximately USD 9.3 bn between 2015 and early 2023 (APROBI, 2023; IEA, 2023). Domestic biodiesel sales amounted to 12.2 million kilolitres in 2023 (Jakarta Globe, 2024).

Indonesia plans to increase the blending level to 40% (B40) by 2025 and 50% (B50) by 2029, as committed by the new president to reduce oil imports (BioEnergy Times, 2024; S&P Global, 2024). Trials for B40 have shown minimal performance differences, and the state-owned rail operator Kereta Api Indonesia (KAI) currently uses 300 million litres of B35 fuel without issues, and is conducting B40 trials on the Yogyakarta-Jakarta route (MEMR, 2024a; S&P Global, 2024). Trials in the non-automotive sectors will commence soon (S&P Global, 2024).

Further advancing biofuel usage, Pertamina and the Bandung Institute of Technology (ITB) developed J2.4 fuel, containing 2.4% palm oil–based bioavtur (bio-jet fuel), with a successful commercial flight test on Garuda Indonesia in October 2023 (MEMR, 2024a).

Bioethanol

In contrast to biodiesel, bioethanol blending has not been as successful. MEMR Regulation No. 12 of 2015 targeted 5% (E5) blending by 2020 and 20% (E20) by 2025, but these targets have not been met. Only about 500 kilolitres of bioethanol were blended with gasoline between 2012 and 2017, with virtually no blending since 2018 (ERIA, 2024).

In June 2023, Indonesia restarted its bioethanol program (MEMR, 2023c). Presidential Regulation No. 40 of 2023 sets goals to achieve self-sufficient sugar production by 2028 and produce 1.2 billion litres of sugarcane-based ethanol by 2030. Pertamina launched "Pertamax Green 95", a gasoline with 5% bioethanol, in July 2023, which has received a positive market response and is currently available at certain gas stations in Surabaya and Jakarta (MEMR, 2024a).

The government proposes maintaining 5% bioethanol content in 2024 and increasing it to 10% by 2029 (MEMR, 2024a). However, realistically, a 2% (E2) blending program would require around 700 million litres of bioethanol annually, while the current installed production capacity is only at 45–100 million litres (ERIA, 2024). In addition, concrete measures are needed to bridge the price gap between fuel-grade bioethanol and gasoline. The government is revising mandatory blending policies and exploring incentive funding sources (CNBC Indonesia, 2019; Bisnis.com, 2020; IESR, 2021a).

Link to deforestation and food competition

Deforestation is a key issue for biofuel development in Indonesia, as palm oil plantations are a main driver for tree-cover loss (see the Forestry section). Implementing the B30-B50 programme is estimated to require 11-18 million tonnes of CPO, equivalent to 20.5-22.8 million hectares by 2024, meaning another 4-6 million hectares of land will need to be cleared (IESR, 2021b). This could also cause domestic supply shortages and rising cooking oil prices, similar to the 2021-2022 crisis (Chain Reaction Research, 2022).

Palm oil-based biodiesel can reduce 50-85% of GHG emissions compared to fossil fuels without considering land-use change. However, the GHG emissions will be much higher when considering land-use change. First-generation biofuels also compete with food sources, potentially passing oil price volatility to food prices and affecting food security (IESR, 2021a).

To address concerns over palm oil-driven deforestation, Presidential Regulation No. 44 of 2020 mandated all oil palm plantations to be certified under the Indonesia Sustainable Palm Oil (ISPO) scheme. However, significant concerns remain around its limited coverage, weak design, and poor transparency (EIA, 2022; Indonesia Information Portal, 2022).

Strengthening environmental policies for biofuel development will be key for Indonesia's export market. In June 2023, the European Union introduced the Regulation on deforestation-free products (EUDR), imposing restrictions to ensure consumption in the EU does not drive deforestation (European Commission, 2023). The EU, Indonesia, and Malaysia have agreed on a Joint Task Force to implement the EUDR (European Directorate-General for Environment, 2023).

Electric vehicles

Indonesia is focusing on electric vehicles (EVs) to address air pollution and meet its NDC targets. The government aims for electric two-wheelers (E2W) to reach 1.8 million by 2025 and 13 million by 2030, while electric four-wheelers (E4W) are targeted to reach 400,000 by 2025 and 2 million by 2030 (Republic of Indonesia, 2022). By April 2024, Indonesia had approximately 133,000 EVs, with E2Ws dominating at 110,000 units and E4Ws comprising 23,000 units (CNN Indonesia, 2024a).

The government has issued regulations to boost the domestic EV industry and support infrastructure development, but barriers remain. The high local content requirement (LCR) for domestically manufactured EVs is considered a barrier to industry growth. MOI Regulation No. 27 of 2020 sets a minimum LCR of 35% for two-wheelers and 40% for four-wheelers in 2021. Government plans to increase this to 60% by 2024 could constrain the expansion of Indonesia's domestic EV industry, as domestic battery production is yet to begin (IESR, 2022b). Presidential Regulation No. 79 of 2023 has extended the 40% minimum LCR deadline for EVs from 2023 to 2026 and the 60% minimum LCR deadline from 2024 to 2027.

Fiscal and non-fiscal incentives have been introduced to encourage EV adoption, including luxury tax breaks, subsidies, and discounted electricity rates for home charging (AC Ventures and AEML, 2023; The Diplomat, 2024b). In total, the government earmarked USD 455m in subsidies to promote EV purchases (IEA, 2024). However, these measures are still insufficient to make EV purchase prices comparable with conventional vehicles in Indonesia (IESR, 2021c, 2022b).

Challenges persist in accelerating EV adoption. Charging infrastructure, while expanding rapidly, remains insufficient to meet growing demand. By September 2023, Indonesia had around 850 fast-charging stations and 1,700 battery exchange units (Kompas, 2023). The availability of charging stations remains a key barrier, contributing to "range anxiety" among consumers (IESR, 2023a, 2024). Moreover, the lack of standardised batteries hinders the widespread adoption of battery-swapping stations (IESR, 2023a).

Transport infrastructure & public transit

Public transport coverage remains low in most Indonesian cities, with an average modal share of 2-5% (except Jakarta, which has a 10% share) (WRI Indonesia, 2024). In Greater Jakarta, there are four main modes: TransJakarta (Bus Rapid Transit/BRT), the KRL Commuter Line, Mass Rapid Transit (MRT), and Light Rail Transit (LRT).

Approximately three million people – around 10% of Greater Jakarta’s population – use these systems daily (Almaputri, 2019), with TransJakarta serving the largest number of users, followed by KRL, MRT, and LRT (ANTARA News, 2022). Plans are underway to extend the MRT, LRT, and KRL networks in Greater Jakarta, and the government is also considering to develop an LRT system in Bali, with an initial underground route linking the airport to city centre (PwC, 2024).

With co-financing from Switzerland, Indonesia is advancing Bus Rapid Transit (BRT) systems in six pilot cities: Pekanbaru, Batam, Bandung, Semarang, Makassar, and Surabaya (GIZ, 2023). Of the 17 BRT systems across Indonesia, only four currently operate electric buses (Faqih Rohman and Kairini, 2023). TransJakarta (BRT operator in Jakarta) is leading the electrification of public transport, with 52 electric buses by 2023 and plans to fully electrify its 10,000 bus fleet by 2030 (Ditjen Hubdat, 2022; Semarang Department of Transportation, 2022; Faqih Rohman and Kairini, 2023). However, limited budgets and the higher costs of electric buses (15-35% above diesel alternatives) pose challenges, with substantial government incentives still needed to make EV buses economically viable (IESR, 2024).

Electrifying long-haul and intercity buses presents additional hurdles due to limited range, insufficient charging infrastructure, and higher upfront costs. Policy uncertainties also persist, as the government has yet to decide whether to adopt an EV bus strategy for long-distance routes or prioritise fuel quality improvements for conventional vehicles. Bus operators currently maintain Euro 4 standards, awaiting clearer guidance on long-distance travel electrification (IESR, 2024).

Indonesia’s emissions from land-use, land-use change and forestry (LULUCF) have accounted for almost half the country’s total emissions over the last 20 years, reaching around 1 GtCO₂e per year (Republic of Indonesia, 2021a).

Reducing emissions from deforestation is a vital part of Indonesia’s climate action – the forestry sector accounts for around 60% of the emissions reduction effort in Indonesia’s conditional and unconditional NDC targets. To meet its NDC and LTS targets, Indonesia envisages the forestry sector becoming a net sink by 2030. Stronger policies are needed to drive reductions in the sector, with current policy projections to be around 920 MtCO₂e per year in 2030 (see Figure 2) (Nascimento et al., 2024).

Indonesia alone contributed to 6.3% of the total global tree cover loss between 2001 and 2023 (Global Forest Watch, 2024). Annual tree cover loss peaked in 2016 at 2.4 Mha, however, annual tree cover loss decreased each year between 2016 and 2021. It is contested whether this was due to improved enforcement of forestry regulation, or due to increased rainfall that reduced emissions from slash-and-burn land clearing, and a drop in the palm oil price (Union of Concerned Scientists, Greenpeace, World Resources Institute, 2019). Tree cover loss increased for the first time since 2016 following the expiration of the 2019-2021 moratorium on new palm oil plantations, increasing to 0.89 Mha in 2022 and reaching 1.40 Mha in 2023 (Global Forest Watch, 2024).

As the world’s largest palm oil exporter, it comes as no surprise that the biggest driver for deforestation is commodity-driven deforestation, which accounted for over 80% in 2023 (Global Forest Watch, 2024). Fires are used as a cheap and easy way to clear land for commodity plantations like palm oil and are a major source of LULUCF emissions in Indonesia.

Deforestation for palm oil plantations is a particularly pressing concern with Indonesia's biofuel development, especially in light of discussions around increasing the biodiesel blending mandate beyond 35% – see Biofuels section. Deforestation continues to be concentrated in Kalimantan, a critical biodiversity hotspot, with four provinces in the island alone accounting for 72% of all palm oil-driven deforestation in 2018–2022 (SEI, 2024).

The international community can play a key role in protecting Indonesia’s forests by providing results-based financing for activities that Reduce Emissions from Deforestation and Forest Degradation (REDD+). Norway and the US support Indonesia’s REDD+ activities through bilateral agreements. In October 2022, Indonesia received USD 56m from Norway for verified emissions reductions in the year 2016/2017 (Norway’s International Climate and Forestry Initiative, 2022). In 2023 USAID pledged USD 50m over the next five years to support Indonesia with its REDD+ activities (USAID, 2023). In addition, Indonesia is set to receive USD 103.8m from the UN’s Green Climate Fund (GCF) for verified emissions reductions in the forestry sector between 2014 and 2016 (UNDP, 2023).

The permanent moratorium on primary forest and peatland destruction has been one of the main policies to limit deforestation since its introduction in 2011. The moratorium was renewed every two years and became permanent through Presidential Instruction No. 5 of 2019. The moratorium covers 41% of Indonesia’s forests and peatlands – the remaining 59% is excluded as secondary forest (47%) and land within concession (12%) (Union of Concerned Scientists, Greenpeace, World Resources Institute, 2019).

Emission reductions from the moratorium on *new* concessions on forest and peatlands only amount to 3-4% of the 29% reductions targeted in Indonesia’s 2021 NDC (Groom et al., 2022). The efficacy of the moratorium is contested: while the policy is considered a good instrument to limit future deforestation in Indonesia (Mosnier et al., 2017), some research shows that deforestation has increased since it was implemented (Greenpeace Southeast Asia, 2019).

The strict enforcement of this moratorium is essential for mitigating the environmental and social risks of biofuel and commodity production in Indonesia. Upgrading the Presidential Instruction to a law or Presidential Regulation would provide legally binding means of enforcement.

Indonesia’s LTS envisages this sector becoming a net sink by 2050 under the current policies scenario, and by 2030 under the ambitious low carbon scenario compatible with the Paris Agreement (LCCP). In February 2022, the Ministry of Environment and Forestry published an operational plan for achieving net negative emissions in the forestry and other land use (FOLU) sector by 2030 (MoEF, 2022).

In this sector, Indonesia aims to reach –140 MtCO₂e net GHG emissions by 2030. The plan emphasises several key mitigation actions, including prevention of deforestation, conservation of natural forests, sustainable forest management (SFM), and enhancing carbon sinks from peatlands and mangroves. However, given current LULUCF emission trends and policy projections estimated around 920 MtCO₂e per year in 2030, it is uncertain how Indonesia will achieve such steep emissions reductions within this short timeframe.

Nusantara, the new capital

The development of Indonesia's new capital city, Nusantara, in East Kalimantan has led to destructive impact on its pristine rainforests. According to data from Forest Watch Indonesia (2024), between 2018 and 2021, the IKN area experienced a loss of 18,000 hectares of forest cover. The relocation is intended to alleviate the burden on the Jakarta metropolitan area and distribute economic growth beyond Java. However, it threatens the rich biodiversity of East Kalimantan, home to endangered species like orangutans and proboscis monkeys (Modern Diplomacy, 2024; Tempo, 2024c).

This destruction contradicts the government's rhetoric of Nusantara being a “green” and “sustainable” city (NASA Earth Observatory, 2024). Critics emphasise that Nusantara is becoming a significant driver of deforestation, similar to the damage caused by palm oil plantations and mining concessions. As the government touts plans to replant 180,000 hectares of forest, environmentalists argue that these measures fall far short of compensating for the environmental losses already incurred (Context, 2024).

The social consequences of the Nusantara project are equally alarming, particularly for the indigenous Balik tribe (especially women) and other communities who rely on East Kalimantan’s ecosystems for their livelihoods. For decades, these communities have been marginalised by logging, mining, and palm oil plantations. Land acquisition for the project has displaced indigenous peoples with minimal consultation and compensation, exacerbating the risks of their displacement (East Asia Forum, 2024). The Indigenous Rights Bill (Rancangan Undang-Undang Masyarakat Hukum Adat), introduced in 2003 with an academic draft completed in 2010, remains unlegislated fourteen years later – highlighting the government’s failure to secure constitutional rights for indigenous peoples (CNN Indonesia, 2024b).

The Nusantara project also brings to light concerns about the deep entanglement of corporate interests and land control in East Kalimantan. Over 51% of the land in the Nusantara Capital region is controlled by corporations involved in mining, palm oil plantations, and forestry, many of which stand to gain enormous profits from the project (Forest Watch Indonesia et al., 2021). Activists argue that the non-participative, opaque process of land acquisition has favoured large corporate entities, leaving indigenous people with little recourse to defend their land rights.

Over the past two decades, Indonesia's agriculture sector has seen a declining trend in emissions intensity. Key mitigation areas identified in Indonesia's LTS include rice cultivation, livestock, and fertilisers (Government of Indonesia, 2021). Main mitigation measures include adopting low-emission rice varieties, water-saving paddy cultivation, utilising livestock waste for biogas, improving livestock feed, and expanding the use of organic fertilisers.

In response to food security concerns and reducing reliance on imported crops — especially in the aftermath of the COVID-19 pandemic — former President Joko Widodo launched the Food Estate Programmes as part of the 2020–2024 National Strategic Projects (MoEF, 2020). The government aims to enhance food self-sufficiency and stimulate economic growth by developing large-scale agricultural estates across several provinces, including Central Kalimantan, North Sumatra, with plans for South Sumatra, Papua, and East Nusa Tenggara (Environmental Paper Network et al., 2021; Tempo, 2021; USDA, 2021).

However, these initiatives have failed to enhance food security, instead posing significant environmental and social risks. Past projects resulted in environmental disasters rather than improved food security. The new food estates are expected to span over 5.7 million hectares, exceeding the land area of Croatia (Siborutorop, 2023). Conversion for these estates can occur in Convertible Production Forests (HPK) if certain criteria are met, but critics highlight vague language that could permit the conversion of protected forests (USDA, 2021).

The Central Kalimantan project plans to convert 770,000 hectares for rice and cassava cultivation. This area overlaps with regions affected by the failed 1996 Mega Rice Project under President Soeharto, which led to massive peat fires due to peatland clearing and draining (Environmental Paper Network et al., 2021). Similarly, the Papua project plans to convert two million hectares for sugarcane, mirroring the environmentally damaging Merauke Integrated Food and Energy Estate (MIFEE) launched in 2010 under former President Susilo Bambang Yudhoyono (GRAIN, 2015; Mongabay, 2024a).

Indonesia’s forests are among the most biodiverse ecosystems on Earth. Converting these habitats threatens species like Sumatran tigers and orangutans, pushing them closer to extinction (Environmental Paper Network et al., 2021). To make matters worse, these programmes also have devastating impacts on indigenous communities who depend on forests for their livelihood, leading to displacement and land grabbing without their free, prior, and informed consent (FPIC) or fair compensation (Green Network, 2024; Mongabay, 2024b). The government violated laws designed to protect indigenous land rights, such as Indonesia’s 2013 Constitutional Court ruling that recognised indigenous communities rights to their customary forests (Environmental Paper Network et al., 2021).

The initiatives neglect core issues like food distribution inefficiencies and access to affordable, nutritious food. High logistics costs and infrastructural deficiencies hinder food access, especially in remote areas, driving up prices and exacerbating malnutrition and poverty (WRI Indonesia, 2021). The food estate projects also struggle due to insufficient planning, unsuitable soil conditions, neglect of scientific and local knowledge, and inadequate infrastructure (The Jakarta Post, 2022; Mongabay, 2023). To improve food resilience, Indonesia should move diversify its agriculture to include a wider array of nutritious crops, invest in sustainable practices, and improve its food supply chain and infrastructure (WRI Indonesia, 2021).

Energy efficiency

The growing middle class in Indonesia keeps the building sector a critical part of the country’s energy demand landscape. To address this, the Indonesian government has implemented policies to promote energy efficiency. The 2014 National Energy Policy (KEN) targets a 15% reduction in building sector energy consumption by 2025 compared to business-as-usual (ASEAN Centre for Energy and GIZ, 2018). The National Energy General Plan (RUEN) supports this goal through four initiatives: developing Energy Service Companies (ESCOs), implementing energy audits, incentivising industrial machinery upgrades, and raising public awareness (MEMR, 2022c).

In 2022, MEMR published a roadmap for energy efficiency and low-carbon buildings, outlining short, medium, and long-term priorities. Short-term actions include enforcing building codes, establishing Minimum Energy Performance Standards (MEPS), and promoting green certifications and Net Zero Energy Buildings (MEMR, 2022c). Early actions have focused on the adoption of Ministerial Regulation No. 14 of 2021 and implementing Ministerial Decisions for appliances like air conditioners, fans, refrigerators, and rice cookers to align with international standards (IESR, 2022c).

The Government Regulation No. 33 of 2023 on Energy Conservation mandates local administrations to include energy efficiency in budgets and enforce conservation in public buildings. The regulation sets stricter consumption thresholds, requiring large energy users across transportation, industry, and buildings sectors consuming over 500 tonnes of oil equivalent to adopt energy management practices (The Jakarta Post, 2024e).

Green building

Although still in its early stages, Indonesia is progressing in green buildings through regulation and certification efforts. Government Regulations No. 16 and No. 21 of 2021 set standards for green building performance, covering new and existing buildings and green areas. Projects meeting these standards are eligible for certification by the Green Building Council Indonesia (GBCI).

A key initiative in green building is the Indonesia Green Affordable Housing Programme (IGAHP), launched by the Ministry of Public Works and Housing (PUPR: Kementerian Pekerjaan Umum dan Perumahan Rakyat). The programme aims to build 100,000 green affordable housing units by 2024, build and retrofit one million units by 2030 (with a potential emissions reduction of 19-36 MtCO₂), and achieve 100% net-zero housing by 2050 (PUPR, 2023).

Challenges remain, particularly in the residential sector, which accounts for 83% of building energy demand and has limited adoption of green building standards. Government Regulation No. 16 of 2021 mandates compliance only for large buildings (over 5,000 m²), and current regulations lack details for city-level implementation and renewable energy integration, which is essential for achieving net-zero carbon buildings (Climate Policy Initiative, 2024). Smaller budget allocation, coupled with low public awareness and the complexity of energy audits, continue to hinder progress in energy efficiency initiatives (The Jakarta Post, 2024e).

Future trend: data centres

Indonesia’s digital economy has driven demand for green data centres. In June 2022, the country opened its first solar-powered data centre in Bekasi (30 MW capacity) (DCI Indonesia, 2023). Currently, there are 35 centres operating in Greater Jakarta by the end of 2023 (Business Indonesia, 2024). The government is also developing four national data centres, including Nongsa Digital Park in the Riau Islands, expected to reach a capacity of 221 MW by 2025 (The Jakarta Post, 2023; Indonesia Investment Authority, 2024).