Indonesia’s Energy Policy Under The New President Prabowo Subianto

The fossil fuel reserves of Indonesia have largely dictated its energy policy throughout the years. Will Indonesia’s energy policy change under the new president, Prabowo Subianto? Once a rich oil and gas nation, today, it is a global coal superpower. The country is the world’s largest global thermal coal exporter and third-largest coal producer. 

However, according to Climate Action Tracker, Indonesia’s climate targets and policies are “critically insufficient”. The huge fleet of newly operating coal plants will increase its total power sector emissions to 400 MtCO₂ in 2030. This is over twice the level of the Paris Agreement’s temperature limit. Whether Indonesia’s new president is willing to change that remains to be seen, but the initial signals fail to convince.

New President, But a Similar Energy Policy Trajectory for Indonesia

In February 2024, Prabowo Subianto won the presidential election with 58.6% of the vote. Even though rivals challenged his win in court, the allegations were rejected, and the Subianto took office on the 20th of October.

Prabowo, a former general, chose Gibran Rakabuming Raka, son of the outgoing president Joko Widodo, for his vice president.

Renewable Energy

During his tenure, President Widodo started supporting Indonesia’s commitment to sustainability and scaling up renewable energy, including opening the largest floating solar power plant in Southeast Asia. His cabinet also prioritised implementing forest and mangrove reforestation policies and tackling plastic waste. 

While details about the concrete action plan of the new leadership are scarce at the moment, most experts believe that in many ways, Prabowo will continue the policies of his predecessor, focusing specifically on energy and food security. 

Coal as a Crucial Point in the New Energy Policy

Indonesia is the world’s sixth-biggest CO2 emitter, and its emission reduction efforts have global implications. Today, the country remains the only one in the top 10 to be increasing its reliance on coal power. 

Indonesia operates Southeast Asia’s largest coal-fired power plant fleet, with 249 units and 45.6 GW in total capacity. Furthermore, the coal plants have an average age of less than 15 years compared to the 40-year typical lifespan. The country also has a massive captive coal problem and is building a fleet of new coal plants to supply its booming nickel processing industry. In fact, Indonesia’s coal capacity additions have been outpacing those of renewables despite its goal of peaking emissions by 2030. 

While the topic of transitioning away from coal has been mentioned in Prabowo’s campaign, the preferred approach is said to be “gradual”. Uncertainty also remains about whether the new leadership will address the loopholes in the nation’s investment plan for coal-fired power plants and the high fossil fuel subsidies straining the national budget. Furthermore, the new leadership is likely to accelerate efforts to adopt carbon capture and storage. 

Strong Ties with The Fossil Fuels Industry

Analysts note that the new president has strong ties in the fossil fuel industry, including receiving campaign support and being a shareholder in various coal companies. The platform Climate Rights International even urged the president to “divest himself and close family members from ownership and investments in fossil fuels, including coal, oil and gas” to avoid conflicts of interest in industries that harm the environment, increase GHG emissions and violate human rights.

Polls reveal that prioritising coal power phaseout would prove a popular move among Indonesians. The Southeast Asia Climate Outlook 2023 Survey Report by the Climate Change in Southeast Asia Programme at ISEAS reveals that most of the interviewed Indonesians think their country should stop building new coal power plants immediately. In fact, Indonesian respondents are the strongest advocates of closing coal plants right away and among the most supportive of a national carbon tax. Furthermore, they emerge as some of the most concerned about climate change in the entire region.

While the challenge of transitioning away from coal is significant, Indonesia can rely on strong international support. One example is the USD 20 billion JETP program. However, the progress under the partnership is stalling, with the deadline for the first Indonesian coal plant closure already missed. Stakeholders such as the state power utility, the Asian Development Bank and others are actively working to identify and schedule additional Indonesian coal plants for early retirement to speed up the country’s decarbonisation and reduce air pollution. Yet, the journey would be way longer and more challenging without substantial support from the new cabinet. 

Climate Change: A Thorny Topic

Prabowo Subianto shares his predecessor’s ambition to make Indonesia one of the world’s top five largest economies by 2045 by supporting ongoing infrastructure projects. Among them is moving the capital from Jakarta to Nusantara on the island of Borneo – a move partly motivated by climate change.

Worryingly, a 2023 analysis has shown that the Prabowo-Gibran pair had the worst climate and energy transition statements in the news and social media among competing presidential pairs.

After the elections in February, Prabowo Subianto reportedly said: “No one should teach Indonesia about climate change,” sending a worrying signal that should he claim victory, the handling of the climate crisis would not be open to discussion. 

Many analysts say the leadership will stick to a business-as-usual scenario, with slow progress toward implementing climate policies. Yet, according to Climate Action Tracker, if all countries followed Indonesia’s climate target and policy approach, warming would exceed 4°C.

Launching a Green Economy Fund

Indonesia’s president plans to launch a green economy fund to raise USD 65 billion from selling carbon emissions credits internationally. According to officials, the green fund intended to capitalise on Indonesia’s competitive advantage – nature. 

The vehicle will serve as another avenue to help the government reach Indonesia’s emissions targets under the Paris Agreement. Among the covered projects are rainforest preservation, reforestation and peatland and mangrove replanting. 

However, market experts say the fund’s goals are unrealistic and raising the target financing might prove challenging. Among the reasons are factors like volatile carbon pricing mechanisms, market demand and competition, and ensuring the quality of the carbon credits.

Increased Focus on Biofuels and Energy Transition

During the election campaign, the Prabowo-Gibran pair laid a vision to make Indonesia a “green energy superpower”. To achieve this, they claimed to focus on advancing power sources that would boost the country’s energy self-sufficiency. Among them are biofuels from palm oil, cassava and sugar cane. The president has even proposed to set up a separate palm oil ministry. 

The new leadership expressed confidence that accelerating the transition to green energy can be done by improving incentive schemes to encourage activities to reserve new energy sources and revising regulations that hinder investment, like reducing red tape for the renewable energy industry. Other measures include stimulating the discovery of energy reserves and constructing hydropower dams.

Although Indonesia has massive untapped solar and wind power potential, the signs that it will be exploited are less strong. However, the Prabowo-Gibran 8% Growth Team recently met with the Coalition of Civil Society for Just Energy Transition to hear their eight-step energy policy action plan during the first 100 days of the new presidency. Among the suggested measures were prioritising cheaper and cleaner renewable energy over investing in new nuclear, coal, CCS and natural gas infrastructure, formulating a concrete roadmap for the early retirement of coal-fired power plants and scaling up financing for the shift to renewable energy.

TransitionZero estimates that when accounting for air, water and climate costs, the average operating cost of coal is 27% higher than that of clean energy. By 2030, replacing fossil fuels with renewables will save between USD 15.6 and 51.7 billion, when accounting for air pollution costs. This will generate a net positive since the clean energy transition will require USD 16 billion in annual investments.

Focus on Exploiting Indonesia’s Natural Resources

During Joko Widodo’s leadership, Indonesia banned palm oil and pulp companies from receiving new deforestation licenses. Through measures like these, the previous government managed to tame deforestation, slashing rates by almost two-thirds in the past decade. Despite this, Indonesia’s annual forest losses remain the fourth largest globally. The country also ranks third, after Brazil and China, for land use emissions. 

The new president has promised to double GDP growth through expanded mining and industrial development, implementing policies that prioritise natural resource industrialism. However, according to environmentalists, such a move will worsen problems like deforestation and biodiversity loss and further increase emissions. 

To encourage the domestic battery-making industry, the new president has said he supported the existing ban on raw nickel exports. However, research from Climate Rights International reveals that its mining and processing activities have significantly affected the lives, health and environment of Indonesians. Air and water pollution, breathing difficulties, deforestation and marine life loss are just a part of the reported problems. In areas resided in by Indigenous peoples, communities share that their land was grabbed by companies or they were intimidated into selling it. Currently, Indigenous rights groups are pushing for the government to pass the Indigenous Peoples’ Rights Bill to recognise them and their lands. However, it hasn’t been enacted into law for years, giving the new president an early opportunity to prove that his administration will listen to the voices of the most affected and vulnerable. 

Such a move will also help the new president address his controversial public image. According to The Guardian, he is dealing with allegations of human rights abuses, enforced disappearances of student activists, kidnappings and torture. This has made him subject to scrutiny from the wider public and foreign partners.  

Activists and civil society monitoring groups have also expressed concern over the increased risk of attacks on and the restriction of human rights defenders, journalists, and activists under a Prabowo presidency. Campaigners from 350.org note that his leadership will make it “difficult for civil society movements in Indonesia, including the environmental and climate movements”.

Indonesia’s Next Step Is of Crucial Local and Global Importance

Indonesia is preparing for another administration that will prioritise economic growth while continuing to deal with sustained high emissions, a glaring deforestation problem and a resource mining industry shrouded in environmental and human rights controversies.

In that sense, the new administration should ensure that economic competitiveness and sustainability aren’t mutually exclusive. The first few months of Prabowo’s leadership will be enough of an indicator of where Indonesia will head in its energy transition and sustainability journey.

However, considering the country’s importance for global emissions reduction efforts, one thing is clear: what happens in Indonesia won’t just stay in Indonesia.