UCL STEaPP Blog, 25 August 2022
The transition from fossil fuel-based to renewable energy has become one of the most important global issues at least in the past two decades. In Indonesia, however, incentives for renewable energy have decreased and in contrast, ones for fossil fuels have increased (Kompas, 22/6).
The alleged increase in this unsustainable incentive is encapsulated in a report by the International Institute for Sustainable Development (IISD), titled Indonesia’s Energy Support Measures: An inventory of incentives impacting the energy transition, published this June.
During 2016-2020, the report states, that subsidies and compensation for fossil fuels in Indonesia reached 1,153 trillion Rupiah or around 65 billion Pounds. This number dwarfs incentives for other energy sources, for instance, 150 trillion Rupiah for renewable energy sources and 19 trillion Rupiah for electric vehicles and batteries.
Such gigantic spending indicates, unfortunately, that Indonesia is moving away from its commitment to building a low-carbon economy. At the Conference of the Parties (COP) 2009 and 2016, Indonesia committed to reducing greenhouse gas emissions by 26% (with its own efforts) or by 41% (if receiving international assistance) by 2030.
Fossil fuel incentives help to stabilize the selling price of energy. However, the impact is the use of excessive energy. The affordable but artificial energy prices have even created a ‘blind’ dependence in society. Such artificially low-priced energy addiction, when shaken, for example by price changes, easily provokes social and political turmoil.
In Indonesia’s policymaking context, maintaining the stability of energy (mainly petroleum) prices is a very difficult task. This is because the price of these energy sources is constantly fluctuating. In addition, since 2005, Indonesia has become a net importer of petroleum.
This situation further reinforces what experts fear: carbon lock-in (Seto, et al., 2016). This term refers to economic development that is always dependent on fossil fuels amid the abundance of renewable energy sources. What is happening in Indonesia, unfortunately, represents the situation.
In fact, between 2005-2015, Indonesia succeeded in reducing energy subsidies from around 20 per cent to 5 per cent of total state spending (Jazuli, Steenmans, & Mulugetta, 2021). However, since then, in addition to the increase in incentives in the report above, energy subsidies have recently skyrocketed again, reaching more than 400 trillion Rupiah (22 billion Pounds) or around 15 per cent of total state spending.
Dilemma
It should also be noted that low-carbon development is a relatively new agenda. The start was arguably marked by the signing of the 1992 United Nations Framework Convention on Climate Change which was later strengthened by the 1997 Kyoto Protocol. Before that, the modern industrial world had been running for about a century. The main motor: fossil fuels.
This means that the advanced industrial countries in Europe and America at that time were the biggest consumers of fossil fuels (oil and coal) in the world. Their awareness of the side effects of industrialization, especially on global warming, then led to the low-carbon economic agenda we know now. So, how can developing countries catch up with advanced industrialization levels if they are not encouraged to use fossil fuels like developed countries did in the past?
Allowing developing countries, including Indonesia, to continue to use fossil fuels is certainly not a mindful policy choice. However, allowing them to find their own way to undertake the low-carbon economy agenda will also not be effective. It is necessary to take a complex, unorthodox approach to address such a ‘carbon dilemma’. Various parties need to be thoughtful and willing to collaborate to find solutions.
Low-carbon development is not cheap, let alone free. The cost of using solar panels, for example, is still much higher than that of fossil fuels to produce equivalent electrical power.
One of the problems is that developed nations that have been successful in developing low-carbon technologies do not automatically have the will to ‘endow’ their copyrights and financing schemes to help the implementation of low-carbon economic agendas in developing countries (Kameyama, 2016; Otero, 2022).
To this end, reducing fossil fuel incentives requires strong policy and political commitment both globally and nationally. At the global level, developed countries must be willing to provide financial assistance and to more readily transfer technology copyrights to developing ones. Without such approaches, it may take another century for developing nations in the global south, including Indonesia, to achieve their low-carbon development targets.
At the national level, a collaboration between government, civil society, academia, and business players should be pursued. For example, these various parties agree to commit to saving energy in their daily activities. Japan’s efforts to control its energy consumption during the oil crisis in the 1970s can be a valuable example.
The crisis could have significantly endangered the Sakura nation’s efforts to rehabilitate its industry after World War II. However, the Japanese government immediately mitigated this with a massive energy-saving campaign, as well as providing financing and tax relief for companies that wished to adopt energy-efficient technologies.
Various parties, public and private, follow this recommendation strictly. Hotels, for example, limit the air conditioning temperature to only 25 degrees. As a result, Japan survived the energy crisis at that time and successfully rehabilitated its industrialization. (*)
This opinion blog has been published on UCL STEaPP Blog on 25 August 2022
This piece is an English and updated version of what was originally published in Indonesian on a national online news outlet Kompas.com, 2 July 2022, titled ‘Dilema Karbon’.
Muhamad Rosyid Jazuli, second-year PhD student at the Department of Science, Technology, Engineering and Public Policy (STEaPP), University College London (UCL). He can be reached at muhamad.jazuli.20@ucl.ac.uk or rosyid@policy.paramadina.ac.id
