The world’s largest exporter of coal aims to increase the proportion of renewables in its energy mix to 23% by 2025 but has only reached around 12% so far. Coal currently powers around 60% of the country’s electricity needs. Indonesia set a goal last year to achieve net-zero emissions by 2060 and pledged alongside dozens of other countries to phase down coal use to help limit global warming to less than 1.5 degrees Celsius above pre-industrial levels.
Indonesia have been instructed to create a plan for early retirement of some coal power plants and the government could help absorb any losses incurred. Plans to get rid of 15 Gigawatts of coal power generation over the next three decades will require $600 billion of capital support.
The regulation states no new coal power plants can be built, but those that are already in the pipeline and those that are integrated with the natural resources processing industry will be allowed to go ahead as planned. Emissions by new coal power plants must be reduced by 35% within 10 years of operation compared to average coal plant emissions in 2021, the document read, and could only be operated up to 2050.
To boost investment in renewables, the government will also provide fiscal incentives including financing facilities and ease of licensing in forest areas. Indonesia needs to ensure policy reforms including introducing transparent and competitive tariffs and predictable project pipelines to encourage renewables and reduce reliance on coal.