Can Indonesia go green in time?

Indonesia, the world’s fourth most populous nation and largest coal producer, has committed to a net-zero future. Great news for the environment? Conservationists are sceptical

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By Mark Rowe

According to its government and international donors, Indonesia has finally joined the conversation. Long vilified by conservationists for rainforest logging and palm oil plantations, the nation of 270.6 million people spread across 17,500 islands has committed to ditching fossil fuels for an altogether greener economy. ‘Indonesia is committed to using our energy transition to achieve a green economy and drive sustainable development,’ president Joko Widodo declared during a G20 leaders’ summit in Bali last year. Widodo pledged, ambitiously, to shut down the country’s coal power plants, ensure his country’s power sector emissions peak by 2030 and reach net-zero emissions by 2060 or before.

Post-2020 emissions-reduction targets have been set at 29 per cent for 2030, with a medium-term strategy to reduce risks from climate change on all development sectors: agriculture, water, energy security, forestry, maritime and fisheries, health, public services, infrastructure and urban systems. 

Size matters

Whether or not Indonesia succeeds matters a good deal, for the nation has the largest economy in Southeast Asia, projected to become the world’s fourth biggest by the 2050s. Indonesia’s extremely varied geography, topography and climate, with peat swamps and montane forests, 81,000 kilometres of coastline, along with high population densities in hazard-prone areas, make it vulnerable to the sea-level rises and higher temperatures that climate change is bringing.

Indonesia is also important because the country harbours some of the world’s richest terrestrial biodiversity. Due in large part to its mega-diverse tropical rainforests, Indonesia is one of the world’s biodiversity giants. The forest estate stores a tremendous amount of carbon, both above ground and in the soil and, in a country with a monsoonal climatic regime, the forests perform a crucial role in maintaining natural hydrology and preventing disastrous floods.

Interaction between humans and Indonesia’s natural environment is profound and for Indigenous communities, cultural identity and livelihoods are bound up with the land. Indonesia’s forest estate covers 64 per cent of the land and is of great social, economic and environmental importance. The number of people who live in or around forests is 8.6 million, of whom 35 per cent rely on forest resources to supplement their livelihoods and 18.5 per cent rely on them for their primary source of livelihood. 

The palm oil problem (1)

Implementing change is difficult because Indonesia’s environmental record is widely deemed to be poor; the nation is viewed by NGOs as one of the world’s most rapacious exploiters of natural resources. Indonesia is the world’s largest palm oil producer, with 46 million tonnes of crude palm oil produced in 2021; it accounts for 58 per cent of all palm oil production and 59 per cent of total global exports. The industry has been responsible for a third of the loss of old-growth forests in the past 20 years, while devastating fires have been blamed on the burning and clearing of rainforest for plantations. Between 2000 and 2012, six million hectares of primary forest cover was lost (equivalent to three per cent of national land area), around 40 per cent of which took place within areas with designated protections. More than 200,000 hectares of rainforest were cleared in 2022. Over the past three decades, 40 per cent of Indonesia’s mangroves have been degraded or lost.

Mining, mainly of coal and nickel, is another environmental open wound: more than half of all tropical deforestation directly attributable to industrial mining takes place in Indonesia and the sector is closely linked to pollution of rivers and coastal seas. Meanwhile, hydro, often promoted as a ‘greener’ energy source, has seen the £1.5 billion China-led Batang Toru forest dam in Sumatra displace Indigenous people and a rare subspecies of orangutan.

Funding the shift from coal

To support Indonesia in turning the Bali rhetoric into meaningful change, the World Bank announced a Just Energy Transition Partnership (JETP), whereby rich nations, including the UK, USA, Japan and Germany, promised US$10 billion over three years, with international banks such as HSBC and Bank of America matching this figure.

The funding will support Indonesia’s move away from coal-fired power plants, but this is a daunting task, for hefty increases, rather than decreases, characterise Indonesian coal production. In the ten years to 2019, annual coal production more than doubled, reaching 616 million tonnes, and now exceeds that of the USA and Australia. Nearly all domestic energy demand is met by fossil fuels, with 60 per cent coming from highly polluting coal-fired plants. The country is responsible for 2.7 per cent of all emissions from fossil fuels and is the ninth-largest carbon dioxide emitter.

The political pressure from all sides is strong, for Indonesia has been dependent on resource exploitation to drive its economic transformation of recent decades. The poverty rate has dropped from 60 per cent in 1970, to 24 per cent in 1999 to 9.78 per cent in 2020. Palm oil accounts for 4.5 per cent of GDP; mining not only powers the economy but is also key to the exploitation of critical minerals used in renewable energy construction, for lithium-ion batteries and stainless steel. Climate change could derail these advances; pulling the fossil fuel rug out from under the economy too quickly, some argue, could derail it too.

Read the small print

The devil of the JETP lies in its detail. According to the International Energy Agency, Indonesia needs to increase annual spending on renewable energy from US$2 billion in 2020 to US$38 billion by 2026. This funding would enable the scaling up of solar, wind, hydro and geothermal energy. The whole transition, covering everything from shutting coal plants to compensating and retraining redundant workers, is likely to cost US$150–200 billion a year from 2024 to 2030.

‘The amount of funding announced is not significant in itself – it’s a small percentage of what is needed,’ says Tiza Mafira, director of Climate Policy Initiative Indonesia. ‘I haven’t seen a credible, financially viable pathway to achieving the JTEP. There is no single coal plant that has yet to strike a deal to be retired. When we do scale this up, it’s going to be a huge task.’ The symbolism of the JETP does have positive elements, she suggests. ‘The significance is that it moves the political willingness, the discussions – it’s stirring a lot of action. Without the JETP, early coal retirement would not be pushed.’

A cautious welcome was also given by Jeri Asmoro of the community renewable campaign group 350.org Indonesia. ‘Hopefully, the JETP programme can truly be maximised to trigger a massive, sustainable and just energy transition in Indonesia,’ he says. This is necessary, he adds, because ‘Indonesia’s emission projections will increase in the future with increasing national energy needs, The energy transition will become an important part of preventing global emissions.’

When a coal plant is no longer a coal plant

Greenpeace Indonesia is sceptical that the JETP will make any meaningful difference. Its chief worry is that the plan for coal plants is for them to co-fire with either biomass from palm oil or wood pellets, waste pellets, sawdust, palm shells, sawdust and rice husks – all mixed with coal. Up to 52 coal power plants may operate this way by the end of this year. The percentage of biomass will increase over time, but generally from a base of one to five per cent; the other 95 per cent would be coal. 

Greenpeace Indonesia says the biomass supply chain will increase Indonesia’s greenhouse gas emissions by 26.48 million tonnes of CO2 equivalent a year. ‘This will actually make land use even more problematic – where do you think the woodchip is going to come from?’ asks Iqbal Damanik of Greenpeace Indonesia. ‘They are planning to allocate one million hectares of forest for what they call the “energy forest transition”. The narrative regarding the portion of mixing biomass with coal ignores the fact that the demand for coal is still high in this co-firing programme.’

In addition, closer inspection of the JETP small print by Mongabay.com found that it actually provides certainty and protection for plans to build new coal power plants, so that they can be built until 2030. Capacity for nearly 14 gigawatts of electricity from coal-fired power plants can still be created before then.

‘Our coal production continues to increase, and the plan to carry out co-firing cannot be fully implemented due to a shortage of ready-to-burn biomass raw materials,’ says Agung Ady Setyawan of the campaign and advocacy department at Forest Watch Indonesia. ‘Why aren’t these funds used to build power plants that are truly renewable and in accordance with geographical conditions in Indonesia, such as solar, wind and water energy? It is important for us to start shifting to energy that is greener and in accordance with our conditions.’

The palm oil problem (2)

The government’s attitude towards palm oil plantations also suggests that change will happen slowly. A 2020 law extended the grace period for firms to halt forest destruction to three years and replaced penal sanctions with administrative penalties. At the end of 2019, there were 3.12 million hectares of oil palm planted inside Indonesia’s supposedly protected forest estate; oil palm concessions currently contain one million hectares of primary rainforest that’s scheduled to be exploited. ‘Illegal palm oil plantations still happen all over the country,’ says Damanik. ‘They could have stopped them outright, or let them finish the last plantation and then return it to nature. Instead, they allowed the companies to pay fines and continue as usual. There’s no real action.’ 

Such developments – or lack of them – lead some to infer that the Indonesian government isn’t wholly serious about climate change, that it doesn’t ‘get it’. ‘The message from central government is that it’s committed to tackling the climate emergency but not at the cost of economic development,’ says Mafira. ‘That’s the wrong way round. If the government were really getting this, they would be saying that without a green transition, there won’t be economic development.’ Other voices are powerful, too, Mafira acknowledges. ‘The coal and forest interests are just so strong.’

This sentiment also frustrates Asmoro, who describes it as still ‘dominant in business and economic calculations’ and fails to join the dots for the long-term common good. Asmoro points out how companies often operate both a sustainable and a non-sustainable arm. ‘Conflicts of interest between officials and their businesses still dominate when it comes to managing the energy system in Indonesia,’ he says. ‘Are they business people or policymakers?’

The ambiguity of some operators who sign up to the Roundtable on Responsible Palm Oil (RSPO) also frustrates Greenpeace Indonesia, which has identified almost 100 RSPO companies that each have more than 100 hectares planted in the forest estate; eight have more than 10,000 hectares each.

The creation of a new capital – replacing Jakarta – as a purpose-built city in Kalimantan is likely to say much about the government’s true priorities. The rationale is that the move will help tackle climate change; the new city will be more resilient to sea-level rises, distribute wealth and create a hub for greener energy distribution. Damanik thinks the opposite is true. ‘There are more natural resources [to exploit] there,’ he says, ‘and many politically connected people are involved. There will be impacts on the environment; it will be built on the coast where there are many mangroves. It will impact and displace Indigenous people. They’re really just moving Jakarta’s problems to Kalimantan.’

Yet, given the political will, the challenge of transitioning is achievable, says Mafira. ‘If this is tackled on a step-by-step basis, coal plant by coal plant, then, spaced out, it becomes manageable and that gives time and space for renewables to enter the market and to pay for worker compensation.’

The benefits of renewables

According to the data-modelling company Transition Zero, replacing coal with renewables would create a windfall of new jobs for Indonesia, which would outweigh coal-closure job losses by six to one. In terms of installed capacity of geothermal plants, Indonesia is second only to the USA and its total renewable energy potential, including hydro, geothermal, solar, wind and ocean energy, is 409 gigawatts. Yet the International Renewable Energy Agency says just 12 per cent of Indonesia’s energy potential has been tapped.

Solar and hydro offer the key opportunities, with hydro and geothermal the best bets for providing baseload renewables, according to Mafira. ‘Renewables are at much more competitive costs these days,’ she says, ‘but solar investment is dire because the market attractiveness of renewables is low. The regulatory regime is favourable to the incumbent coal industry.’

Yet ambiguous wording has again raised eyebrows. The Indonesian Renewable Energy Society has questioned the regular use within government of the term ‘new energy’, a phrase that could provide a loophole for the re-entry of fossil energy in other guises. ‘New energy’, the society notes, covers nuclear, hydrogen, marine, methane gas from coal, liquefied coal, gasified coal, fuel cells, cogeneration and carbon and non-carbon emissions.

Yet meaningful change – at least, a significant slowing of the rate at which damage is being caused – is happening and giving grounds for optimism that momentum may start to swing behind Indonesia’s more sustainable actors. The Stockholm Environment Institute confirms that Indonesian deforestation for palm oil has declined significantly, with the greatest declines occurring in supply chains governed by zero-deforestation commitments. Indonesia, the institute reports, ‘has achieved a remarkable reversal in deforestation trends, including deforestation for palm oil production.’ 

Between 2018 and 2020, deforestation for palm oil was 45,285 hectares per year – only 18 per cent of its peak in 2008–12. Importantly, deforestation has fallen during a period of continued expansion of palm oil production. In 2021, Widodo ended a temporary freeze on new permits for palm oil plantations, to the alarm of environmentalists, although the government said this was procedural and no new permits would be issued. 

Leading by example

While he sharply criticises Indonesia’s record, Jeri Asmoro of 350.org says that outsiders should first get their own house in order. ‘Indonesia’s energy transition to abandon fossil energy must also be carried out by the top emitter countries in the world,’ he says. 

A serious change in mindset is required to achieve meaningful change, argues Iqbal Damanik of Greenpeace. ‘The goal of reducing emissions by 29 per cent of the business-as-usual scenario by 2030 will be difficult to achieve if the same lack of law enforcement persists. We don’t just need a transition in energy but a transition in attitudes towards nature.’

The obsession with coal inclines Agung Ady Setyawan of Forest Watch Indonesia to pessimism. ‘How could they be serious if on the one hand they say they will reduce emissions while coal mines continue to maximise their production, cutting down forests.’

Tiza Mafira, director of Climate Policy Initiative Indonesia is cautiously optimistic. ‘There’s a game going on; it’s push and pull,’ she says. ‘The government is saying, “We can do this if you pay us enough”; the international funders are saying, “Show us you can do this and we’ll give you the money.” A lot more people are wading into the discussion; from policy to engineering to finance are now involved. But the more people just talk about it, they end up saying they know what needs to be done rather than doing it.’

The symbolism of Indonesia transitioning, she recognises, would be vast. ‘It’s so important,’ Mafira concludes. ‘For a country of our size, population, economy and coal use, if we say it makes sense for us to do this, all the world’s eyes will be on us to see whether we can do it. Are we really prepared to make the sacrifices?’