Conflicts between development and climate mitigation arise in Indonesia, as in many other developing nations, due to the difficulties in balancing economic growth with environmental sustainability. Primarily, Indonesia has relied on fossil fuels, notably coal, to meet rising energy demands and drive economic growth. The energy industry will become a significant carbon emitter if the government does not commit to removing impediments to renewable energy expansion.
However, the Indonesian government is adopting Low-Carbon Development (LCD) into its National Medium-Term Development Plan for 2020–2024. The aim of LCD is not only to reduce emissions following the Paris Agreement but also to increase economic growth and reduce poverty. It covers three main programs: renewable energy, energy efficiency, and fuel substitution from oil to biofuel. According to literature studies, LCDs have four impediments: socio-cultural, economic, technological, and governance.
Some barriers to promoting renewable energy are lack of public awareness, limited information, lack of skilled labor, lack of financing and institutional capacity, and rejection by local communities. The “Not in My Backyard (NIMBY) syndrome exists in local communities in Indonesia about renewable energy projects. Locals frequently feel that renewable energy initiatives will jeopardize their livelihood, indicating concern about opportunity costs. Moreover, other political barriers include political elites who prioritize short-term profits over community welfare. For example, biofuel production can result in the conversion of rainforests or peat swamp forests, threatening the long-term viability of land previously worked by small farmers. This consequence would be contrary to LCD’s inclusive philosophy, which concerns the socioeconomic interests of low-income people.
Furthermore, governance is an essential aspect of providing an environment that enables renewable energy development and can cover several dimensions. Governance encompasses the government and its relationships with other stakeholders, such as private corporations, associations, non-governmental organizations (NGOs), and civil society organizations. Administrative and bureaucratic complexity and a lack of standards and certifications are some of the regulatory hurdles to renewable energy development in Indonesia.
The Indonesian government’s budget for climate action remains low. However, the government has pledged to establish financial resources through various green financing tools such as carbon trading and tax laws. Carbon trading has been implemented through various procedures, including the Clean Development Mechanism (CDM), the Joint Credit Mechanism (JCM), and the Nusantara Carbon Scheme. However, resource gains can also be realized if the government regularly cuts fossil energy subsidies and reallocates them to energy infrastructure improvements such as smart grids and a feed-in tariff for renewable energy.
Regarding technological constraints, most respondents, particularly government officials and academics, believe that a lack of smart grid infrastructure that integrates conventional and renewable energy is the most significant barrier. The importance of Research & Development (R&D) in energy storage technology remains restricted. Further R&D breakthroughs and investments are required to advance smart grid infrastructure and energy storage technologies.
Low-carbon development has become a mainstream model of economic development around the world, including Indonesia. It has been stated that encouraging renewable energy is critical for sustainable development, but numerous problems must be addressed. A shared vision, equal responsibilities, appropriate governance roles, and the introduction of fiscal instruments can all help to strengthen the coherence and continuity of renewable energy development plans and operations.
This Post was submitted by Climate Scorecard Indonesia Country Manager Netra Naik.
References:
https://www.sciencedirect.com/science/article/pii/S2405844022005928#abs0010