Green Transition Woes amid the Indonesia’s Coal Curse
The tale of Indonesia’s natural resource curse seems to enter the new chapter at the early 2022. Among decades, Indonesia extremely rely on the oil as a primary source of cheap energy to fuel cars and homes. Besides, it also becomes the main fountain of government income and the largest export earner. Such condition happened from 1970s to the 1990s, then coal took over.
Although oil is our past story, however, Indonesia still strives to eradicate its dependency. Perfect combination between falling production and rising domestic demand at the turns of the millennium, Indonesia became a net oil importer and yet, the oil curse has remained to this day. The cheap oil stayed, following the fuel subsidy regulation. Even as Indonesia increasingly had to import the bulk of its oil needs.
How about coal? Evidence speaking, the world coal prices soaring to record highs last year (peak on October by USD 269.50). Abruptly, the government imposed an export ban to secure sufficient domestic supply and avert power shortages. Of course, it ignited the protest from the miners and threats from foreign buyer. Then, the saga of Indonesia’s coal continued with the flip-flop of government’s policy by revoked its export ban. The coalminers are back on the business for making tons of money.
The policy flip-flop reveals how Indonesia has become addicted to coal. Our power plants are fired by coal in tone of 66% nationwide, and we have also become dependent to some extent on coal exports to fuel economic growth. Despite coal labelled as the world’s dirtiest fossil fuel, we should recognize the coal magic has helped our economy rebound in 2021 (the growth predictions above 3 percent against 2.1 percent contraction in 2020).
Has it really been a win-win solution? Well, lest we forget on Indonesia’s green transition commitment. At the COP26 stage, Indonesia joined other countries in pledging to phase down the coal use for taking a part on initiative to stem global warming. However, it seems those pledges have been thrown out of the window as countries scramble for coal supplies to keep their power plants running.
Indonesia’s 237 coal-fired power plants (34.6 gigawatts), emit 192 million tons of greenhouse gases per year. The government touted it will begin decommissioning these plants in 2031. On the other side, foreign funding scenario becomes the rational way to dismantle the power plants. For instance, for retiring early coal plants with a combined capacity of just 5.5 GW, we need at least USD 20 billion. That’s not a low cost.
Then, how about the coming years? Quite tough for eradicating the coal dependency. There will be more pressure from the powerful coal lobby to delay the switch as green transition commitment. Because Indonesia has a huge surplus due to the other countries renewable energy shifting, and the coal is no longer relevant for foreign commodity.
In the end, the natural resource curse will stay with us for a little bit longer, unless we act decisively. Let’s be prepared to face an even worse condition, from the coal abundance, as Indonesia’s natural resource curse after oil.