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How To Decarbonize Indonesia And Achieve Low-Carbon Prosperity

Indonesia stands at a crossroads. It is the fourth-largest country in the world, with a population approaching that of the United States and a per-capita GDP nearly as large as China’s.  Like many countries in Southeast Asia, Indonesia is developing rapidly.  The manner in which it develops will have consequences for hundreds of millions of Indonesians as well as the developing countries of Southeast Asia and Africa that look to Indonesia as a model.  Indonesia’s choices also have global consequences, as the way the developing world chooses to provide better lives for its citizens will determine whether we can keep global warming in check and provide a livable climate for mankind.

Western countries and, more recently, China have built their development upon a high-carbon foundation.  China possesses over 800 gigawatts (GW) of operating coal plants, and its cities are choked with pollution, which kills more than one million people every year.  Today, China is working hard to change course, cancelling the construction of more than 100 planned coal plants, launching a nationwide carbon cap-and-trade system, and aiming to peak its carbon dioxide (CO2) emissions by 2030.

Indonesia may follow in China’s footsteps, supply its growing energy demand with coal, ruin the health of its citizens, and put more heat-trapping gases into the atmosphere (Figure 1).  Alternatively, Indonesia may leapfrog high-carbon development by adopting policies that promote energy efficiency and clean energy now, years ahead of the largest projected increases in national energy demand.  Choosing clean growth requires political will and upfront investment in efficient equipment, but these investments more than pay for themselves over time, even before the costs of health impacts and climate change are factored in.  Taking action now could put Indonesia on a path to prosperity and health, but the challenge is identifying and implementing the right policies to do the job.

Figure 1. Projected Annual Carbon Dioxide Equivalent (CO2e) Emissions in a Business-As-Usual Future.

A Tool For Selecting Low-Carbon Development Policies In Indonesia

Selecting the best set of policies to change the course of a country’s development is no small undertaking.  Hundreds of potential policies aim to reduce greenhouse gas (GHG) emissions, but not all of them will be effective, especially in the Indonesian context, where limited monitoring and enforcement capacity can present complications.  The task is made more difficult by the fact that policies interact: The emissions savings and financial impacts of one policy on its own will be different from the impacts of that same policy when enacted as part of a suite of interrelated climate and energy policies.  As a result, it is necessary to have a quantitative tool that can assess the impacts of policies in concert, without double-counting, to allow policymakers to explore various avenues to decarbonization.

Energy InnovationWorld Resources Institute, and Indonesia’s Institute for Essential Services Reform(IESR) have launched such a tool: the Indonesia Energy Policy Simulator (EPS).  The program is free and open-source, and it relies on publicly-available data, largely from the Indonesian government.  Versions of the EPS have been developed in cooperation with government agencies or NGOs and are publicly available for China, the United States, and Mexico.  This deployment adds new features to better support Indonesia, including a more detailed treatment of land use, land use change, and forestry (LULUCF) policies and emissions.  It also benefits from technical enhancements to the underlying tool, such as the ability to create GHG abatement wedge diagrams and abatement cost curves in real time, for any policy package the user creates.

A Glimpse Of Indonesia’s Business-As-Usual Future

The Indonesia EPS includes a business-as-usual (BAU) scenario based on energy use, economic, and other input data.  Most of the input data come from Indonesian government sources, such as the Ministry of Energy and Mineral Resources and the Ministry of Environment and Forestry.  We released a detailed technical note with more information on the model’s input data.

Indonesia’s BAU emissions trajectory (Figure 2) features an exponential increase driven by economic development, which is associated with more energy demand (for air conditioning, industry, etc.).  The Indonesia EPS calculates emissions of 12 different pollutants, and all of them show large increases over the BAU case timeframe.  For example, fine particulate matter, a type of pollution especially damaging to human health, increases by more than 500 percent from 2016 to 2050.  This BAU future shows why it is urgent for Indonesia to adopt ambitious, smart policies without delay.

Figure 2. Economy-wide CO2-equivalent emissions for Indonesia in the business-as-usual (BAU) case.

Indonesia has established a Nationally Determined Contribution to the Paris Agreement on Climate Change of unconditionally reducing its emissions 29 percent relative to a business-as-usual case in 2030 and up to 41 percent with international assistance.  Figure 2 shows Indonesia’s unconditional and conditional NDC targets.  Both are quite ambitious, as they require policy-driven emissions cuts to counteract the growth of emissions in the BAU case.  Although land use and forestry have long been a focus in Indonesia, emissions growth will come from the industry, transportation, and electricity supply sectors (Figure 3).  These three sectors are the most important targets for emissions-reducing policies going forward.

Though our BAU case shows land use sector emissions flattening, past land use-related emissions have been extremely volatile, and forest cover loss has accelerated.  Though the BAU case reflects policies already enacted, to achieve even our BAU case will require improved enforcement of these policies, such as the moratorium on new forest concessions.

Figure 3. Economy-wide CO2-equivalent emissions for Indonesia in the business-as-usual (BAU) case disaggregated by sector.

In the BAU case, Indonesia is on track to satisfy most of the growth in electricity demand with coal (Figure 4).  This is roughly in line with government-owned electric utility PLN’s 2017-2026 business plan (page VI-71), except that PLN plans to obtain more electricity from natural gas than we see in our BAU case (perhaps because we use a cost-optimizing methodology, while PLN may be aiming to hit national targets or goals).

Figure 4. Electricity generation in Indonesia in the BAU case.

Policy Analysis Capabilities And Future Work

The Indonesia EPS is a powerful tool for identifying emissions-reducing policy packages and estimating their impacts on costs and savings, premature deaths, and other important metrics.  To illustrate some of these capabilities, Figures 5 and 6 show results from an illustrative example scenario (not a policy recommendation) in which 19 policies are ramped in linearly from 2017-2050.  In Figure 5, the abatement resulting from each policy in each year is represented by a colored wedge.  The upper black line is the BAU case, and the lower green line is the emissions trajectory that results from all of the policies enacted together.

Figure 5. The Indonesia EPS calculates contribution of various policies to the GHG abatement achieved by the entire policy package.

Figure 6 shows an abatement cost curve, where each policy is represented as a rectangle.  The height of the policy shows the savings (below the X-axis) or cost (above the X-axis) per ton of CO2e abated.  The width of each policy shows the quantity of CO2e abated.

Figure 6. The Indonesia EPS can calculate the GHG reduction and cost-effectiveness of each policy within a policy package.

In a future phase of this work, Energy Innovation, WRI Indonesia, and IESR plan to use the tool to develop policy recommendations that will help Indonesia achieve its energy and emissions goals.

A Climate Challenge – And An Opportunity

Today, Indonesia is faced with both a challenge and an opportunity: It must achieve economic development and improve the lives of its people without following the high-carbon development pathway forged by China and the West.

By investing in clean energy and efficiency, as well as enhancing land use policies such as the moratorium on forest concessions, Indonesia can save money over the lifetime of the capital assets, avoid countless deaths that would be caused by air pollution, and reduce its contribution to climate change.  In this way, Indonesia can be a model that the rest of the developing world will look to, as each country seeks a path to sustainable prosperity.

By Jeffrey RissmanHead of Modeling & Energy Policy Expert at Energy Innovation, where he leads modeling efforts for Energy Policy Solutions.

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