Abstract
This chapter reviews the development of climate change policies in Indonesia from the mid-2000s to the early 2020s. In the first part, we discuss Indonesia’s involvement in climate change initiatives at the global level that include ratification of the 2015 Paris Agreement and subsequent publication of a Nationally Determined Contribution (NDC) to reduce emissions through domestic efforts by 2030 from 29 to 41%. We aim to shed light both on complications with respect to implementation of these policies and reasons why they did not develop quite as planned. The next part of the chapter consists of simulations to model what would be the economic consequences if Indonesia progressed with its 2022 NDC and other key climate change policies. We highlight lessons based on Indonesia’s experience that could help other developing countries to put in place better climate change policies. Our lessons include an assessment of what could be done towards the dual objective of eradicating poverty and tackling the risks of climate change.
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Notes
- 1.
Some regional dimensions of emission are discussed in the simulation section.
- 2.
We acknowledge, however, that removing fuel subsidy is a political economy decision that must consider the existing socioeconomic situation at the time. Azis (2006) points out that the enormous cut of fuel subsidy in 2005 that led to more than 120% increase in the average domestic price was ill-advised: it should have been a smaller cut of subsidy, complemented with a fractional cut in sovereign domestic debt payments.
- 3.
The selection of a 5% reduction in deforestation as the target is somewhat arbitrary. We opt for a lower number than the NDC target since, as of the writing of this paper, there are no significant new programmes planned by the government to reduce deforestation.
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Appendix
Appendix
Economic changes from 2021 till 2030. Note: GDP = gross domestic product; Urb p Cap Expend = urban household per capita expenditure; Rur p Cap Expend = rural household per capita expenditure; Urb poverty = level of poverty in urban areas; Rur poverty = level of poverty in rural areas
Price differences with and without carbon tax in 2023. Note: E Ind = Eastern Indonesia; Sul = Sulawesi; Kal = Kalimantan; Jv Bl = Java-Bali; Sum = Sumatra; Oil re = Oil refinery products; Ot min = Coal and other mining (other than oil, gas, and geothermal mining) products; Oil gs = Oil, gas, and geothermal mining products
Output differences of coal and other mining sector with and without the coal power plant retirement phase I
Differences in the outputs of the forestry sector under REDD programme relative to business-as-usual situation
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Patunru, A.A., Resosudarmo, B.P. (2024). Climate Change Policies in Indonesia: Challenges and Economic Consequences. In: Resosudarmo, B.P., Mansury, Y. (eds) The Indonesian Economy and the Surrounding Regions in the 21st Century. New Frontiers in Regional Science: Asian Perspectives, vol 76. Springer, Singapore. https://doi.org/10.1007/978-981-97-0122-3_6
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