Part of an ongoing article series on renewable energy / climate crisis in Southeast Asia.
Are We Too Late?
For over a century, climate scientists have been warning the world that reducing carbon emissions is the most critical step to avoid a catastrophic climate crisis.
The matter took an urgent turn in the last four decades, with various global public policy fora and instruments coming about such as the Montreal Protocol (1987), the IPCC (1988), the Kyoto Protocol (1997), the Paris Agreement and UN’s SDGs (2015).
Each of these initiatives has a bold vision for the world, but their implementation has been hampered by various complications that impede progress.
The economic damage caused by the climate crisis through extreme weather has averaged $143 billion a year from 2000 to 2019, or around $16 million per hour for the past 20 years.
This figure seriously understates the true cost, as it only accounts for lives lost and property damage, excluding the broader impacts like crop yield decline, sea level rise, and intangible costs from extreme weather, such as trauma, loss of educational access, and job loss.
With so many years of effort into this, the answer to the question “when must we act on the climate crisis?” should have been “yesterday”. However, the crisis remains, imposing economic costs that will likely worsen if the world continues doing business as usual. In other words, the cost of inaction is going to skyrocket.
The second-best answer to “when must we act on the climate crisis?” is today. In response to the scale and urgency of climate change, many countries are adjusting their economic policies to align with sustainability goals.
Unfortunately, the cost of action is also rising, complicating the effort towards a climate-friendly economy, especially for developing countries. The estimated annual cost to fight climate change, protect biodiversity and reduce pollution in all developing countries is projected to amount to nearly $7 trillion annually from 2023 to 2030.
Globally, most countries have agreed to the commitments laid out in the Paris Agreements and the SDGs, which have led to various climate mitigation and adaptation policies at the national level. There are more than 4,500 climate policies in force worldwide and about 86% of them started in the last 20 years.
The latest climate policies have been observed to be increasingly intersected with economic frameworks, giving rise to new policy avenues in trade, industry and finance. These cross-sector developments require further study to fully understand their implications and opportunities.
Explaining Indonesia’s Delayed Actions
As part of the global community, Indonesia must also participate in the ongoing fight to mitigate the climate crisis.
The country not only suffers from environmental degradation due to climate change, but also potentially loses its economic competitiveness due to isolation from many economies that have adopted carbon-restricting policies. In other words, Indonesia faces the transition cost within its borders and the cost of catching up with the global trend.
Unfortunately, answering “when must we act on the climate crisis?” is more complicated for Indonesia.
The first complication is that climate change is a global problem that needs global solution, yet achieving global cooperation has proven difficult due to sovereignty concerns and differing priorities.
Indonesia has used these reasons to justify its slow progress, with leaders prioritizing economic growth and warning against policies that could “disrupt Indonesia’s economy”. As a result, Indonesia commits to lowering emissions only if growth is not compromised. This is the fundamental problem that underlies all others.
The second complication – which is more pressing– is the overlap of climate mitigation policies with other economic objectives, such as economic growth and security.
While climate change is central to today’s economic policy discussions, the policy implementation often gets distorted, blurring the line between genuine climate action and greenwashing.
Take Indonesia’s nickel industry as an example of a blend between climate and industrial policies. The government heavily supports the industry, promoting it as a way for Indonesia to benefit economically and environmentally from the electric vehicle (EV) industry.
However, the government lacks a long-term vision and strategic thinking, as the EV industry is subject to rapid technological change.
While nickel is essential for lithium batteries today, it may not be needed tomorrow. In fact, top EV car manufacturers like Tesla, Toyota and BYD are working on lithium iron phosphate (LFP) or solid-state batteries that do not contain nickel or cobalt, thus driving down the price of EVs.
Moreover, the rapid expansion of nickel smelters in Indonesia has been criticized for neglecting sustainability standards, resulting in significant environmental and social impacts. In 2022, Indonesia’s coal consumption surged by 33%, largely driven by a 60% increase in nickel production during the same period.
These environmental concerns have prompted many foreign investors to withdraw, leaving behind only those who prioritize short-term economic gains over environmental responsibility.
There is also a growing debate about whether decarbonization policies are a form of economic protectionism or weaponization, which the Indonesian government considers to be unfairly imposed on the country. As a result, Indonesia is disputing the EU’s policy to ban its palm oil to the WTO, arguing that the trade barrier is discriminatory and protectionist.
The government insisted that Indonesia’s palm oil industry does not contribute to deforestation and adheres to sustainability standards. This dispute risks heightening trade tensions and undermining progress on environmental policies, as national priorities may take precedence, leaving global environmental goals and broader benefits of open trade as secondary.
Indonesia’s Climate Policy Ahead
The future of Indonesia’s climate policy should be closely observed, especially with the incoming Prabowo administration.
The most likely scenario is the continuation of Jokowi’s policies. As reflected in Prabowo’s “Astacita”, or the so-called blueprint for the next five years, many of the goals are legacies from Jokowi’s administration. These include the policies of downstreaming, industrialization and infrastructure development goals, which were central to Jokowi’s presidency.
These policies are not without problems. During Jokowi’s 10-year administration, emissions increased from 488 mtCO2 in 2014 to 729 mtCO2 in 2022, a total increase of 49.4%.
Prabowo will also inherit numerous projects, such as the 35GW power generation program, which will contribute tremendous amounts of carbon emissions for years to come. Additionally, Prabowo has to manage cheap but carbon-intensive energy sources that will be necessary to support nickel and other critical mineral production as part of the “green economy” vision.
Even if Prabowo seeks to diverge from Jokowi’s legacy, he has shown little interest in environmental or climate change mitigation policies.
Since the campaign period, Prabowo and Gibran Rakabuming Raka have been the least engaged in addressing climate and energy transition issues, both in the media and on social media, compared to other candidates.
Moreover, while the “green” and “blue” economies are mentioned in the Astacita, the focus is more on security and defense rather than genuine climate action – reflecting his true military background and interest.
Given this observation, it seems likely that Indonesia’s climate policy under the new administration will continue to be overshadowed by economic development priorities.
Realistic Steps for Indonesia
With these questions and complications in mind, what should Indonesia’s approach ideally be?
The country should take more systematic measures to reduce carbon emissions, focusing on both domestic and international issues.
Domestically, developing human capital is key. Besides other strategic issues, Indonesia’s awareness of the climate crisis is pretty low. Only six out of 10 Indonesian youths (aged 17-39) are aware of the climate crisis; of these, only 3% see environmental degradation as an urgent problem, a very diminutive figure.
Human capital must be prepared with green skills for green jobs and adaptation too. Policies could include education reforms to raise awareness and understanding of the climate crisis across all disciplines. This would lead to a more informed public that can push for genuine policies supporting a climate-friendly and future-proof transition.
Furthermore, Indonesia needs to implement effective carbon pricing, both direct and indirect. Direct pricing involves properly establishing carbon trading and carbon taxes.
So far, Indonesia’s carbon price is approximately $2 per tCO2e, based on carbon tax regulation that is still pending, or about $5 per tCO2e based on the carbon trading market. In contrast, Singapore’s is already at $18.48 per tCO2e, while the EU’s – the frontrunner in this industry – is at around $61.30 per tCO2e in 2024.
Most of Indonesia’s trading partners, such as China, Japan, South Korea and Australia have also adopted carbon pricing, though at different levels and standards.
Indirect pricing, which may be more challenging, requires reducing fuel subsidies, which currently consume approximately US$10 billion or nearly 7.4% of the total government budget in 2023. These funds could be better allocated to other priorities such as education, health, social welfare and environmental protection.
With the growing number of climate-related economic policies across countries, Indonesia should strengthen their economic diplomacy in the region, such as ASEAN or the G20 forum. This must be done to promote the rules-based economic measures and relevant complementary policies that can address the negative impacts of such economic decarbonization on developing economies, allowing for a softer transition.
Economic diplomacy would also provide a good opportunity for Indonesia to rally foreign support in terms of improving standards and strategies – be it financially or technically – for economic transition, so that the cost of catching up can be minimized. ensuring that the burden of catching up is shared with the global community. After all, this climate change problem is a global problem that needs a global solution.
Conclusion
In conclusion, Indonesia stands at a critical crossroads in addressing the climate crisis. As an emerging economy, the nation faces significant challenges but also holds the potential to lead by example in the global effort to combat climate change.
By prioritizing human capital development and implementing effective carbon pricing, Indonesia can lay the foundation for a sustainable future. Strengthening economic diplomacy within regional as well as global forums will also be crucial in ensuring that the costs of transition are shared and that developing economies are not left behind. In the face of a global challenge, Indonesia’s proactive approach could not only safeguard its economic future but also contribute meaningfully to the global fight against climate change.
