Jakarta – Civil society is pushing the government to ensure that additional funds from the increase in mineral and coal royalty rates are not absorbed solely as state revenue, but are directed to accelerate the transition to clean and equitable energy.
Civil society groups see the government’s move to set new royalty rates through Government Regulation (PP) Numbers 18 and 19 of 2025 as a strategic opportunity to accelerate renewable energy development.
“This royalty increase should not only be seen as additional state revenue,” said Al Ayubi, Policy Strategist at energy research institute CERAH, in an official statement, Friday, 9 May.
In the policy, the government applies a progressive rate for nickel royalties – previously a flat 10%, now rising to 14% to 19%, depending on the Reference Mineral Price (HMA). For coal, adjustments are made based on the type of business licence, where royalties on Mining Business Licences (IUP) increase, but royalties on PKP2B and IUPK are reduced.
“This must be used as a momentum for extractive governance reform to support the energy transition in real terms. Royalty proceeds need to be directed towards renewable energy subsidies and green investment incentives,” Ayubi said.
Clean energy needs are still far from target
According to Ayubi, the realisation of the renewable energy budget is still far from meeting real needs. Based on data from the 2020-2024 RPJMN, the government has only budgeted around Rp34.2 trillion annually, while the actual need reaches Rp148.3 trillion annually.
“Without adequate funding, the national energy mix target and climate commitments in the NDC will be difficult to achieve,” he said.
Furthermore, data from the Institute for Essential Services Reform (IESR) shows that throughout 2019-2021, investment in the fossil sector dominated at 73.4%, while renewable energy received only 26.6%. This imbalance is considered a major obstacle in accelerating the national energy transition.
Tata Mustasya, Executive Director of Sustain, stated that this policy is a golden opportunity for the new government under Prabowo Subianto to align fiscal policy with the energy transition agenda. “The increase in coal production levy should be directed towards three objectives: increasing state revenue, disincentivising coal production, and realising climate justice,” he explained.
Tata explained that under the coal price scenario for 2022-2024, additional state revenue could reach between USD5.63 billion (Rp84.55 trillion) and USD23.58 billion (Rp353.7 trillion) per year. Such funds could be used to support the Just Energy Transition Partnership (JETP) programme, which requires USD96.1 billion until 2030 but has yet to have a solid, concrete funding scheme.
However, this royalty policy direction also received a strong warning. Aryanto Nugroho, the National Coordinator of Publish What You Pay (PWYP) Indonesia, reminded the government not to repeat the old approach of only pursuing short-term revenue.
“This policy should be a tool to reduce dependence on coal, instead of using it for projects such as downstreaming coal to DME, which is inefficient and not environmentally friendly,” said Aryanto.
He highlighted that in the RPJMN 2025-2029, the government still set coal production at 700 million tonnes per year, exceeding the safe limit of 400 million tonnes set in the National Energy General Plan (RUEN).
“The mineral and coal industry has long enjoyed huge incentives. It is time for royalties to be used to ensure sustainability, environmental protection, and justice for affected communities,” said Aryanto.
Various parties agree that managing state revenue from the extractive sector needs to be thoroughly reformed. Royalty adjustments must be accompanied by production restrictions, gradual termination of power plants, and enforcement of the “polluters pay” principle for industries that damage the environment. (Hartatik)
Banner photo: shutterstock
