IESR: MSMEs generate significant emissions and need to be supported in Indonesia’s green transition

Jakarta – A new Institute for Essential Services Reform (IESR) study found that most micro, small, and medium enterprises (MSMEs) emissions are from burning fossil energy. The study found that the estimated energy-related emissions from MSMEs reached 216 MtCO2 in 2023, equivalent to half of the national industrial sector emissions in 2022.

“Our study found that 95 per cent of emissions from these MSMEs come from burning fossil energy,” said IESR Executive Director Fabby Tumiwa in a webinar on Decarbonization Opportunities for Small and Medium Enterprises (SMEs) in Indonesia and Learning from Global Experiences, Thursday, March 19.

MSMEs are the backbone of Indonesia’s economy and play a crucial role in achieving decarbonization and addressing the climate crisis. Despite being a significant labour absorber and making a major contribution to Gross Domestic Product (GDP), MSMEs also contribute to greenhouse gas (GHG) emissions that cannot be ignored.

Furthermore, Tumiwa said, the government needs to start identifying opportunities and challenges in decarbonizing MSMEs and providing financial and technical assistance to reduce GHG emissions.

IESR has collaborated with Lawrence Berkeley National Laboratory (LBNL) to formulate decarbonization solutions specifically for Small and Medium Industries (SMI), the highest-emitting subsector among other MSMEs. Their analysis suggested technology upgrades and electrification as the main steps in decarbonizing SMEs.

In response to these recommendations, Achmad Taufik, the Green Industry Development Program Team Leader at the Ministry of Industry, stated that the government is working to obtain green funding for SMEs from internal and external sources and increase capacity and access to green technology.

From a global perspective, LBNL’s Energy and Environmental Policy Researcher Bo Shen highlighted that implementing energy efficiency can attract the market to SME products.

“There are several effective ways to promote energy savings in SMEs in Indonesia,” Bo Shen said, adding that these “include standardizing systems for tracking energy performance, government-backed evaluation schemes, and setting clear decarbonization targets.”

Overall, through collaboration between the government, private sector, and society, MSMEs in Indonesia can play a significant role in driving the transition to a clean and sustainable economy.

With concrete steps in decarbonizing, MSMEs can improve environmental sustainability and increase their competitiveness in the global market. (Hartatik)

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