Jakarta – Indonesia’s reliance on heavy carbon-based energy remains a major challenge in its efforts to transition to clean energy, according to a Finance Ministry official. Despite its commitment to achieving net-zero emissions (NZE) by 2060, Indonesia needs to find affordable green energy solutions for the people and industries.
Deputy Finance Minister Suahasil Nazara, in a public lecture titled Energy Transition Towards a Low Carbon Economy in Jakarta on Wednesday, February 19, said that energy transition is a necessity and an opportunity for more inclusive and sustainable economic development.
“We cannot only think about reducing emissions, but also how to ensure that people still have access to sufficient, quality, and affordable energy,” Suahasil said.
He explained that Indonesia is still highly dependent on carbon-based energy resources such as coal and natural gas. Given this position, switching to renewable energy becomes a significant challenge, mainly because of the high investment costs. “This transition must be carefully designed. We want cleaner energy, but not at the expense of people’s welfare and industrial competitiveness,” he added.
As part of the transition strategy, the government has established an Energy Transition Mechanism (ETM) to accelerate the shift to clean energy while maintaining economic stability. The government is also implementing climate budget tagging to ensure that state budget allocations are used effectively in climate change mitigation efforts.
One initiative being developed is the carbon market. According to Suahasil, carbon trading can be an important instrument in Indonesia’s climate finance.
“Since its launch in September 2023, Indonesia’s carbon exchange has traded 1.5 million tons of carbon. This shows that there is great potential that we can utilise to support the energy transition,” he said.
In addition, the government sees opportunities to utilise forests as a source of carbon credits. Many parties are now applying for forest concessions to preserve forests and gain economic benefits from carbon trading.
“Indonesia is one of the few countries that still has vast forests. This is a valuable asset that can be a way for us to achieve our climate targets,” Suahasil explained.
Although various initiatives have been rolled out, the main challenge remains ensuring clean energy availability at competitive prices. The government emphasised the need for a realistic transition strategy, including using carbon capture and storage technology, optimising renewable energy-based generation, and reforming energy subsidy policies.
“This transition is not easy, but we must keep moving forward. The key is balancing environmental sustainability, energy security, and economic growth,” Suahasil concluded. (Hartatik)
