Financial Supports for Coal and Renewables in Indonesia

This report shows that the “true cost” of coal, including subsidies1 and externalities, is considerably greater than the cost of renewable energy.
The report identifies 15 subsidies to Indonesia’s coal industry. It was possible to quantify seven of these. In 2015, subsidies to coal production were estimated to be worth approximately IDR 8.5 trillion (USD 644 million). In 2014, this figure was estimated at IDR 12.4 trillion (USD 946 million). Due to a lack of data and inability to quantify all subsidies, current estimates for coal are considered to be in the lower range.
Subsidies to coal are significantly larger than subsidies to renewables. In 2015, renewables received an equivalent of roughly USD 133 million in subsidies, a considerable increase from around USD 36 million in 2014.
From 2010 to 2015, renewables received a cumulative total of USD 179 million. This is far less than the amount of subsidies provided for coal through the export tariff exemption alone, totalling USD 719.6 million from 2012 to 2015.
The report demonstrates that subsidies to the coal industry are associated with significantly higher external costs than renewable energy. Subsidies to coal drive and lock in these externalities, whereas subsidies to renewable energy do not.
The report provides strong evidence that, from a “true cost” perspective, the overall goal of Indonesia’s energy policy should be to increase the share of renewable energy while reducing the share of coal.