The energy transition is no longer an option but a necessity. Political support and strong leadership, as well as a long-term vision, are needed to support the country’s development of a green economy.
By
ARIS PRASETYO
·6 menit baca
KOMPAS/RENY SRI AYU
Wind power plant (PLTB) in Sidrap, Tuesday (12/10/2021). Inaugurated by President Joko Widodo in 2019, the Sidrap PLTB is the largest PLTB in Indonesia.
The Covid-19 pandemic has often been associated with the need to transition from fossil fuels, or “dirty energy”, to clean and renewable energy. The pandemic is seen as the opportune moment to accelerate the process of transition so as to be able to cope with the impacts of climate change, the cause of global warming.
The report from the Global Carbon Project states that in April 2020, during the early days of the pandemic, daily global emissions fell 17 percent from the daily average recorded in 2019, thanks to the mobility restrictions and lockdowns many countries imposed to prevent the spread of Covid-19.
However, as the economy began to recover, global emissions in 2021 are estimated to increase 4.9 percent year-on-year. Indonesia last year recorded 589.5 megatons of carbon dioxide equivalent (Mt CO2e) in emissions, an 11 percent decrease from 2019.
During the pandemic, discussions have grown on developing a green economy. Green growth, according to the website of the National Development Planning Agency (Bappenas), refers to strong economic growth that is also environmentally friendly, sustainable, and socially inclusive.
This issue rose out of concerns over unintended social, environmental and economic consequences, due also to rapid population growth, economic growth, and consumption of (extractive) natural resources.
So, what is the connection between energy transition and economic recovery? The energy transition is said to be able to create a large number of new jobs. At the global level, the energy transition is estimated to create 395 million new jobs by 2030. In addition, the energy transition is projected to generate up to US$10.1 trillion in new business opportunities (Kompas, 29/12/2021).
The sectors with the most potential are agriculture, tourism, and energy. Specifically as regards the energy sector, the realization of new projects in the renewable energy sector absorbed 12 million workers in 2020. It is estimated that renewal energy projects can absorb 43 million workers by 2050.
In Indonesia, renewable energy projects have a dual impact, namely creating new jobs and reducing government subsidies for fossil fuels. Based on a study by the Institute for Essential Services Reform (IESR), building solar power plants (PLTS) is the easiest way to develop renewable energy and has the most advantage in terms of labor absorption.
Kompas/Totok Wijayanto
Workers install solar panels in the courtyard of the Parliament complex, Jakarta, Monday (12/13/2021). Indonesia has the potential for new and renewable energy (EBT) that can be used as a power plant, including wind, solar, hydro and geothermal power.
For example, developing a PLTS plant with an installed capacity of 1,000 megawatts (MW) generally requires an investment of Rp 15 trillion (30 percent of which is allocated to employee wages) and at least 20,000 new workers. If the PLTS can provide electricity for 660,000 households, the government’s subsidy spending can be reduced by up to Rp 727 billion per year.
It is not only energy transition projects, and the idea of promoting a circular economy also grew during the pandemic. A circular economy is an industry model that minimizes the use of raw materials while reducing waste and emissions through technologies for reusing, refurbishing and recycling existing materials and products.
In Indonesia, five sectors have the potential to apply the circular economy model, namely the textiles and textile products, plastics, electronics, construction, and food and beverage sectors.
According to Bappenas, these key sectors can contribute Rp 593 trillion in economic value, equivalent to 2.3 percent of gross domestic product (GDP) in 2030. These sectors are also projected to create 5.5 million new jobs..
Challenge
The energy transition is also the main agenda for Indonesia's G20 presidency in 2022. Indonesia has included three main topics in the G20 working agenda for next year, namely global health architecture, digital transformation of the economy, and the energy transition. The Indonesian G20 presidency is expected to contribute to national and global economic recovery efforts as well as to helping small developing countries.
Not only that, at the 26th United Nations Conference of the Parties on Climate Change (COP26), the latest annual UN climate change conference held in early December 2021 in Glasgow, Scotland, Indonesia also pledged to achieve net zero emissions by 2060 or earlier. The government also pledged a Nationally Determined Contribution (NDC) target for reducing carbon dioxide emissions by 29 percent by 2030.
It is important to remember that energy transition is not cheap.
With international support, Indonesia's NDC target is 41 percent, equivalent to 1.1 gigatons of carbon emissions. The NDC targets spotlight four sectors: forestry with a contribution of 17.2-24.5 percent, energy (11-15.5 percent), waste management (0.38 percent), and agriculture (0.32 percent).
It is important to remember that energy transition is not cheap. For Indonesia, reducing the use of fossil fuels is no easy matter, especially regarding coal as the primary fuel for coal-fired power plants (PLTU).
KOMPAS/IWAN SETIYAWAN
Workers perform maintenance at the turbine house of the Kamojang Geothermal Power Plant (PLTP) in Bandung Regency, Wednesday (29/9/2021).
Finance Minister Sri Mulyani Indrawati has said that the PLTUs that would shift to renewable energy had a total capacity of 5,500 MW. In the next eight years, Indonesia will need between $20 billion (Rp 284 trillion) and $30 billion (Rp 426 trillion) to realize its energy transition program (Kompas, 5/11).
As a developing country, Indonesia relies on the state budget to finance its energy transition. Therefore, it still needs the support of developed countries and international financial institutions. It is unfair if developed countries, which often pressure developing countries to reduce their consumption-based emissions, did not provide any assistance.
In fact, developed countries have also contributed emissions in an equally large amount in their journey to become industrialized counties. So far, the Asian Development Bank (ADB) and Japan have committed to help finance the energy transition in Indonesia through the energy transition mechanism (ETM).
Even though there are funding problems, it doesn't mean that Indonesia can't do anything about this. Indonesia has abundant renewable energy potential. Data from the Energy and Mineral Resources Ministry show that the renewable energy potential reaches more than 400,000 MW. However, utilization was still very low at less than 11,000 MW.
What is needed is the government's commitment to use renewable energy as the primary energy source, although this process will have to be carried out in stages. Existing investment barriers, such as a complicated bureaucracy that requires multiple of permits, need to be resolved.
Realizing a commitment to use renewables as the main energy source also requires the collaboration of many parties, such as the private sector, academia, and nongovernmental organizations. The private sector, in particular, should not underestimate the mainstreaming of renewable energy.
Market demand is shifting to low-emissions products or those produced by industries that use renewable energy sources. In fact, the European Union will implement the Carbon Border Adjustment Mechanism (CBAM) in 2023. This mechanism imposes carbon import duties on certain products that contain carbon to the European market.
Again, the energy transition is no longer an option, but a necessity. Domestic political support, as well as strong leadership and a long-term vision, are needed to support the development of the country’s green economy. In this way, the goals of achieving social welfare and sustaining the environment can be realized.
This article was translated by Hendarsyah Tarmizi.
