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Challenges and policies in Indonesia's energy sector

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  • Dutu, Richard

Abstract

Fossil fuels are central to Indonesia's energy policy, and its main source of export revenues. However, insufficient investment, the lack of transport infrastructure and an unwieldy regulatory environment are inhibiting the sector from reaching its full potential. Looking ahead, growing environmental concerns combined with sharp falls in coal prices and the on-going shale gas revolution call into question the sustainability of an energy strategy based almost exclusively on fossil fuels. This viewpoint challenges Indonesia's current energy policy and proposes ways to increase its energy efficiency and use of renewables. In particular, its gas sector should be further developed to plug the gap until sufficient renewable energy, especially geothermal, comes on line. Government control over the oil industry via state-owned Pertamina should be gradually reduced. Clarifying, streamlining and publicising simple regulations in energy, especially regarding land rights and on-shore processing, and removing foreign-ownership restrictions will help bring much needed investment. The pressure on the environment of natural resource exploitation should also be addressed by properly defining property rights and regulations regarding forest land, and implementing a positive implicit carbon price.

Suggested Citation

  • Dutu, Richard, 2016. "Challenges and policies in Indonesia's energy sector," Energy Policy, Elsevier, vol. 98(C), pages 513-519.
    • Handle: RePEc:eee:enepol:v:98:y:2016:i:c:p:513-519
    DOI: 10.1016/j.enpol.2016.09.009
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    References listed on IDEAS

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    More about this item

    Keywords

    Indonesia; Natural resources; Energy; Coal; Oil; Gas; Environment;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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