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Investment, growth and development in Indonesia

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Abstract

This paper examines whether an accelerated energy transition in Indonesia can support economic growth. Using an integrated macroeconomic modelling framework, it compares a Current Policies scenario with an Enhanced Policies scenario aligned with Indonesia’s emissions peaking and net-zero objectives. Results indicate that GDP could be around 1% higher by 2035 and 1.4% higher by 2040, driven mainly by investments into the energy sector with a net gain of around 600,000 jobs by 2040 and reduced exposure to fuel price volatility, without accounting for avoided climate damages. Realising these gains depends on mobilising finance at scale and effective Nationally Determined Contribution (NDC) implementation. The paper therefore sets out possible actions to strengthen intragovernmental co-ordination, build an investable project pipeline and make more strategic use of financing instruments such as sovereign green sukuk.

Suggested Citation

  • Oecd, 2026. "Investment, growth and development in Indonesia," OECD Environment Policy Papers 52, OECD Publishing.
    • Handle: RePEc:oec:envaac:52-en
    DOI: 10.1787/313ca2cf-en
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    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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