Coal is currently a major part of the Indonesian economy with coal mining contributing to about 5% of the country’s GDP and 12% of all export income. However, the Indonesian coal economy is changing. Indonesian coal exports are highly vulnerable to fluctuations in demand from China, India, and global market conditions.
At the same time, Indonesia’s domestic electricity demand is projected to increase 8.4% per year over the next decade. This is shifting the coal economy from exports to the use of domestic coal-fired power plants.
However, the country’s geographical features have resulted in the development of smaller, less efficient coal power plant units compared to those developed in other countries. These coal plants are not subject to stringent emission standards and add to the severe air quality issues originating from forest fires.
Indonesia’s energy policies favor coal, but the expansion in coal use is deeply misaligned with the country’s climate targets as well as its environmental and public health issues.