Indonesia Dumps Climate Politics in Favor of Energy Security 

The archipelago nation of Indonesia represents just 1% of Earth’s land area, but it has set the stage for global geopolitics surrounding fossil fuels and climate policies. 

As a part of climate negotiations between G-7 nations, Indonesia was expected to be the first among developing countries to announce early closures of coal plants. 

In the spotlight is the 660-megawatt Cirebon-1 plant in West Java province, which had been scheduled to shut down by 2035. However, it is understood that Jakarta will not follow that timeline but rather continue to operate the plant to its originally projected end of life in 2042. A stumbling block to the early closure is a price tag of more than $1 billion to replace the coal plant with so-called renewable energy.

In reaffirming its commitment to the unrestricted use of coal, Indonesia makes a bold and sensible decision to put energy security and economic priorities ahead of international climate politics. The move sets up Indonesia as a model for other developing countries to defy the western agenda to reduce emissions in favor of their own self-interest. 

Coal in Indonesia

For developing nations like Indonesia, the path to prosperity is paved with affordable energy. Coal, abundant and cheap, has long been the fuel of choice for powering economic growth. The country sits atop vast coal reserves, estimated at 37 billion metric tons, which are primarily located in Sumatra and Kalimantan.

Jakarta has approved a coal production quota of 922 million metric tons for 2024, a significant increase from previous years. This move has sparked international criticism, but it’s a calculated step to ensure energy affordability.

Coal remains the backbone of Indonesia’s energy sector, accounting for over 60% of its electricity generation. Also, Indonesia relies on coal-fueled smelters for most of its nickel production. 

Producing about half of the world’s nickel, Indonesia is the top producer of the metal, which is needed to make batteries that run electric vehicles and energy storage devices.

Economic Case for Fossil Fuels

In the late 1990s, nearly 50% of Indonesia’s population lived in poverty. Today, that number is closer to 10%, thanks to unabated use of coal during the past two decades. At 70%, Indonesia manages to maintain one of the highest employment rates among the G20 countries. 

“Despite challenges in 2023, Indonesia has demonstrated resilience to global shocks and an ever more diversified economic base is expected to mitigate adverse impacts,” says a spokesman for financial services company PwC.

Much of this success is due to a stable and reliable energy supply of coal, oil, and natural gas for electricity and industries. Coal and petroleum, along with nickel and ferroalloys, are among Indonesia’s top exports.

Poverty, though declining, remains a pressing issue, with over 26 million Indonesians classified as poor. Rapid industrialization and economic growth are essential for improving living standards and creating opportunities for millions. 

Western Hypocrisy

Many western leaders lecturing Indonesia on the evils of coal had their own economies built with that very fuel and continue to rely on oil and gas. 

The United States, for instance, underwent an energy revolution through fracking, which unlocked vast reserves of natural gas and oil. In 2023, U.S. was the number one oil producer in the world.

Similarly, Norway, often lauded for its commitment to “sustainability,” continues to issue oil drilling permits in the North Sea. If Norway, a country with a superior economy and high standard of living, can still prioritize its economic self-interest by extracting its oil, why should Indonesia be criticized for utilizing its coal reserves?

The $1.4 trillion Indonesian economy is in no mood to compromise its future or the continuing upward trend in economic growth. Count on Jakarta to exploit its natural resources well into the future.