Indonesia's Energy Support Measures:: An Inventory of Incentives Impacting The Energy Transition Gsi Report

Indonesia’s
Energy Support
Measures:
An inventory of incentives
impacting the energy transition
GSI REPORT
Anissa Suharsono
Murtiani Hendriwardani
Theresia Betty Sumarno
Jonas Kühl
Martha Maulidia
Lourdes Sanchez
© 2022 International Institute for Sustainable Development | IISD.org /gsi June 2022
Indonesia’s Energy Support Measures
© 2022 International Institute for Sustainable Development

Published by the International Institute for Sustainable Development
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Indonesia’s Energy Support Measures: An inventory of incentives

impacting the energy transition
June 2022
Written by Anissa Suharsono, Murtiani Hendriwardani, Theresia Betty
Sumarno, Jonas Kühl, Martha Maulidia, and Lourdes Sanchez
IISD.org/gsi ii
Acknowledgements
The authors are very grateful for the valuable insights and recommendations received
throughout the writing of this report. A special thank you to Balasubramanian Viswanathan
and Tara Laan of the IISD for their contributions to the methodology and data estimates, as
well as the following individuals:
• Surya Darma, Indonesia Renewable Energy Society (METI-IRES)

• Dewa Ekayana, Badan Kebijakan Fiskal (Fiscal Policy Agency), Ministry of Finance of
Republic of Indonesia
• Thomas Capral Henriksen, The Royal Danish Embassy in Indonesia
• Nicki Khorram-Manesh, Embassy of Sweden in Indonesia
• Bronwen Tucker, Oil Change International
• Cahyadi Indrananto and Florian Kitt, Asian Development Bank, Jakarta
• Elrika Hamdi, Vibhuti Garg, and Putra Adhiguna, Institute for Energy Economics and
Financial Analysis
• Angela Picciariello, Chido Muzondo, Greg Muttitt, Jobit Parapat, Lucile Dufour,
Lucky Lontoh, Max Schmidt, M. Jeffry Giranza, Philip Gass, and Richard Bridle, of
the International Institute for Sustainable Development.
IISD.org/gsi iii
Executive Summary
Access to affordable, reliable, and clean energy is critical for economic and social
development. Most governments—including Indonesia’s—therefore provide financial support
and incentives for energy production and consumption. Careful scrutiny of these policies is
necessary to determine whether they are helping or hindering the government’s objectives to
expand energy access, improve energy security, and promote the transition to clean energy.
The Government of Indonesia (the “government” or the “GoI”) provides a range of energy
support measures, incentives, and interventions that stimulate energy production and
consumption, some of which are directed to support and protect the vulnerable segments
of the population (e.g., poor households and small businesses). The COVID-19 National
Economic Recovery Program is one such support measure that, like many others provided
to the energy sector, disproportionately benefited the fossil fuels sector. There are also other
measures aiming to promote a transition toward clean and renewable energy, although today,
government support is still predominantly addressed to the fossil fuel sector.
This first-of-a-kind report has been developed to identify all the support measures and
incentives that are available and have been given to the Indonesian energy sector by the GoI.
This stocktaking report takes into account support provided for six types of energy: 1) oil and
gas, 2) coal, 3) electricity, 4) renewable energy,1 5) biofuels, and 6) electric vehicles (EVs) and
batteries for EV (EV and batteries). A substantial amount of support was provided for the
fossil fuels sector, comprising oil and gas, coal, and electricity.2
The definition of “support measure” used in this report is based on the definition of
“subsidy” from the Agreement of Subsidies and Countervailing Measures of the World Trade
Organization (WTO) (1994), while the estimation methods were based on the Methodology
for SDG Indicator 12.c.1 (Wooders et al., 2019).
The report covers the period from FY 2016 to FY 2020.3 Throughout the time period
observed, a total of 78 measures were identified. Out of those measures, 37% (29 measures)
were estimated, representing at least IDR 1,225 trillion (~USD 83.7 billion)4 of support to the
energy sector, distributed as follows (see Figure ES1):
• 94.1% of the total value estimated or IDR 1,153 trillion (~ USD 79 billion) has been
given to support the production and consumption of fossil fuels—oil and gas ( 38.8%),
coal (18%), and electricity (37.3%).
1 Indonesia defines clean, renewable energy as Energi Baru Terbarukan (EBT) or New and Renewable Energy
(MEMR, 2008), but the definition of what constitutes “Baru” (or “new”) is unclear (i.e., specific types or sources
of energy). In this report, the term renewable energy includes energy from hydro, geothermal, solar, wind, biomass,
biogas, and other clean and renewable forms of energy generation.
2 In Indonesia, over 90% of electricity consumed is sourced from fossil fuels. Therefore, measures supporting the
electricity sector are considered fossil fuel support.
3
The fiscal year for the State Budget of the Government of Indonesia starts in January and ends in December.
The State Budget for the following year is usually ratified before November of the previous year.
4 IDR to USD Exchange Rate is based on the rate published by the Indonesian Central Bank, Bank Indonesia, as
of May 20, 2022.
IISD.org/gsi iv
• Less than 1% of the total value of support measures estimated (0.94%) has been
provided to incentivize the renewable energy sector.
• 5% of estimated support, IDR 61 trillion (~ USD 4.2 billion), went to the biofuels
industry, most of which (97%) was derived from a levy on crude palm oil export
allocated to a dedicated fund known as the Crude Palm Oil Supporting Fund.
• 0.002% of estimated support or IDR 19 billion (USD 1.3 million) went to the
emerging but growing EV and EV battery industries.
Figure ES1. Support measures provided to the energy sector in Indonesia, FY 2016 to
FY 2020
300
EV and batteries
Renewable
250
Biofuels
Coal
Electricity
200 Oil and gas

IDR trillion
0.002%
150 EV and battery
0.94%
Renewable energy
4.97%
100
Biofuels
50
94.1%
Fossil fuels
0
2016 2017 2018 2019 2020
Source: Authors’ calculations.
IISD.org/gsi v
These figures are likely to be an underestimation since many of the support measures
could not be quantified due to data limitations (data not available, data cannot be verified,
or identified support or incentive has yet to be disbursed). Whenever available, official
government data were used to provide quantitative estimates.
Most of the support measures 77% identified (60 measures out of 78) were for the benefit of
energy producers. Only 20% of all measures were given to support consumers, and the rest of
the measures (three) were provided to benefit both producers and consumers.
Over the 5-year period observed, the number of support measures given to the Indonesian
energy sector has steadily increased throughout the years, with a particularly sharp increase in
2020. This is largely attributed to the economic recovery packages that were given mostly to
the fossil fuel sector through state-owned enterprises bailouts (Energy Policy Tracker, 2020).
Indonesia is a net oil importer, and under the current context of high international oil prices,
the risk of a price increase would impact the retail prices in Indonesia. In turn, this could
translate into the GoI increasing the amount of support to protect purchasing power and
control inflation. As this report is being published, the GoI announced an increase in fossil
fuels subsidies in response to the record-high international oil prices (Anggela, 2022; Antara,
2022; Ulya, 2022).
Given its nationally determined contribution (NDC) and renewable energy targets, it would
be reasonable for Indonesia to focus more on creating effective incentive mechanisms to
further promote the adoption and development of renewable energy. Shifting or reallocating
support from fossil fuels to renewable energy would be a good start.
Key Findings From Our Research

Government support for fossil fuels and fossil fuel-generated electricity
remains substantially higher than for renewable energy, undermining the
effort to achieve 23% of renewable sources in the energy mix by 2025 and net-zero
carbon emissions by 2060. This support also serves to lock in fossil fuel production
and consumption. Switching support from fossil fuels to clean energy would help
Indonesia accelerate its energy transition and reach its renewable energy targets.
Support measures for oil and gas have been fluctuating rather
significantly. Based on the total quantified measures, the amount provided
increased from IDR 73 trillion (USD 5.4 billion) in FY 2016 to its peak of
IDR 126 trillion (USD 8.7 billion) in FY 2018, before tapering off to IDR 73.5
trillion (USD 5 billion) in FY 2020. Most of the support for oil and gas was
in the form of tax exemptions or relaxations (government revenue foregone)
intended to encourage exploration activities, therefore mainly benefiting
producers. A total of 23 support measures have been identified for oil and gas,
but only seven were quantified.
Support for coal has also risen considerably and is likely to continue to
rise. In real terms, total quantified support measures for coal increased between
FY 2016 and FY 2020, from IDR 19.5 trillion (USD 1.5 billion) to IDR 61.04
IISD.org/gsi vi
trillion (USD 4.2 billion). Support for coal was also mostly in the form of tax
exemptions or relaxations (government revenue foregone), mainly benefiting coal
producers. In total, 12 support measures were identified for coal, but only three
were quantified. In the future, the number of coal support measures will most
likely increase, as new measures to encourage the coal derivatives industry, such
as dimethyl ether, are anticipated.
PT Perusahaan Listrik Negara, the state-owned electricity provider,

continues to benefit from government support. The most important support
received was in the form of direct transfers from the government to compensate
for the below-market pricing of the retail tariff. This compensation accounted for
between 65% and 80% of all the quantified spending to support the electricity
sector between FY 2016 and FY 2019 and about 82% in FY 2020. The sector
also benefits from several tax exemptions and relaxations for producers of
electricity (non-renewable), most of which could not be quantified. Most
electricity in Indonesia (~91%) is generated using fossil fuels, notably coal, thus
support for electricity can be considered to be supporting fossil fuels. In total, 12
support measures were identified for fossil fuel-based electricity, but only seven
were quantified.
Incentives for renewable energy are undermined by the support given to

fossil fuels, despite geothermal enjoying most of the related funding from
the government. Renewable energy received less than 1% of all support provided
to the energy sector over the past 6 years, despite the target of achieving 23%
renewable mix by 2030. The high potential for capturing solar energy is not reflected
in government support. More support for renewables to mobilize at least IDR 500
trillion (USD 30 billion) in additional investment is required (Pribadi, 2019) if
Indonesia is to meet its NDC and renewable energy targets. A total of 16 support
measures were identified for renewable energy: only five were quantified, and some
of them (like the feed-in tariff) were phased out within the period considered.
Support for biodiesel from the Crude Palm Oil (CPO) export levy
accounted for the majority of subsidies for biofuels. The total quantified
subsidies received from FY 2016 to FY 2020 increased from IDR 10.8 trillion
(USD 740 million) to IDR 31 trillion (USD 2.1 billion). Since incentives for
biofuel given to biodiesel producers are dependent on the fluctuating CPO market
price, the amount of incentives going forward might fluctuate. Three support
measures were identified for biofuels.
Since both the EV and EV battery industries are emerging sectors, most
of the identified measures are relatively new, and they were not readily
quantifiable. For the most part, the GoI has only supported the EV and EV
battery industries since 2019, when Bali became the first provincial government to
implement electric bus regulations (Thorn, 2021). A total of 12 support measures
were identified for EV and EV batteries, but only three were quantified. Most of
these measures were government revenue foregone in the form of tax breaks or
special taxes that benefit the consumers.
IISD.org/gsi vii
Table of Contents
Introduction............................................................................................................................................................................. 1
The Energy Landscape in Indonesia .................................................................................................................................... 2

Approach and Scope ........................................................................................................................................................................ 3
1.0 Oil and Gas....................................................................................................................................................................... 5
Measures Quantified ........................................................................................................................................................................6

Measures not Quantified................................................................................................................................................................7
Future Trends............................................................................................................................................................................................8
2.0 Coal...................................................................................................................................................................................... 9
Measures Quantified......................................................................................................................................................................10
Measures not Quantified.............................................................................................................................................................11
Future Trends..........................................................................................................................................................................................11
3.0 Electricity........................................................................................................................................................................13
Measures Quantified ..................................................................................................................................................................... 14

Measures not Quantified ............................................................................................................................................................15
Future Trends ........................................................................................................................................................................................15
4.0 Renewable Energy...................................................................................................................................................... 17
Measures Quantified ..................................................................................................................................................................... 18

Measures not Quantified ............................................................................................................................................................19
Future Trends.........................................................................................................................................................................................20
5.0 Biofuels............................................................................................................................................................................21
Measure Quantified ........................................................................................................................................................................ 23

Measures not Quantified ........................................................................................................................................................... 24
Future Trends......................................................................................................................................................................................... 24
Measures Quantified...................................................................................................................................................................... 28
Measures not Quantified............................................................................................................................................................ 29
Future Trends......................................................................................................................................................................................... 29
Concluding Thoughts and Remarks .........................................................................................................................31
References ............................................................................................................................................................................33
Appendix 1. Approach and Methodology............................................................................................................... 39
Appendix 2. Indonesia’s Energy Support Measures by Energy Source.....................................................41
IISD.org/gsi viii
List of Figures
Figure ES1. Support measures provided to the energy sector in Indonesia, FY 2016 to FY 2020.....v
Figure 1. Indonesia’s primary energy supply by source, 2021 .................................................................................... 2
Figure 2. Energy sectors observed....................................................................................................................................................4
List of Tables
Table 1. Quantified government support for oil and gas in Indonesia by mechanism
(in IDR trillion)....................................................................................................................................................................................................7
Table 2. Quantified government support for coal in Indonesia by mechanism
(in IDR trillion)................................................................................................................................................................................................10
Table 3. Quantified government support for electricity in Indonesia by mechanism
(in IDR trillion).................................................................................................................................................................................................15
Table 4. Quantified government support for renewable energy in Indonesia by mechanism
(in IDR trillion).................................................................................................................................................................................................19
Table 5. Quantified government support for biofuel in Indonesia by mechanism
(in IDR trillion)................................................................................................................................................................................................ 24
Table 6. Quantified government support for EV & battery in Indonesia by mechanism
(in IDR billion)................................................................................................................................................................................................. 28
IISD.org/gsi ix
Introduction
The Indonesia’s Energy Support Measures: An Inventory of Incentives Impacting the Energy
Transition report is the first of its kind. It is a report—an inventory—designed to identify all
support measures available for the energy sector in Indonesia from FY 2016 to FY 2020. The
report includes support measures given to various types or sources of energy, and it serves as
a starting point for the Government of Indonesia (GoI), as well as all stakeholders, concerned
citizens, and the wider public to allow them to “follow the money”: to track the flow of public
funding and to understand how public money is being spent on different types of energy.
Through data visualization of the flow and allocation of the support measures throughout the
period observed, this report also aims to shed light on government spending for fossil fuels vis-
à-vis renewable energy and clean technology.
This stocktaking report takes into account support provided over 5 years, from FY 2016 to
FY 2020, for six energy sources: 1) oil and gas, 2) coal; 3) electricity; 4) renewable energy5; 5)
biofuels; and 6) electric vehicles (EVs) and battery for EV (EV and batteries).
This report has three parts:

1. This companion brief.
2. A catalogue of all the support measures identified during the period observed, FY
2016 to FY 2020, presented in a table format in Appendix 2: Indonesia Energy
Support Measures by Energy Source.
3. A data visualization of all support measures that is available and can be accessed
through the following link.
The support measures identified in this report benefit mostly energy producers rather than
consumers. The report defines “support measure” following the definition of “subsidy”
from the Agreement of Subsidies and Countervailing Measures (ASCM) of the World Trade
Organization (WTO) (1994). Thus, “support” refers to a government policy or program that
creates a financial contribution or infers a policy advantage to non-government actors, and the
report finds that support measures for the Indonesian energy sector come in many different
kinds or forms, including incentives, interventions, loan and credit guarantees, as well as
measures that are not clearly and/or consistently outlined in the state budget.
In all, 78 support measures were identified as having been provided by the GoI through the
following types of mechanisms:
• 55 in the form of government revenue foregone

• 16 in the form of direct and indirect transfer of funds
• 6 in the form of income or price support
• One in the form of provision of goods or services below market value.
5 Indonesia defines clean, renewable energy as Energi Baru Terbarukan (EBT) or New and Renewable Energy
(MEMR, 2008), but the definition of what constitutes “Baru” or “new” is unclear (i.e., specific types or sources of
energy). In this report, the term “renewable energy” includes energy from hydro, geothermal, solar, wind, biomass,
biogas, and other renewables.
IISD.org/gsi 1
Due to data limitations (e.g., data not available, source of data could not be verified, and/or
measures are not yet applicable), only 29 support measures identified were quantified (37%),
while the rest (63%) were not quantified. Data availability and transparency would be critical
to arrive at a more comprehensive understanding of the size and number of support measures
available for the energy sector in Indonesia.
It is anticipated that this report would encourage further research and a more in-depth
analysis of the size and types of support measures, prioritization of the different support
measures and energy sources, as well as the socio-economic and policy implications of such
measures going forward.
The Energy Landscape in Indonesia

Indonesia is a vast archipelago with over 17,000 islands (Badan Perencanaan Pembangunan
Nasional - BAPPENAS, 2022; Ministry of Trade, n.d.) and more than 270 million people
(World Bank, n.d.). It is the largest member of the Association of Southeast Asian Nations
and accounts for 40% of energy consumption in the region. Energy demand in Indonesia
is predicted to increase by 80%, while electricity demand is anticipated to triple by 2030
(Badan Koordinasi Penanaman Modal (Indonesian Investment Coordinating Board)
[BKPM], 2021). The Indonesian economy is based on agriculture and crude oil production,
and the energy sector is the second highest contributor of greenhouse gas emissions after
agriculture (BKPM, 2021).
According to a recent energy sector assessment by the Asian Development Bank (2020),
energy production in 2019 was based mostly on fossil fuels, comprising 616 million metric
tons of coal, 2.8 million standard cubic feet of natural gas, and 272 million barrels of oil.
Fossil fuels also remain the main source of energy, with coal, gas, and oil accounting for the
largest share of primary energy supply by source (see Figure 1)—approximately 84% for 2021
(Ministry of Energy and Mineral Resources [MEMR], 2022).
Figure 1. Indonesia’s primary energy supply by source, 2021

4.24%
11.35% Biofuels
Renewable energy
16.16%
Gas
36.15%
Coal
32.10%
Oil
Source: Authors’ diagram based on MEMR, 2022.
IISD.org/gsi 2
The GoI has recognized the need to move toward clean, sustainable energy (Asian
Development Bank, 2020; BKPM, 2021), and to that effect it has committed to achieve
23% of renewable energy mix by 2025 and net-zero by 2060. In 2020, total electricity
consumption was about 265 TWh, down from 271 TWh in 2019 (International Energy
Agency, 2020), but the electricity mix in Indonesia remains dominated by oil and coal (BP,
2021; Enerdata, 2022).
With Indonesia holding the G20 Presidency in 2022, this is a momentous opportunity for
the government to show that Indonesia has an important role to play in ensuring that public
money is being used appropriately and effectively to achieve a sustainable recovery and
clean energy transition, which are the priority issues for the Indonesia G20 Presidency (G20
Indonesia 2022, n.d.).
Indonesia has announced its commitment to reach net-zero by 2060 and to prioritize the
clean energy transition (Ministry of Finance, 2021); as such, this report will be relevant to see
whether Indonesia’s policy settings are helping achieve this goal.
Approach and Scope

The report defines “support measure” following the definition of “subsidy” from the WTO
ASCM, which includes the following features (WTO, 1994):
1. Direct and indirect transfers of funds and liabilities, or the potential transfer of funds
and liabilities (such as budget outlays, loans, and credit guarantees).
2. Government revenue foregone (reduced tax rates and tax exemptions).
3. Provision of goods or services below market value (such as land or water).
4. Income and price support through market regulations (including non-enforcement).
For the purpose of this report, the term “support measure” has a slightly wider scope
than the WTO ASCM subsidy definition. For example, we also include Domestic Market
Obligation (DMO) and the Crude Palm Oil (CPO) Fund for biofuels. Therefore, “support”
refers to a government policy or program that creates a financial contribution or confers a
policy advantage to non-government actors that could include direct budgetary transfers,
tax expenditures, loans from public institutions, credit guarantees, spending by state-owned
enterprises, and certain forms of government debt.
To calculate the monetary value of the support provided, the Methodology for SDG Indicator
12.c.1 (Wooders et al., 2019) has been used to arrive at an estimate for all six types of energy
that serve as the primary sources of electricity in Indonesia, as illustrated in Figure 2:
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Figure 2. Energy sectors observed
Oil and gas Coal Electricity Renewable Biofuels EV and

energy batteries
Whenever available, official government data were used to provide quantitative estimates.
Based on data availability, 29 of the identified support measures were quantified (37%), while
the rest (63%) were not quantified.
A support measure is considered quantified if there is data available for any given year. When
data are not available for a quantified measure, the value of the support measure is noted as
N/A (not available) for the relevant year. When not yet applicable, which can be due to the
support measure not being provided for the particular year or the measure being for future
implementation (i.e., approved but to be implemented in the following year), it is indicated as
N/P (not applicable).
A detailed explanation of the methods by which the various support measures have been
calculated and categorized is provided in Appendix 1: Approach and Methodology.
Appendix 2: Indonesia’s Energy Support Measures by Energy Source provides a

comprehensive listing of all 78 support measures identified.
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1.0
Oil and Gas
IISD.org/gsi 5
Crude oil production in Indonesia has been declining since 2009. The production
decline is mainly caused by mature oil wells, while the growth of new wells
is relatively limited. Since then, Indonesia has mainly been relying on crude
oil imports to meet domestic demand (Dewan Energi Nasional, 2019). As a
consequence, the GoI has provided various incentives and support measures to promote
investment in the oil and gas upstream sector through tax deductions in the exploration and
exploitation phases, as well as new schemes for upstream oil and gas contracts. Most of the
support measures are in the form of government revenue foregone and aim to encourage
exploration activities, therefore mainly benefiting the producers.
A total of 23 support measures for the oil and gas sector from FY 2016 through FY 2020 have
been identified. Of these, four are for the benefit of the consumers and the rest are for the
benefit of the producers. These measures can be classified as follows:
1. 19 measures represent government revenue foregone (tax exemptions and reductions).

2. Two are in the form of income or price support.
3. One is in the form of direct and indirect transfer of funds.
4. One is in the form of the provision of goods or services below market value.
The total quantified support measures for oil and gas in FY 2020 reached IDR 73.5 trillion
(USD 5 billion). The overall amount of support provided has been fluctuating, with an
upward trend between FY 2016 and FY 2018, from IDR 73 trillion (USD 5.4 billion) in FY
2016 to IDR 126 trillion (USD 8.7 billion) in FY 2018, and then a downward trend from
FY 2019. The lower amount of support provided in FY 2020 was caused by lower oil prices
and also lower demand due to the COVID-19 pandemic. Only 30% (seven out of 23) of the
subsidies could be quantified due to the lack of necessary data.
Table 1 summarizes the total estimates between FY 2016 and FY 2020, while details on
the different support measures for oil and gas can be found in Appendix 2. A: Oil and Gas
Support Measures.
Measures Quantified
Out of the 23 oil and gas support measures that were identified, only seven were quantified.
The top two quantified measures in order of magnitude are:
• Total Reimbursement for PT Pertamina (both already paid and still due6). The
number throughout FY 2016–FY 2020 reached IDR 432 trillion (USD 30.8 billion).
• Value-added tax (VAT) exemption for crude oil and natural gas sales, totalling IDR
27 trillion (USD 1.94 billion) throughout FY 2016–FY 2020, with the largest amount
distributed in 2017.
6 The amount for Total Reimbursement for PT Pertamina is taken from their Annual Report, where it includes
the number for paid and due reimbursement from the GoI. As of the end of 2021, the GoI still owes PT Pertamina
IDR 109 trillion (USD 7.6 billion) in unpaid support throughout the year. The amount of support measure that is
still due is recorded separately for each financial year.
IISD.org/gsi 6
The reimbursement for PT Pertamina is for below-market pricing of certain fuels for
consumers. The GoI has set retail prices for certain types of gasoline, diesel fuel (“Solar”), and
kerosene below market since 1967. Three-kg liquefied petroleum gas (LPG) canisters are also
subsidized.
In 2015, following a decline in oil prices, the subsidies for gasoline (Premium) were entirely
removed, and diesel was set at IDR 1,000/litre. Given the unfavourable market conditions at
the time, this temporary removal saved the GoI around IDR 211 trillion. The compensation
from the GoI for Pertamina’s losses as the result of the lower selling price is recorded as a
support measure for fuel, with the 3-kg LPG canister as the highest item subsidized. The
amount recorded for the item “VAT exemption for crude oil, coal and natural gas” was
estimated based on the foregone revenue (10% VAT) from the annual sales value for the
commodities.
Table 1. Quantified government support for oil and gas in Indonesia by mechanism (in
IDR trillion)
Mechanism FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Direct and indirect transfer

54.51 90.76 120.03 98.34 68.58
of funds and liabilities
Government revenue
foregone (tax exemptions 18.47 8.71 6.03 4.99 4.93
and reductions)
Total volume of quantified

support measures 72.98 99.47 126.06 103.33 73.52
(in IDR trillion)
Measures not Quantified

Due to the lack of available data, 16 of the identified support measures were not quantified:
they were in the form of government revenue foregone, where no official government data
were available to facilitate quantification. These incentives were given to the oil and gas sector
in the form of tax deductions or relaxations, such as import duty exemptions and income tax
Article 22 exemptions, where these items are not recorded in the state budget, nor is there
any requirement for the beneficiaries to declare them. Information on the effective tax rate or
the extent to which the tax deduction was utilized by the oil and gas companies was also not
available. Unlike quantified tax subsidies, such as the VAT exemption, it was also not possible
to identify an appropriate benchmark to use as a reference to estimate the tax exemptions.
IISD.org/gsi 7
Future Trends
The total reimbursement for PT Pertamina for under-pricing the retail price of fuel has been
the largest form of support for all the years observed and remains so to date (see Appendix
2. A: Oil and Gas Support Measures). There have been several plans to reform the support
provided for retail fuel, including the request from PT Pertamina to eliminate Premium
RON 88 (Asmarini, 2021), a subsidized fuel. In addition to eliminating Premium, PT
Pertamina has also suggested the reformation of the distribution method, from reimbursing
Pertamina to giving out targeted support measures directly to eligible individuals, according
to the Integrated Social Welfare Database (Data Terpadu Kesejahteraan Sosial/DTKS). This
targeting method would be in line with the incentive reform for 3-kg LPG canisters already
approved by the Parliament (Putri, 2021), in which the support measures have already been
distributed directly to the targeted individuals. This move is expected to reduce the amount of
government support for oil and gas.
However, with Indonesia being a net oil importer, the risk of increasingly high oil prices
would eventually impact the retail prices in Indonesia. This could, in turn, translate into the
government increasing the amount of support measures to protect purchasing power and
control inflation.
IISD.org/gsi 8
2.0
Coal
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Coal plays an important role in the Indonesian economy. Indonesia became a

major coal-producing and -consuming country after the coal mining sector was
reopened to foreign investment in the 1990s (Indonesia-Investments, 2018). In the
first half of 2021, the coal industry contributed around USD 38 billion in export
earnings for the country (Nangoy & Suroyo, 2021). Coal is an important source of electricity
in Indonesia. It is considered crucial to economic growth and, therefore, heavily subsidized
(Suharsono & Gençsü, 2019).
Twelve coal support measures provided from FY 2016 through FY 2020 have been identified,
four of which have been quantified. All of the identified coal support measures are provided
for coal producers in the form of tax benefits that improve production margins.
Details on the different support measures for coal can be found in Appendix 2. B: Coal
Support Measures.
In real terms, the total quantified support measures for coal increased significantly throughout
the period observed, from IDR 19.4 trillion (USD 1.4 billion) in FY 2016 to IDR 61.04
trillion (USD 4.2 billion) in FY 2020.
The 12 support measures identified can be classified as follows:
• Nine measures are in the form of government revenue foregone.

• Two measures are direct and indirect transfers of funds and liabilities.
• One measure is for income or price support.
Measures Quantified
Table 2 summarizes the total coal support measures estimated, covering the period from
FY 2016 to FY 2020. Only measures in the form of government revenue foregone were
quantified. Government support for coal reached its peak in FY 2019, totalling IDR 66 trillion
(USD 4.8 billion). In FY 2020, the value decreased slightly, possibly due to a drop in overall
electricity generation (as coal is the main source) and a decline in coal exports attributable to
COVID-19 (MEMR, 2021; Oxford School of Enterprise and the Environment, 2020).
Table 2. Quantified government support for coal in Indonesia by mechanism (in IDR
trillion)
Government revenue
19.41 21.78 51.76 66.34 61.04
foregone
Direct transfer 0.092 – – – –

(in IDR trillion)
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The three largest support measures could be quantified based on in-house estimates:
• Preferential royalty and corporate tax rates for small coal mining licence holders.
Although the report is only able to quantify the last 3 years for one province (FY
2018–FY 2020) using production data from only one main coal-producing province
(East Kalimantan), the number reached IDR 93 trillion (USD 3.5 billion).
• Preferential export tax rate on coal totalling IDR 71.6 trillion (USD 5.1 billion)
throughout FY 2016–FY 2020, with the largest amount occurring in 2018, because of
the higher price of coal at the time. The amount was estimated based on the foregone
revenue from the applicable 1.5% coal export tax rate compared to the 7.5% export
tax rate that applies to other mineral commodities.
• VAT exemption for coal (also applying to crude oil and natural gas), totalling IDR
55 trillion (USD 3.9 billion) throughout FY 2016–FY 2020, with the largest amount
occurring in 2019—IDR 13.6 trillion (USD 966 million). The amount was estimated
based on the foregone revenue (10% VAT) from the annual sales value for coal.

Due to the lack of or limited data to estimate the value of support measures provided, eight
support measures are not quantifiable, and most of these measures (seven) were in the form of
government revenue foregone.
This was because tax deductions or relaxations are not recorded in the state budget, nor is
there any requirement for the beneficiaries to declare them. Unlike the quantified measures,
it was not possible to identify either a benchmark rate, a subsidized rate, or the extent to
which the measures were utilized as tax deductions by companies. The only non-tax measures
are a loan guarantee and above-market pricing for low-quality coal provided to mine-mouth
power plants. These were not quantified because no official government data were available to
facilitate quantification.
Given the number of unquantifiable measures, it is reasonable to assume that the actual
amount of support given to the sector is much larger than what has been identified, with an
annual amount that is steadily increasing, from IDR 19.4 trillion (USD 1.45 billion) in FY
2016 to IDR 61.04 trillion (USD 4.2 billion) in FY 2020.
Future Trends
Since the ratification of the Job Creation Law (UU no. 11/2020) in 2020, the coal sector
has been receiving more support, mostly in the form of preferential taxation and facilitation
of business practices such as ease in getting contract extensions and removal of the limit on
mining production areas. Although the law now includes coal as a taxable good on which a
10% VAT will be imposed starting in 2020, this tax will be borne by the state-owned electricity
company, PT Perusahaan Listrik Negara (PLN). This will translate into a higher financial
burden for PLN.
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The rise of coal prices in 2021 caused many coal producers to prefer exporting production
at international prices instead of fulfilling the DMO—which mandates domestic coal
producers to sell part of their production to the domestic market at discounted prices, where
it is generally used in coal-fired power plants to generate electricity—raising concerns of a
domestic coal shortage that peaked in late 2021. This resulted in a short-lived export ban
in January 2022. On the same day the export ban was lifted, it was also announced that the
government is currently discussing a new scheme for PLN to purchase coal for its power
plants, in which PLN will be required to purchase it at the market price, no longer using the
DMO price of USD 70 per metric ton.
Recently, Indonesia announced a new regulation that introduces a carbon tax at a minimum
rate of IDR 30 (USD 0.0021) per kilogram of carbon dioxide equivalent to be applied only
to coal-fired power plants starting in July 2022, at the floor rate. Although the announcement
of the carbon tax is generally welcomed, it has already faced resistance from the coal industry.
The Indonesia Coal Miners Association requested a postponement of the implementation of
the tax until further discussions. PLN has also expressed concern over rising power prices that
will translate into either a higher electricity tariff to the customer or increasing subsidies and
compensation from the government (Ungku & Christina, 2021).
Following its commitment from the 26th Conference of the Parties to the United Nations
Framework Convention on Climate Change and PLN’s Electricity Supply Business Plan
(RUPTL) 2020–2028 to dial back the usage of coal power, the GoI is now looking to
develop the coal derivatives industry, especially the conversion from coal to dimethyl ether,
in the hopes of reducing LPG imports (Wareza, 2022). The President has also expressed his
intention to ban the export of coal as a raw mineral (Kencana, 2022). The form of support
to the coal industry in the future will most likely be along the lines of encouraging the coal
derivative industry.
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3.0
Electricity
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Over the past decade, installed electricity capacity in Indonesia more than doubled,
from about 33 GW in 2010 to about 70 GW in 2020, with most capacity generated
from coal, followed by gas. Part of this increase was to significantly improve
Indonesia’s electricity access rate to 99.4% in 2021, up from 67% in 2010.
In all, 12 support measures for electricity from FY 2016 to FY 2020 have been identified.
Nine of these measures were applicable throughout the entire period, while three measures
were applicable only in 2020 as part of the government’s COVID-19 recovery package.
The electricity support measures can be classified as follows:
• Six in the form of direct transfers of funds.

• Five in the form of government revenue foregone.
• One in the form of income or price support.
With the exception of one measure, all of the electricity support measures almost equally
benefit producers (five measures) and consumers (six measures). Of the identified measures,
58% (seven out of a total of 12 measures) were quantified, and mostly given to poor
households within the R-1 tariff group (450 VA–2200 VA). Measures identified under
“electricity” mostly benefit fossil fuels, as the vast majority of electricity is generated from coal,
oil, and gas (91% of total electricity generation). Therefore, they can be considered fossil fuel
support.
Details on the different support measures for electricity can be found in Appendix 2. C:
Electricity Support Measures.
Measures Quantified
A total of seven measures could be quantified (i.e., data for these support measures are
available), including three COVID-19-related support measures for 2020. Five of these
quantified measures took the form of direct transfers of funds, while the remaining two
measures represent government revenue foregone and income or price support.
All but one of these quantified measures benefit the consumers. The other quantified measure
is for the benefit of electricity producers.
Until FY 2019, the quantified amount remained fairly stable in the range of IDR 85
trillion and IDR 94 trillion. In FY 2020, the amount of the quantified measures increased
significantly by about 72% compared to FY 2019, mainly as a result of the additional
COVID-19-recovery related support. Throughout the years, the largest quantified measure
was a transfer that the government paid to PLN. This transfer was provided in the annual
state budget (APBN) to compensate PLN for losses that occur due to the below-market tariff
setting by the government for end-user electricity prices. This compensation accounted for
between 58% and 67% of all the quantified spending to support the electricity sector between
FY 2016 and FY 2019 and about 40% in FY 2020.
The VAT exemption for electricity procurement and the DMO were the second and third
largest quantified support measures between FY 2016 and FY 2019.
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All three measures explained above (direct transfer to PLN, DMO, and VAT exemption)
contributed to the below-cost pricing of electricity in Indonesia; however, there are
differences regarding who benefits from the support provided. For example, all consumers
benefit from the DMO, and all consumers (except households with power connections
above 6,600 VA) benefit from the VAT exemption whereas only households, businesses,
and government buildings with 450 VA–950 VA power capacity benefit from the below-
cost tariffs. In 2020, the one-time compensation payment to support PLN as part of the
COVID-19 Economic Recovery Program was the second largest quantified measure. To
a large extent, all of these quantified measures were support given to the fossil fuel sector
since the vast majority of electricity is generated by coal, oil, and gas (roughly 91% of total
electricity generation) (PLN, 2021a).
Table 3. Quantified government support for electricity in Indonesia by mechanism (in

IDR trillion)

63 51 71.5 74 92.1
Government revenue
23.8 5.7 6.4 6.6 6.4
foregone
Income or price support 9.4 10.3 11.2 12.2 13.3

support measures 96.2 67 89.2 92.7 111.7
(in IDR trillion)

Five measures could not be quantified. Four of them were in the form of tax exemptions,
and one was a direct transfer of funds in the form of a credit support through the Indonesia
infrastructure guarantee fund that provides government guarantees for public–private
partnership infrastructure projects in Indonesia. The tax exemption measures include an
import duty exemption covering equipment and machines for all types of power-generation
projects, an income tax deduction, and an extension period of income tax deductions on losses
arising from investment on losses to support new types of fossil power generation, such as
those using hydrogen, coalbed methane (an unconventional form of natural gas found in coal
deposits or coal seams), and liquefied coal or gasified coal.
Future Trends
According to PLN’s RUPTL 2021–2030, electricity demand will grow at an average rate
of 4.9% per year until 2030. To meet this growing demand, electricity capacity needs to be
further expanded, and the RUPTL aims to increase capacity by 40.6 GW by 2030, 51.6%
IISD.org/gsi 15
of which is to be met through renewable sources and the rest (48.4%) through fossil fuels
(PLN, 2021b).
In addition, the building of almost 48,000 km of transmission lines is planned, as well as

substations with a capacity of about 76,000 megavolt amperes for distribution. All these
require PLN—as well as independent power producers—to invest an average of around IDR
129 trillion annually (Pratiwi, 2021).
Yet, PT PLN is carrying a large debt of several hundred trillion IDR, which is why the GoI
is considering restructuring the company to increase its budget efficiency (Pratiwi, 2021).
According to the plan, to be finalized in 2022 and fully implemented by 2025, two sub-entities
are being considered:
• One is a holding company that will focus on
° Handling transmission, distribution, and retail, GENCOs7 subsidiary (with

transferred assets) to handle generation assets.
° Another subsidiary that will focus on non-power business (e.g., fibreoptics and
charging stations).
• A second holding company that will focus on power plant expansion and electricity
generation will enable the necessary transition toward renewable energies (Agung, 2022).
To accelerate the energy transition and reduce carbon emissions, PT PLN plans to build new
and renewable energy (EBT) plants with a total capacity of 648 MW, with a target operating
date of 2022 (Christian, 2022). However, it was unclear at the time of publication whether
this target would be achieved. To support this, PLN is not only intensifying the construction of
EBT plants, but also in parallel, modelling an early-retirement scenario of steam power plants
(Pembangkit Listrik Tenaga Uap, or PLTU) in several stages up to 2056. In the first stage, by
2030, PLN will reduce 5.5 GW of steam power plants as power supply contracts come to an
end. In the second stage, PLN will retire 10 GW of subcritical steam power plants by 2040.
Meanwhile, in 2050, PLN will close 18 GW of subcritical and 7 GW of supercritical power
plants (Hendartyo & Silaban, 2022).
To improve its financial position, the GoI plans to remove the electricity support measure
and instead provide social support directly to poor households and small businesses. As
a consequence, PLN will price electricity at the market price, thereby eliminating under-
recoveries. This reform plan was approved by the budget committee of the House of
Representatives in 2021, and the GoI was aiming to begin implementation in June 2022
(Umah, 2021a).
7
This holding company is comprised of the five Korean generation companies known as GENCOs: KOSEP,
KOMIPO, KOWEPO, KOSPO and EWP, which are all KEPCO's subsidiaries (KEPCO, n.d.).
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4.0
Renewable Energy
IISD.org/gsi 17
Indonesia has enormous renewable energy potential. Across six major renewable
energy sources, Indonesia can potentially generate upwards of 400 GW in
renewable power from the following sources: solar (207.8 GW), hydropower (75
GW), wind (60.6 GW), bioenergy (32.6 GW), tidal (17.9 GW), and geothermal
(11 GW) (Mulyana, 2018).
Even though the largest potential lies in solar energy (Mulyana, 2018), the GoI is currently
not providing any specific support for solar energy. Instead, support is generally available for
all other types of renewable energy and particularly for geothermal energy.
A total of 16 renewable energy support measures have been identified for the period from
FY 2016 through FY 2020. These measures can be classified into the following types of
support mechanisms:
• 10 are in the form of government revenue foregone.

• Five are in the form of direct or indirect transfers.
• One is in the form of income or price support.
All of the support measures identified for renewable energy benefit producers. Due to the lack
of or limited data, only 31% (five out of 16) of these measures could be quantified.
Details on the different support measures for renewable energy can be found in Appendix 2.
D: Renewable Energy Support Measures.
Measures Quantified
Five measures that could be quantified include four direct transfers from the state budget and
one price support (a feed-in tariff [FiT] instrument for renewable energy).
The GoI provided support for renewable energy projects in certain regions through the
Special Allocation Fund for Small Scale Energy until 2018. Since FY 2019, renewable energy
support has been provided as part of consolidated funding for line agencies, without separate
program accounting, making it difficult to identify the support allocation for renewable energy.
Some funding in FY 2019 and FY 2020 was also provided through the Geothermal
Infrastructure Financing Fund, which had been transferred from the Government Investment
Centre to PT Sarana Multi Infrastruktur (PT SMI). The government granted state capital
participation (Penyertaan Modal Negara, or PMN) to PT Geo Dipa Energi (Persero),
amounting to IDR 700 billion in the 2020 fiscal year as a state equity. The provision of state
capital participation is a form of commitment from the House of Representatives and the GoI
to encouraging the achievement of the target of utilizing geothermal energy of 7,000 MW as
an EBT mix in 2025 (PT Geo Dipa Energi, 2019).
As an income or price support, the GoI also provided FiTs for new renewable energy
generation until 2016, but this was reformed in 2017 by basically moving from fixed
tariffs to indexed tariffs to PLN’s price of production (BPP, basic electricity generation
cost), which is mostly determined by coal. The fixed tariff was established at 85% of
BPP. Therefore, the new tariff system does not provide subsidies because the tariff levels
IISD.org/gsi 18
are below the average generation price. Nonetheless, government spending for FiTs for
renewable energy projects built in the previous years continued after 2016, due to contract
durations of 10 to 20 years. Spending on FiTs is calculated by comparing the tariff levels
with PLN’s average production cost and resulted in a total of IDR 7.4 trillion (USD 535
million) between FY 2016 and FY 2020.
Table 4. Quantified government support for renewable energy in Indonesia by

mechanism (in IDR trillion)

0.48 0.5 0.5 1.1 1.5
Income or price support 2.6 1.8 2 0.4 0.6

(in IDR trillion)
Table 4 shows the fluctuation of support provided for renewable energies during the period
observed (from FY 2016 through FY 2020). This is primarily due to the changing policy
environment, marked by the end of fixed FiTs for new projects and lower FiT spending for
existing installations due to a higher PLN average production cost used as reference—which
had made up most of the quantified support measures for FY 2016 through FY 2018—and
support given to geothermal development.

A total of 11 of the 16 support measures for renewable energy could not be quantified,
and almost all (10) of these unquantified measures were government revenue foregone (tax
exemptions and reductions). These measures could not be quantified due to the lack of
sufficient publicly available information about the investment projects that have benefited
from these fiscal incentives. Some of these incentives were based on the profit margin of the
renewable energy developers, for which no generalized assumption can be made.8
The remaining unquantified support measures were direct transfers, such as funding that has
been provided through the environmental fund management agency, the Badan Pengelola
Dana Lingkungan Hidup (BPDLH) under the Ministry of Finance.
BPDLH was established in 2018 as the designated agency for the distribution and
management of the national environmental fund. The purpose of the BPDLH is to channel
funding for specific environmental projects and activities, including renewable energy, through
8 Note: Renewable energy project developers need to apply for some of these incentives, and the government needs
to grant the support. This information should be available in government records and could therefore be made
public.
IISD.org/gsi 19
a variety of instruments. These funding instruments include the following (see Appendix 2. D:
Renewable Energy Support Measures for details):
1. Viability Gap Fund

2. Project Development Fund
3. Credit Enhancement Fund
4. Technical Assistance Fund
These support measures could not be quantified since many other sectors also received this
support, and it was not clear how much of the spending was allocated to renewable energy.
Other unquantified incentives include tax holidays and capital income tax deductions on
losses of renewable energy projects, but these are considered ineffective (Lestari, 2021) due to
inadequate or misaligned criteria against the actual project duration, payback period, financial
viability, and return on investment considerations.
Future Trends
Indonesia is under-exploiting its renewable energy potential. Even though the share of
renewable energy in the national power mix doubled from 5.3% in 2015 to 11.5% in 2021,
it remains at a very low level (Julian, 2022; MEMR, 2016). Current annual investment in
renewables is also quite low, with only IDR 131.5 trillion (USD 9 billion) in investment
annually for the period from 2015 to 2030, although it is expected to grow to IDR 226.6
trillion (USD 15.5 billion) annually (BKPM, 2021). To achieve its nationally determined
contribution target of 23% by 2025, Indonesia will need to significantly increase its investment
in renewable energy to the tune of IDR 533 trillion (USD 37 billion) of additional investment
(Pribadi, 2019).
Over the past years, the GoI has been reviewing the New and Renewable Energy Bill and
Draft of President Regulation on FiTs but is falling behind its timeline to finalize this review,
which was planned for 2021 (Mudassir, 2021; Pushep, 2021). These laws and regulations
are expected to improve renewable energy development in Indonesia, but to date it is not
clear what these laws and regulations include and when they will actually be implemented
(Mudassir, 2021; Pushep, 2021).
In the meantime, the Indonesian Renewable Energy Society (METI) has proposed that a
new renewable energy fund be included in the revised regulation, which could help Indonesia
accelerate its renewable energy growth (S. Darma, personal communication, December
10, 2021). In 2015, a similar fund to provide incentives and financing facilities for the
development of renewable energy—the Energy Resilience Fund—was proposed but never
implemented.
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5.0
Biofuels
IISD.org/gsi 21
After the United States and Brazil, Indonesia is the third largest producer of
biofuels (Sönnichsen, 2021) and the largest producer of biodiesel (Stallard & Song,
2021). Indonesia is also the largest producer of palm oil, and, given its abundance
and typically low prices, the country has been increasingly reliant on palm oil for biofuel/
biodiesel production since 2006 (CDP, 2021).
Biofuels play a strategic role in the context of the Indonesian energy sector, and the GoI has
been providing incentives or support measures to the biofuels industry since 2006 (Kharina,
2016). To finance these biofuel support measures, the GoI collects levies from CPO exports,
the proceeds of which are channelled into a fund called the Crude Palm Oil Supporting Fund.
It is used to support and provide compensation for biofuels producers across a range of areas,
including research and development, price support, credit interest support, and replanting
programs for smallholder farmers (“Indonesia Says,” 2020).
Of particular importance are the support measures given to the mandatory 30% Biodiesel
(B30) Program, which was launched by President Jokowi in December 2019 and became
effective in 2020.9 There have been several attempts to replace the existing B30 Program with
a new B40 Program, but these attempts have been paused several times (“Indonesia Says,”
2020; Umah, 2021c).
The aim of the B30 Program is to reduce fuel imports, hence reducing the trade deficit and
boosting domestic consumption of palm oil (Christina, 2019). The B30 Program requires
biodiesel to contain 30% palm-based fuel mixed with 70% diesel oil (MEMR, 2019).
Indonesia is the first country in the world to have the highest blend of biodiesel program
(MEMR, 2019).
Three biofuel support measures have been identified, all of which are quantified. They can be
classified as follows:
1. One measure in the form of income or price support.

2. Two measures in the form of direct transfers of government funds.
Government support for biofuels increased throughout the period observed, rising from IDR
10.8 trillion (USD 806.7 million) in 2016 to IDR 30.8 trillion (USD 2.1 billion) in 2020. In
2020, the B30 Program received a one-time support of IDR 2.78 trillion (USD 191.3 million)
as part of the National Economic Recovery Fund in response to COVID-19 (Kontan, 2020).
From FY 2016 to FY 2020, total support provided for the biofuel sector amounted to IDR
60.8 trillion (USD 4.2 billion).
Details on the different support measures for the biofuel sector in Indonesia can be found in
Appendix 2. E: Biofuels Support Measures.
9 Based on Presidential Regulation No 79 Year 2014 on National Energy Policy targets biodiesel blending of
30% for transportation without public service obligation by 2025, and Minister of Energy and Mineral Resources
Decree No 227/K/10/MEM/2019 on the Piloting Implementation Biofuel Blending of B30 into Diesel in the Year
of 2019.
IISD.org/gsi 22
Measure Quantified
All of the three identified support measures for biofuel are quantifiable, and in terms of value,
a large portion of the incentives came in the form of price support (see Table 5). The three
support measures identified and quantified include the following (see Appendix 2. E: Biofuel
Support Measures for details):
• Price support to biodiesel producers.

• One-Time Support from National Economic Recovery Program.
• Small-Holder Biofuel Credit Interest Support.
Data for the amount of support measures provided each year were derived from three primary
sources: 1) biofuel support from the CPO Supporting Fund was based on unpublished data
from the Ministry of Finance (Traction Energy, 2021); 2) non-recurrent support from the
National Economic Recovery Fund; and 3) biofuel credit incentive data were drawn from the
Financial Reports of the Central Government (LKPP) years 2017–2020.
1. Due to the fluctuating global market price of both diesel and fuel oil and CPO, the
amount of the B30 subsidies tends to vary from year to year. In 2019, the levying of
CPO export was postponed to 2020, anticipating the implementation date of the B30
Program (January 1, 2020), resulting in abnormally low support in that year. In 2020,
the support provided increased to more than nine times that of the previous year.
From 2016 to 2020, total B30 Program amounted to IDR 57.7 trillion (USD 4.1
billion). In the first quarter of 2021, the subsidies reached IDR 34.6 trillion (USD 2.4
billion).
2. In May 2020, a few months after the onset of the COVID-19 pandemic, the GoI
provided funds for the National Economic Recovery Program which aims at
supporting the severely hit public health and economic sectors including small, micro,
and medium-sized enterprises, ultra-micro businesses, and strategic business sectors,
including state-owned enterprises. The funding mechanisms include placement of
funds, guarantees, state capital participation, and government investment. The B30
mandatory program was one of the eligible programs that received government
support of IDR 2.78 trillion (USD 191.3 million) in 2020.
3. From 2016 to 2020, the government spent IDR 371.5 billion (USD 191.3 million) in
the form of credit support for biodiesel development and plantation revitalization. The
GoI paid for the differences between market credit interest and the interest paid by the
oil palm farmers eligible for the support.
IISD.org/gsi 23
Table 5. Quantified government support for biofuel in Indonesia by mechanism (in IDR
trillion)
Income or price support 10.7 10.3 5.7 3.110 28.0

0.15 0.13 0.052 0.016 2.811
of funds

(in IDR trillion)

In the case of the biofuel sector in Indonesia, all identified measures were quantified for the
years observed (see Appendix 2. E: Biofuel Support Measures for details).
Future Trends
Incentives given to biodiesel producers depend on the fluctuating CPO market price, and this
dependency increases the unpredictability of the amount of subsidies provided each year. Over
the past 6 years, CPO prices have been increasing, including the CPO reference price set by
the GoI that reached USD 1,787.50/metric ton in April 2022 (Sawit Indonesia, 2022).
In an effort to counter the high CPO price and relatively low domestic demand for fuel, the
government had attempted to increase the mandatory content to 40% and introduce the B40
Program in July 2021 (Christina, 2021; “Indonesia Says,” 2020). However, due to budgetary
constraints, the B40 Program has been suspended and will not be implemented until 2025
(Argus, 2021; Netral News, 2021; Umah, 2021b).
After reaching an all-time high of CPO spot price of USD 1,900/ metric ton in March 2022, it
is anticipated that the prolonged Russia–Ukraine conflict may keep CPO prices soaring until
2023 (Vasu, 2022).
For the foreseeable future, the B30 Program will remain in place, while the GoI continues
to monitor the rising price of palm oil, which is primarily driven by the Russia–Ukraine
crisis, and also to further discuss the implementation of the B40 Program, including the B40
biodiesel road tests that had been planned for April (Listiyorini, 2022). The MEMR intends to
test two types of B40 blend based on a combination of fatty acid methyl ether, distilled palm
methyl ester, and the so-called green diesel (Biofuel International, 2022) that is made entirely
from palm oil (Tømte, 2020).
10 In 2019, the payment for biodiesel incentive was postponed to 2020 to wait for the implementation of B30
(starting January 1, 2020).
11 This figure includes the one-time incentive of IDR 2.78 trillion from the Economic Recovery Program.
IISD.org/gsi 24
Indonesia also intends to explore other possibilities for biofuels and biodiesel beyond the B30
Program, working to use palm oil for green diesel (D100), green gasoline (G100), and green
jet fuels (MEMR, 2020) as part of the effort to achieve energy security and the renewable
energy target of 23% by 2025 (“Indonesia, Malaysia,” 2022).
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6.0
Electric Vehicles
and Battery for EV
IISD.org/gsi 26
The EV and EV battery industry in Indonesia is still relatively new, but it is

growing in both market potential (“EV Battery Indonesia,” 2022) and strategic
importance (Cabinet Secretary of the Republic of Indonesia, 2022).
EV and batteries production is also considered a pioneer industry and receives support
accordingly (Ministry of Finance Decree No 130/PMK.010/2020).
The National Industry Development Plan (RIPIN) sets EVs as the main priority of the
automotive industry (Ministry of Industry, 2015). In 2020, the Ministry of Industry
established a roadmap for EV production with a target of 600,000 units of four-wheel EVs
and 2.45 million units of two-wheel EVs by 2030 (Kemenperin, 2021). This is almost 190
times the current EV fleet of 16,060 units (Kompas, 2022). In addition, the Ministry of
Industry is also planning to issue a roadmap for EV purchasing by government agencies
(Kemenperin, 2021).
In conjunction with developing its EV sector, Indonesia also intends to develop its EV battery
industry and establish an integrated EV supply chain with an EV battery production target
of 140 GWh by 2030 (Huber, 2022). To realize this objective, the GoI issued the Presidential
Regulation 55/2019 on the Acceleration of Battery-Powered Electric Vehicles Program in
2019, in order to provide a set of overarching directives and incentives to develop a new
market for battery-powered EVs and also to regulate the production of EVs and the required
components. In 2021, the Indonesia Battery Corporation was established with an investment
of IDR 238 trillion from the Ministry of State-Owned Enterprises (Mordor, 2020).
To encourage the adoption of EVs, the GoI provides several incentives, mostly in the form of
tax reductions, which were first introduced in 2019 and reinforced in 2021. The government
also provides tax breaks and other support measures that, given the industry’s nascency, only
recently came into effect (i.e., since FY 2019).
In all, 12 measures to support and incentivize the domestic market for EVs and the EV battery
industry were identified, and all in the form of government revenue foregone.
Of these, 10 of the 12 are tax breaks or special taxes, while the other two are in the form
of under-pricing of government-owned resources. Some of the measures were difficult to
quantify; for instance, it was not possible to estimate the income tax of EV/ battery for EV-
producing companies. Only three measures were quantifiable, namely the luxury tax for EV
sales in 2020 and the first half of 2021, the reduced electricity tariff for charging, and the
discount on electricity installation and wattage upgrade.
Presidential Regulation No 55/2019 (issued in 2019) provides the basis for incentivizing both
the supply and the demand sides of EVs.
From the demand side, the support will make EVs more affordable for the consumers in terms
of cost of purchase, recharging, replacing batteries and spare parts, and easy access to finance.
For the electricity consumption side of EVs, the government also provides several incentives
through PLN. PLN offers a reduced electricity tariff for EV charging and discounts for
electricity installation and wattage upgrading.
IISD.org/gsi 27
From the supply side, Regulation 55/2019 provides fiscal and non-fiscal incentives for 12
types of activities, which include research and development, training, production-related
activities, battery swap and charging services, and other infrastructure. The regulation also
allows for gradual restrictions on the use of fossil fuel-based vehicles, the implementation of
which will be aligned with the national automotive industry development road map (Dawborn
et al., 2019).
Details on the different support measures for the biofuel sector in Indonesia can be found in
Appendix 2. F: EV and Batteries Support Measures.
Measures Quantified
Three of the 12 support measures identified for EVs and batteries are quantified, and the
estimated amounts are based on the publicly available data. Since the EV and batteries sector
is still in its infancy, the three quantified measures only came into effect in FY 2019 and FY
2020, and they include the following incentives:
1. EV. 2: Zero Luxury Tax for Battery-Powered EVs. Issued in 2019, this regulation took
effect in 2020, and it is estimated that EVs received a luxury tax incentive of IDR 17.5
billion (USD 1.2 million) for that year. The estimate is based on EV sales data from the
Association of Indonesia Automotive Industries (Fikriansyah, 2021) and an assumption
of 20% tariff12 on the off-road price for internal combustion engine vehicles.
2. EV. 11: Reduced Electricity Tariff for Charging. The price support given to EV owners
is estimated based on the 30% lower electricity tariff for EV charging from 10:00 p.m.
to 5:00 a.m. (Ramli, 2021; Umah, 2021b). Assuming a daily average travel distance
of 50 km per unit, 5 days per week, and 50 weeks a year (Kompas, 2008; Pratama
& Tokai, 2018), combined with a tariff of IDR 1,444.7/kWh (Umah, 2021b) and
electricity consumption of 15 kWh/100 km (Energuide, n.d.), it is estimated that an
incentive of IDR 101.6 million (USD 7,000) was given to the EV sector in 2020.
3. EV. 12: Discount on Electricity Installation and Upgrade (PLN). The discount given
to EV owners is based on the assumption of a tariff class upgrade from 4,400 kVa to
11,000 kVa that would cost IDR 7,945,400 (PLN, n.d.). In 2020 and 2021, PLN gave
a 100% discount on tariff class upgrades for EV owners. This resulted in an incentive
of IDR 993.2 million or around USD 68,400 in 2020.
Table 6. Quantified government support for EV & battery in Indonesia by mechanism

(in IDR billion)
Government revenue
N/A N/A N/A N/A 18.6
foregone
12
Tariff assumption taken conservatively from the regulation applied for internal combustion engine vehicles,
Government Regulation No 73/2019: https://peraturan.bpk.go.id/Home/Details/122493/pp-no-73-tahun-2019.
IISD.org/gsi 28

Nine of the 12 identified support measures for the EV and batteries sector could not be
quantified because most measures are yet to come into effect.
The nine quantified EV and batteries support measures include the following: acceleration
of battery EV program, vehicle tax and title transfer fee exemption, down payment of 0% for
EVs, concessional GST on EVs, tax holiday, tax allowance, import duty exemption, corporate
income tax facilities, and super tax deduction for R&D.
Future Trends
The EV and EV battery industry in Indonesia will continue to grow, and the GoI has set
ambitious targets for the industry, including accelerating the development of an integrated EV
ecosystem (Cabinet Secretary of the Republic of Indonesia, 2022).
Following its inception in 2021, the Indonesia Battery Corporation formed a consortium,
HKLM Indonesia, with South Korean carmakers and battery suppliers to build the first EV
battery factory in Southeast Asia (Ministry of Foreign Affairs, 2021). Construction of this
USD 1.1 billion EV battery plant in Karawang, West Java, began in September 2021, and
the facility is expected to have an initial production capacity of 10 GWh that will gradually
increase to 30 GWh (Ministry of Investment, 2021). The HKLM Consortium is comprised of
Hyundai, Kia Motors, and LG Energy Solution, which supplies batteries to car manufacturers
such as General Motors, Tesla, and Volkswagen (Huber, 2022).
Soon after, in March 2022, Hyundai inaugurated its full-scale EV factory located in
Cikarang, also in West Java (Lee, 2022; HMG, 2022). This full-scale EV factory has an
annual production capacity of up to 250,000 units of EV annually (HMG, 2022). Both the
Karawang and Cikarang manufacturing plants are the first in Indonesia and in Southeast Asia,
representing the initial steps to an integrated ecosystem of EV industry from the nickel mine,
smelter, and refinery down to the precursor, cathode, battery cell, module, pack, and EV
production, envisioned to be the largest EV export hub in Southeast Asia (Hutauruk, 2021).
The investment made by HKLM Consortium for the EV battery factory in Karawang is
entitled to a 15-year income tax holiday, and this investment is only a small part of the total
planned investment of USD 9.8 billion or around IDR 142 trillion (Victoria, 2021). Other
proposals to further encourage EV adoption include the exemption of EV from goods and
services tax (Pajak Pertambahan Nilai/ PPN) (CNN Indonesia, 2021).
Additional support for EVs also came in the form of tax exemption under a recent law,
which was passed in January 2022 by the Indonesian Parliament (Law No 1/2022 on Fiscal
Relations). This law stipulates the exemption of EVs from vehicle tax (Pajak Kendaraan
Bermotor/ PKB) and title transfer fee (Bea Balik Nama Kendaraan Bermotor/BBNKB). Both
taxes are part of regional taxes controlled by the provincial governments.
Once Indonesia produces its EVs domestically, the government is expected to offer more
incentives than it currently provides. For example, a tax holiday of 20 years is given to
companies that invest more than IDR 30 trillion. Since the consortium’s total investment value
IISD.org/gsi 29
is much more than that amount (estimated to be around IDR 142 trillion) and requires a
longer period of return on investment, the GoI will need to address certain business challenges
and investment barriers, in order to attract the required investment (Huber, 2022).
The integrated battery and EV ecosystem will also require additional import duties and tax
exemptions, as well as possibly relaxation of local content requirements, depending on the
domestic availability of certain components (BUMN, 2020).
Furthermore, the GoI needs to explore the possibility of providing exemptions or concessions
of goods and services tax on EV sales. This may be required to increase the sale of EVs to
absorb the 1,000 unit- annual production (CNN Indonesia, 2021). The Indonesian central
bank, Bank Indonesia, is also reviewing additional incentives related to credits for green
projects, including low-interest rate EV financing to further encourage EV sales (Putri, 2021).
IISD.org/gsi 30
Concluding Thoughts and Remarks

The GoI provides substantial support to the fossil fuel sector, which undermines Indonesia
achieving its target of 23% of renewable energy by 2025 and net-zero by 2060. Almost 95%
of the support provided by the GoI for the energy sector in Indonesia was allocated to fossil
fuels, including the fossil fuel-based electricity sector. These subsidies accelerate climate
change, increase toxic air pollution, and are an ineffective way to extend energy access and
reduce energy poverty (Parry et al., 2021).
This report represents an attempt to track public spending for the energy sector, and it shows
that support provided has been skewed in favour of fossil-based energy—oil and gas, coal,
and fossil fuel-based electricity. The report also shows that the values presented are likely
underestimated, as many of the identified measures, notably in the form of tax exemptions and
relaxations, could not be estimated. Improving data and information availability would help
achieve deeper understanding of how public resources are supporting the energy sector, as
well as help inform policy decisions that align with Indonesia’s renewable energy targets.
Fossil fuel support drains the public budget, particularly under the current context of
high energy prices, support to fossil fuels is coming at a high cost to Indonesia’s public
finances, as can be seen from the recent announcement of the Indonesian Parliament
approving the government’s request for an additional IDR 350 trillion (USD 23.75 billion)
in energy subsidies, in addition to the IDR 154 trillion that has already been spent in the
first quarter of 2022 (Anggela, 2022). Rather than continuing to support the fossil fuel
industry, the government should direct public money toward investments that have social and
environmental benefits.
Government support for fossil fuels is slowing Indonesia’s energy transition in two ways:
1) it locks in fossil fuel production, leading to ongoing fossil fuel dependence; and 2)
by lowering the price of fossil fuels and fossil-sourced electricity, it makes it harder for
renewables to compete.
As this report shows, there are opportunities for Indonesia to use its public resources more
efficiently to provide appropriate support to the vulnerable parts of the population and pave
the way for a just transition away from fossil fuels.
One of the most effective ways would be to improve targeting for the two the largest supports
provided: 1) reimbursement to Pertamina for below-market pricing of fuels; and 2) subsidy to
PLN to provide cheap electricity. The current distribution scheme for these measures is likely
to mostly benefit the wealthier segment of the population, which consumes the largest share
of fuel and electricity. Improved targeting by ensuring that the measures are only accessible
to lower-income groups can free up more resources. The savings generated could be used to
fund the necessary investment in renewable energy, clean transport alternatives, and related
infrastructures. It can also be used to fund more social support to those consumer groups that
need it most, as it would ensure the poor are protected while allowing Indonesia to transition
toward cleaner energy.
IISD.org/gsi 31
In conclusion, the savings derived from ending and reforming government support and
incentives can be used to help the poor cope with higher energy prices in a way that is
decoupled from energy consumption and to provide clean energy alternatives. Swapping
funding for fossil fuels for cleaner alternatives would be a way for Indonesia to get back on
track to reach its 23% renewable energy target by 2025.
IISD.org/gsi 32
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IISD.org/gsi 38
Appendix 1. Approach and Methodology

The definition of “support measure” or “subsidy” used in this report is taken from the
Agreement of Subsidies and Countervailing Measures (ASCM) of the World Trade
Organization (WTO) (WTO, 1994). This definition includes:
1. Direct and indirect transfers of funds and liabilities (budget outlays)

2. Government revenue foregone (reduced tax rates and tax exemptions)
3. Provision of goods or services below market value (such as land or water)
4. Income and price support through market regulations (including non-enforcement).
The inventory takes into account support measures for the following types or sources of
energy:
1. Oil and gas

2. Coal
3. Electricity
4. Renewable energy
5. Biofuels
6. Electric vehicles and batteries for EV (EV and batteries).
The 78 support measures identified have been further qualified into the following categories:
1. Quantified
2. Non-Quantified or N/A
3. Not Applicable or N/P
A support measure is considered quantified if there are data available for any given year within
the period in question (i.e., FY 2016 to FY 2020). Whenever available, official government
data were used to provide quantitative estimates.
Due to the lack of and/or limited data, 37% of the support measures identified are considered
quantified, while the rest (63%) are considered not quantified. Meanwhile, there are some
support measures that fall into the category of Not Applicable (N/P), meaning that the
particular support measure has been enacted but not yet applicable until a specified date in
the future. Support measures that fall into this N/P category are primarily those applicable to
clean new technologies, particularly biofuels and EV and batteries.
Official government data are used whenever available to provide quantitative estimates. Some
of the measures are identified yet not quantified due to lack of data. The years covered by the
inventory are 2016 to 2020.
In the case of estimating subsidies, the methodology used will follow the methodology for
SDG Indicator 12.c.1 (Wooders et al., 2019), and the specific recommendations for each
specific type of subsidy as described in the section above.
IISD.org/gsi 39
• Direct Transfer of Funds: We look at the national budget, SOE financial reports,
COVID-19 recovery packages, and other documents that allow us to identify direct
budget allocations to the different energy types. This is what the International Institute
for Sustainable Development has traditionally called the “bottom-up approach” and
is used by the Organisation for Economic Co-operation and Development in its
inventory. In cases where direct transfers are made to a range of industries, additional
analysis may be required to allocate the number of payments that are specific or quasi-
specific to fossil fuel-related industries. This should be the case for the measures listed
in Indonesia’s National Economic Recovery. The specific methodology to allocate the
money granted to the fossil fuel or energy industry will be discussed and evaluated
case by case.
• Price Gap Approach. This will be applied to both consumption subsidies (the
most common) or production (for example, for refining). In general, it estimates
the difference between domestic energy prices and international reference prices.
If domestic prices are lower than the international reference price, subsidies exist,
formed by the gap between the two. The international reference price is the price if the
commodity at the closest international hub (Singapore, in the case of Indonesia), and
additional import costs will have to be added. Then this price gap will be applied to
the number of units of the product sold. In the case of electricity, in case the incentive
provided for the tariff cannot be determined looking at PLN financials or budgetary
transfers, ideally the cost of international electricity exchange could be used. As this
is unlikely to exist in Indonesia, it can be estimated as the actual cost of generating
electricity vs the tariff. In all cases, the estimates will be ideally done considering
average monthly prices/costs. The specific determination of the reference price will be
discussed and decided case by case. Note that in some cases there can be duplications
with budgetary transfers. These cases will be flagged and discussed case by case.
• Revenue Foregone. This category can be broadly separated into tax expenditures
(the monetary value of tax breaks) and government revenue foregone (targeted
reductions for specific industries of import and other duties), and the under-pricing
of goods and services, including risk (access to government services and goods for
free or at a reduced price). To estimate these subsidies, first a tax benchmark has to be
identified. There are three options to do this (see SDG indicator methodology, page
42), but the easiest is to consider what is the typical tax rate for general companies or
products, and use the differential with the product in question. In the case of Indonesia
production subsidies, there are several tax holidays and exemptions. The revenue or
measure to which the exemption would be applicable should be identified. Then, the
tax differential vs. the standard tax that should apply to the product or sector can be
estimated. The specific determination of the reference price will be discussed and
decided case by case.
Cost of externalities is not included as a support measure.
IISD.org/gsi 40
Appendix 2. Indonesia’s Energy Support

Measures by Energy Source
Download Appendix 2 at: https://www.iisd.org/system/files/2022-06/indonesia-energy-
support-measures-annex.pdf
IISD.org/gsi 41
©2022 The International Institute for Sustainable Development
Published by the International Institute for Sustainable Development
Head Office Global Subsidies Initiative
111 Lombard Avenue, Suite 325 International Environment House 2

Winnipeg, Manitoba 9 chemin de Balexert, 1219 Châtelaine
Canada R3B 0T4 Geneva, Switzerland
Tel: +1 (204) 958-7700 Tel: +41 22 917-8683

Website: www.iisd.org Website: www.iisd.org/gsi
Twitter: @IISD_news Twitter: @globalsubsidies

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Indonesia’s

© 2022 International Institute for Sustainable Development

International Institute for Sustainable Development

IISD is a registered charitable organization in Canada and has 501(c)(3)

Global Subsidies Initiative

Indonesia’s Energy Support Measures: An inventory of incentives

• Surya Darma, Indonesia Renewable Energy Society (METI-IRES)

200 Oil and gas

Source: Authors’ calculations.

Key Findings From Our Research

PT Perusahaan Listrik Negara, the state-owned electricity provider,

Incentives for renewable energy are undermined by the support given to

The Energy Landscape in Indonesia .................................................................................................................................... 2

1.0 Oil and Gas....................................................................................................................................................................... 5

Measures Quantified ........................................................................................................................................................................6

Measures Quantified ..................................................................................................................................................................... 14

4.0 Renewable Energy...................................................................................................................................................... 17

Measures Quantified ..................................................................................................................................................................... 18

Measure Quantified ........................................................................................................................................................................ 23

Concluding Thoughts and Remarks .........................................................................................................................31

Appendix 1. Approach and Methodology............................................................................................................... 39

Appendix 2. Indonesia’s Energy Support Measures by Energy Source.....................................................41

This report has three parts:

• 55 in the form of government revenue foregone

The Energy Landscape in Indonesia

Figure 1. Indonesia’s primary energy supply by source, 2021

Source: Authors’ diagram based on MEMR, 2022.

Approach and Scope

Figure 2. Energy sectors observed

Oil and gas Coal Electricity Renewable Biofuels EV and

Appendix 2: Indonesia’s Energy Support Measures by Energy Source provides a

1. 19 measures represent government revenue foregone (tax exemptions and reductions).

The top two quantified measures in order of magnitude are:

Mechanism FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Direct and indirect transfer

Total volume of quantified

Source: Authors’ calculations.

Measures not Quantified

Coal plays an important role in the Indonesian economy. Indonesia became a

The 12 support measures identified can be classified as follows:

• Nine measures are in the form of government revenue foregone.

Mechanism FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Direct transfer 0.092 – – – –

Total volume of quantified

Source: Authors’ calculations.

Measures not Quantified

The electricity support measures can be classified as follows:

• Six in the form of direct transfers of funds.

Table 3. Quantified government support for electricity in Indonesia by mechanism (in

Mechanism FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Direct and indirect transfer

Income or price support 9.4 10.3 11.2 12.2 13.3

Total volume of quantified

Source: Authors’ calculations.

Measures not Quantified

In addition, the building of almost 48,000 km of transmission lines is planned, as well as

• One is a holding company that will focus on

° Handling transmission, distribution, and retail, GENCOs7 subsidiary (with

• 10 are in the form of government revenue foregone.