Climate Stress-Test Model 2025–2070

Model structure

CST70 is a system dynamics model of how the climate crisis reaches the Indonesian economy and its heavy industries. It runs in annual steps from 2025 to 2070. Every value is a change against a baseline economy that keeps today's climate and adds no new climate policy. The model has four waves. The first wave is physical damage by region and hazard. The second wave is the loss of output by sector and the change in prices. The third wave is the macroeconomy. The fourth wave is the effect on eight heavy industry sectors and on sixteen companies.

The model has four tabs. Tab 1 sets out the reference baseline, the assumptions and the no climate policy path to 2070. Tab 2 follows the first, second and third waves through the Indonesian economy. Tab 3 follows them into the nine sectors of the economy and the eight heavy industry sectors. Tab 4 follows them into individual companies and sets each company beside its sector and the rest of the economy. The left sidebar shows the policy levers each tab needs.

Three switches set the scenario. Climate impacts turns the physical damage on or off. Adaptation turns on the adaptation portfolio. Mitigation puts Indonesia on the path of its commitments. Five presets combine the switches: no climate policy, adaptation, mitigation only, mitigation with impacts, and all three together. Panels 2.6, 3.3 and 4.2 run all five side by side, and every comparison chart in tabs 2 to 4 shows the no climate policy path as a grey line. The scenarios without mitigation follow the selected global emissions scenario, and the scenarios with mitigation follow the global mitigation pathway.

Stocks and feedback

The model carries seven kinds of stock from year to year. They are the capital destroyed by floods, coasts and fire and not yet rebuilt; a productivity scar that lets part of each year's loss persist; public debt; the adaptation capital built by each lever; the low-carbon share of each heavy industry sector; the captive coal still running; and each firm's net debt. Reconstruction draws down the capital gap at 20 percent a year, faster with disaster risk finance. The scar decays at 10 percent a year. Debt grows with the deficit and is eroded by nominal growth. Firms repay or borrow from free cash flow after interest, tax, maintenance, decarbonization capital, site adaptation and repairs. Interest rises with leverage, so weak balance sheets weaken further.

Climate pathway

The global emissions scenario sets global warming and sea-level rise when the world does not mitigate. The mitigation switch treats Indonesia's commitments as its share of a global effort under the Paris Agreement, and the ambition selector matches each Indonesian target with a global pathway. The SNDC comes with all countries’ NDCs implemented, about 1.9 °C in 2050 and 2.3 to 2.5 °C by 2100. Net zero 2060 comes with a global net zero around 2070, close to 2 °C. Net zero 2050 comes with a global net zero in the 2060s, close to SSP1-2.6 at about 1.8 °C. Net zero 2045 comes with a global net zero by 2050, close to SSP1-1.9 and about 1.5 °C. Indonesia then also gains lower physical impacts. Indonesia's own emissions are a small share of the global total, so this benefit depends on other countries acting too. The same pathway applies when the global transition happens without Indonesian mitigation. Indonesian warming is 0.95 times global warming, close to the land warming in the CMCC G20 Climate Risk Atlas. Sea-level rise follows the IPCC AR6 projections for Indonesia, and land subsidence adds to it on the north coast of Java and in other subsiding cities. El Niño and La Niña either follow a fixed sequence that starts with the 2026 El Niño and grows stronger with warming, or enter as expected values.

First wave

Eight hazards hit six regions. Heat cuts outdoor working hours and adds to deaths. Warming, drought and wet years cut crop output. Heavier rainfall and La Niña years raise flood and landslide losses. Sea-level rise and subsidence raise coastal flooding and tidal flooding. Drought, El Niño and positive Indian Ocean Dipole years drive fire and haze, scaled by the lower fire response seen since 2015. Warmer seas cut fish catch. Warming adds to water shortages, most in Jawa and Bali-Nusa Tenggara. Warming spreads dengue and other climate-sensitive disease. Each region carries its own exposure to each hazard. Losses are either flows of lost output or destroyed capital.

Second and third waves

World economy

Global emissions reach the Indonesian economy through the world economy. World GDP falls with global climate damage, which rises with the square of global warming (1.6 percent of world GDP at 2.0 °C), and with the cost of the global transition, which follows IPCC AR6 WGIII (1.3 to 2.7 percent of world GDP in 2050 for pathways below 2 °C and 2.6 to 4.2 percent for 1.5 °C, excluding avoided damage). Lower world GDP cuts Indonesian exports, which are 22 percent of GDP, with an elasticity of 1.5 and 85 percent domestic value added. A global transition also cuts coal export earnings and raises demand for nickel and other critical minerals, both scaled to the ambition of the pathway. Export demand for heavy industry products follows world GDP, and domestic demand follows Indonesian GDP. Panel 2.6 compares the SNDC and the three net zero scenarios with no climate policy, with the GDP effect split into physical impacts, adaptation, domestic mitigation and the world economy.

Each hazard's loss is allocated to nine sectors and then spread through input-output multipliers of 1.4 to 1.7. Crop and fish losses raise food prices. Food prices, carbon prices and supply losses feed inflation. GDP falls by the flow losses times the multiplier, plus the output lost from missing capital, plus the productivity scar. Adaptation spending crowds out a quarter of its value in other investment. Mitigation brings abatement costs, lost coal export earnings, cleaner air and lower fuel imports. Because it is part of a global effort, it also brings lower warming and smaller physical losses. Relief, adaptation, mitigation investment, carbon revenue and lost tax revenue set the deficit. Jobs follow GDP and heat. Poverty follows food prices and GDP, and adaptive social protection cushions both.

Fourth wave

One engine runs each sector and each company. Output grows with sector demand and shifts with the global transition, for example more nickel for batteries and less refined fuel. Physical damage cuts volume at the firm's sites through heat, floods and coasts, water shortages, fire for pulp, and logistics disruption. Lost volume also loses its share of fixed costs. Emissions combine direct emissions with power emissions from captive coal, own clean power or the grid. The low-carbon technology program raises a low-carbon share that cuts both. Captive coal retires on the chosen schedule and is replaced by grid power. Domestic carbon pricing for industry starts in 2028 with benchmark free allocation that falls to zero by 2060. EU CBAM applies to steel, aluminum, cement, fertilizer and ferro-nickel exports to the EU. It follows the CBAM factor from 97.5 percent in 2026 to zero in 2034, and domestic carbon already paid is deducted. Firms pass part of their extra costs on to buyers, and buyers respond by buying less. Green and blended finance lowers interest and covers a fifth of decarbonization capital. A firm is flagged as stressed when its EBITDA is negative, its net debt exceeds four times EBITDA, or its interest cover falls below 1.5.

All sectors and all heavy industries

Panel 3.1 splits the GDP change across the nine sectors of the economy. Physical losses follow each sector's exposure to each hazard and its input-output multiplier, and the missing capital and the productivity scar follow flood and coastal exposure and sector size. Adaptation spending is spread by sector size. Mitigation costs fall on the sectors that use energy and land, lost coal exports fall on mining, cleaner air is spread by sector size, and mitigation investment raises demand for construction, manufacturing and utilities. The nine sectors, weighted by their GDP shares, add up to the GDP change. Net emissions are attributed to the sector that produces them, so agriculture carries forest and land use. The row for all heavy industries in panel 3.2 sums the eight sectors. Its margin, leverage and interest cover are computed from the totals, and its volume loss and low-carbon share are averages weighted by revenue and emissions.

Adaptation

Fifteen levers in four groups each run from 0 to 100 percent of an achievable program. Each lever builds adaptation capital with a lag of 2 to 10 years and cuts specific loss channels at full strength. Overlapping levers combine multiplicatively, so no channel falls by more than 100 percent. Costs are annualized and paid from 2026, and they grow with the economy. Benefit-cost ratios in panel 2.7 run each lever on its own, discount at 3 percent, and count only the losses the model represents.

Mitigation

The current policy path follows the CPOS scenario in the Second NDC and the LTS-LCCR. The commitment path follows the SNDC LCCP_L levels for 2030 and 2035, the LTS-LCCR low carbon path to 540 Mt in 2050, and net zero in 2060. The accelerated option reaches net zero in 2050. Both paths start from the latest national inventory in 2025. On the current policy path, emissions reach 1,780 Mt in 2030, 1,787 Mt in 2035 and 1,887 Mt in 2060, as in Table 1 of the Second NDC, and forest and land use turns into a sink by 2035. On the commitment path it is a sink from 2030. The domestic carbon price rises from about $2.5 per tonne today to $100 by 2050, and a slider scales it. The power system moves from a 16 percent renewable share to 85 percent by 2050 on the mitigation path, which lowers the grid emission factor that industry buys.

Data status

[P] means the value was read in the issuing institution's own document. [S] means it was confirmed only through secondary reporting. [D] means it was derived from tagged inputs. [A] means it is a model assumption. The damage coefficients are calibrated so that the no-policy run under SSP2-4.5 loses about 3 to 4 percent of GDP by 2050, inside the 2 to 4.4 percent range of the CMCC G20 Climate Risk Atlas for mid-century. They are illustrative and should be recalibrated against an input-output table, event loss data and project-level adaptation costs before use in published work.

Audit and validation, November 2026

The model was audited and checked against real-world data on November 1, 2026. Eighty runs across every scenario, climate pathway, El Niño mode and net zero year confirm that the nine sectors add up to GDP, that sector emissions add up to the national total, and that all outputs are finite. The 2025 values reproduce reported GDP, fiscal, labor and poverty figures, the 2024 emissions inventory without forest and land use, and every company’s reported revenue and net debt. Current policy and commitment emissions reproduce Table 1 of the Second NDC within 1 Mt. The 2026 El Niño year gives inflation of 3.5 percent against 3.3 percent reported for September 2026. Physical losses of about 3.4 percent of GDP in 2050 under SSP2-4.5 sit inside the 2 to 4.4 percent range of the CMCC G20 Climate Risk Atlas. Kotz, Levermann and Wenz (2024) was retracted in December 2025 and is not used. The heat, coastal and fisheries damage coefficients still rest on secondary evidence and remain the main calibration uncertainty.

Selected sources

1. Government of Indonesia, 2025, Second Nationally Determined Contribution, UNFCCC, October 24, 2025.
2. Government of Indonesia, 2022, Enhanced Nationally Determined Contribution, UNFCCC, September 23, 2022.
3. Government of Indonesia, 2021, Indonesia Long-Term Strategy for Low Carbon and Climate Resilience 2050, UNFCCC.
4. Peraturan Presiden Nomor 110 Tahun 2025 tentang Nilai Ekonomi Karbon; Peraturan Presiden Nomor 112 Tahun 2022 tentang Percepatan Pengembangan Energi Terbarukan untuk Penyediaan Tenaga Listrik.
5. IPCC, 2021, Climate Change 2021: The Physical Science Basis, Summary for Policymakers, Cambridge University Press.
6. World Bank Group, 2021, Climate Risk Country Profile: Indonesia, Washington, DC.
7. CMCC, 2021, G20 Climate Risk Atlas: Indonesia, Lecce.
8. Cai, W. and others, 2014, "Increasing frequency of extreme El Niño events due to greenhouse warming," Nature Climate Change, 4, pp. 111–116.
9. Peng, S. and others, 2004, "Rice yields decline with higher night temperature from global warming," PNAS, 101 (27), pp. 9971–9975.
10. Glauber, A. and others, 2016, The Cost of Fire: An Economic Analysis of Indonesia's 2015 Fire Crisis, World Bank, Jakarta.
11. Abidin, H.Z. and others, 2015, "On correlation between urban development, land subsidence and flooding phenomena in Jakarta," Proceedings of IAHS, 370, pp. 15–20.
12. International Labour Organization, 2019, Working on a Warmer Planet: The Impact of Heat Stress on Labour Productivity and Decent Work, Geneva. Cited from secondary reporting.
13. Global Commission on Adaptation, 2019, Adapt Now: A Global Call for Leadership on Climate Resilience, Rotterdam and Washington, DC.
14. Centre for Research on Energy and Clean Air and Global Energy Monitor, 2026, Indonesia Captive Coal in 2025, Helsinki.
15. IEEFA, 2024, Indonesia's Nickel Companies Need Renewable Energy amid Increasing Production.
16. Forster, P. and others, 2026, "Indicators of Global Climate Change 2025," Earth System Science Data, 18, p. 3889.
17. Ember, 2026, Indonesia’s Captive Coal Giant: Better Data to Shape Industrial Competitiveness, September 24, 2026.
18. USGS, 2026, Mineral Commodity Summaries 2026: Nickel.
19. Company FY2025 results and presentations of SIG, Indocement and Merdeka; other company figures from secondary reporting, as noted in panel 3.3.