The covid-19 pandemic provides an opportunity to reboot the “old normal” economy that is unsustainable with a “better normal” that is more sustainable and climate friendly. Specifically, it provides the opportunity to increase the ambitions for renewable energy development in Indonesia from 31 percent to significantly higher than that in 2050.
As of today, September 19, 2020, Indonesia has 240,687 confirmed cases with the latest daily addition reached all time high of 4,168 cases. Among them, 174,350 people recuperated (latest daily recuperation reached 3,576 people), but 9,448 people have died (112 people died in one day today). Like it does to other countries, the pandemic has crippled Indonesian economy. Indonesian economy is almost certainly falling into recession after having negative year-on-year growth in two consecutive quarters. After a relatively credible 3 percent in the first quarter, the economy shrank to -5.3 percent in the second quarter, and the government is expecting -2 – 0 percent in the third quarter, bringing the economy into recession. Through a Government Regulation In Lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang) No. 1/2020, ratified by the parliament, a stimulus package has been prepared to address the pandemic. The stimulus package has been increased from Rp 405 trillion (about $28 billion) to Rp 695 trillion (about $48 billion).
This stimulus package is an opportunity to spur the development of low-carbon economy, specifically the development and application of renewable energy in Indonesia. The World Economic Forum coins the opportunity amid the pandemic crisis as “the great reset”. Indonesia can turn it into a “green reset”.
Indonesian President, Joko “Jokowi” Widodo, in his speech in the wake of the 75th Independence Day of Indonesia, describes Indonesia akin to a computer that freezes and needs to be reset. But there appears to be no sistematic allocation of the stimulus package, however, for low-carbon development. Among major economies, Indonesia shows the lowest commitment to green stimulus, and falls into the “brown” category as the stimulus is dominated by high-carbon industry and energy sector recovery plans. In an economy dominated by fossil fuels, the stimulus provides support to oil, gas, and mining (coal) industries, and nothing to renewables. When designed well, however, the stimulus package could uncover the opportunity to shift the balance and provide support to renewable energy, battery manufacturers, and other energy storage technologies.
According to the International Energy Agency in its recent publication, a $1 trillion annual investment (about 0.7 percent of today’s GDP) in three years until 2023 in a sustainable recovery plan could boost global economic growth by about 1.1 percent on average annually, save or create about 9 million jobs, and reduce annual greenhouse gas emissions from the energy sector by 4.5 billion tons by 2023. Additionally, it will bring reduction of air pollution, access to clean cooking in low-income countries, and a great number of people gaining access to electricity. In the 2009 crisis stimulus, South Korea allocated 69 percent of its $60 billion stimulus ¾ the highest of all countries ¾ with greatly positive results: increase in unemployment rate was the lowest and the whole economy rebounded faster than any of the other developed countries.
Meanwhile, Paris Agreement commits the world to achieve its objective, which is to keep “… the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels …”. The most recent publication by the Intergovernmental Panel on Climate Change (IPCC), however, asserts that the current National Determined Contributions (NDCs) to the Paris Agreement are insufficient to keep the increase of temperature of the Earth not to exceed 1.5 °C. The ambition level of current NDCs needs to be tripled to get on track to 2°C and increased fivefold to align with 1.5°C.
Indonesia has committed in its NDC to reduce its emissions by 2030 by 29 and 41 percent below its business as usual trajectories, respectively, with own resources (“unconditional”) and when financial assistance is available (“conditional”). The Green Reset argues for the imperatives of increasing and strengthening ambitions by Indonesia beyond its NDC, specifically that 100 percent renewables is technically and economically achieveable in Indonesia by 2050 (currently about 12 percent renewables in its coal-dominated energy mix), based on the best available scientific information. The Green Reset will then present how the shifting allocation of covid-19 economic stimulus may be economically viable to achieve it.
The Green Reset is formulated through the following activities: (1) participatory projection modeling, involving and guided by key stakeholders including and especially decision makers, on emissions trajectories by adding additional assumptions, inputs, and policy scenarios to the existing model utilized by the Indonesian Government, namely the Ministry of National Development Planning, for its Low-Carbon Development Report; (2) review on various stimulus scenarios; (3) a series of consultative process with key government sectoral authorities, key stakeholders including civil society and the academia, as well as the private sector and the financial sector; and (4) public and key stakeholder outreach and communications. The process will commence in October or November 2020 and will end in November 2021 (12 months), with a presentation in Jakarta, Indonesia, and at the Glasgow, Scotland, 26th Conference of the Parties (COP26) of the United Nations Framework Convention on Climate Change (UNFCCC), among others.