energies

Article
Low-Carbon Energy Development in Indonesia in
Alignment with Intended Nationally Determined
Contribution (INDC) by 2030
Ucok W.R. Siagian 1 , Bintang B. Yuwono 1 , Shinichiro Fujimori 2,3, * and Toshihiko Masui 2
1 Center for Research on Energy Policy, Institut Teknologi Bandung, Jalan Ganesha 10, Bandung 40132,
Indonesia; ucokwrs@tm.itb.ac.id (U.W.R.S.); bintangby@gmail.com (B.B.Y.)
2 National Institute for Environmental Studies, 16-2 Onogawa, Tsukuba 305-8506, Ibaraki, Japan;
masui@nies.go.jp
3 International Institute for Applied Systems Analysis (IIASA), Laxenburg A-2361, Austria
* Correspondence: fujimori.shinichiro@nies.go.jp; Tel.: +81-29-850-2188

Academic Editor: Bin Chen

Received: 29 September 2016; Accepted: 27 December 2016; Published: 5 January 2017
Abstract: This study analyzed the role of low-carbon energy technologies in reducing the greenhouse
gas emissions of Indonesias energy sector by 2030. The aim of this study was to provide insights into
the Indonesian governments approach to developing a strategy and plan for mitigating emissions
and achieving Indonesias emission reduction targets by 2030, as pledged in the countrys Intended
Nationally Determined Contribution. The Asia-Pacific Integrated Model/Computable General
Equilibrium (AIM/CGE) model was used to quantify three scenarios that had the same socioeconomic
assumptions: baseline, countermeasure (CM)1, and CM2, which had a higher emission reduction
target than that of CM1. Results of the study showed that an Indonesian low-carbon energy system
could be achieved with two pillars, namely, energy efficiency measures and deployment of less
carbon-intensive energy systems (i.e., the use of renewable energy in the power and transport sectors,
and the use of natural gas in the power sector and in transport). Emission reductions would also be
satisfied through the electrification of end-user consumption where the electricity supply becomes
decarbonized by deploying renewables for power generation. Under CM1, Indonesia could achieve
a 15.5% emission reduction target (compared to the baseline scenario). This reduction could be
achieved using efficiency measures that reduce final energy demand by 4%; This would require the
deployment of geothermal power plants at a rate six times greater than the baseline scenario and
four times the use of hydropower than that used in the baseline scenario. Greater carbon reductions
(CM2; i.e., a 27% reduction) could be achieved with similar measures to CM1 but with more intensive
penetration. Final energy demand would need to be cut by 13%, deployment of geothermal power
plants would need to be seven times greater than at baseline, and hydropower use would need to
be five times greater than the baseline case. Carbon prices under CM1 and CM2 were US$16 and
US$63 (2005)/tCO2 , respectively. The mitigation scenarios for 2030 both had a small positive effect on
gross domestic product (GDP) compared to the baseline scenario (0.6% and 0.3% for CM1 and CM2,
respectively). This is mainly due to the combination of two assumptions. The first is that there would
be a great increase in coal-fired power in the baseline scenario. The other assumption is that there is
low productivity in coal-related industries. Eventually, when factors such as capital and labor shift
from coal-related industries to other low-carbon-emitting sectors in the CM cases are put in place, the
total productivity of the economy would offset low-carbon investment.

Keywords: Indonesia; low-carbon energy development; Asia-Pacific Integrated Model/Computable

General (AIM/CGE) model; greenhouse gas emission reduction; Intended Nationally Determined
Contribution (INDC); efficiency measures; renewable energies; mitigation cost; economic
development impact

Energies 2017, 10, 52; doi:10.3390/en10010052 www.mdpi.com/journal/energies

Energies 2017, 10, 52 2 of 15

1. Introduction
In an attempt to contribute to the global endeavor of limiting the increase in global average
temperatures by the middle of the century to 2 C, Indonesia has pledged to pursue development
using a low-carbon approach. In its Intended Nationally Determined Contribution (INDC), Indonesia
pledged unconditionally to reduce its emissions to 29% below its business-as-usual emission levels by
2030. With international support, this reduction could be as great as 42% (conditional pledge). As the
second largest greenhouse gas (GHG)-emitting sector in the country, the energy sector is expected to
contribute significantly to Indonesias emission reductions. For its unconditional pledge, the energy
sectors emission reductions are targeted to be 17.5% below the baseline energy sector emission
level by 2030. Under the conditional pledge, the reduction could be up to 32.7%. The magnitude of
these emission reductions is 253 MtCO2 e (million ton of CO2 equivalent) /year (unconditional) and
472 MtCO2 e/year (conditional) in 2030.
Indonesia has various energy sector mitigation options that could achieve this reduction, namely
efficiency measures, deployment of renewable energy, and the use of nuclear power and clean
coal technology (including carbon capture and storage, CCS). These options can be aggregated and
considered part of a low-carbon-energy-system strategy. Energy development using these mitigation
options involves costs that are generally higher than costs under the business-as-usual scenario
(without mitigation actions). In a country with limited wealth, the economic impact of mitigation
actions is an important factor in selecting and eventually implementing these options.
Several studies have discussed future options for the Indonesian energy system. Hasan et al. [1]
comprehensively reviewed energy scenarios for Indonesia. Jupesta [2] projected biofuel production
until 2025 using a linear programing model and concluded that progress in biofuel technology through
research and development (R&D) and scaling up would support a biofuel transition. Although the
main focus of that study was biofuel, several energy system options were modeled. Another study,
which focused not only on Indonesia but also on the ASEAN (Association of Southeast Asian Nations)
region, attempted to clarify the implications of low-carbon power technology options [3] using the
MARKAL (MARKet and ALlocation) model. Their conclusion was that low-carbon technologies bring
multiple benefits, such as a reduction in the primary energy supply as well as reductions in CO2
emissions and air pollutants. Another study that used MARKAL-ANSWER which is (a user friendly
Windows interface with a gentle learning curve) presented projections of Indonesias energy system in
2050 [4]. There are also several publications discussing long-term climate policies for the country [5,6].
While several studies have addressed Indonesias future energy scenarios, there have been no attempts
to assess its Intended Nationally Determined Contributions (INDCs).
Given this background, our study analyzed the potential role of a low-carbon energy system
in reducing energy sector emissions by 2030. For comparison, the emission reduction target of
Indonesia, as pledged in its INDC, is used as a reference. Besides technical potential, this study also
analyzes the mitigation costs and economic impact of various mitigation actions. The indicators
that we analyzed included type of low-carbon energy system, energy supply/demand development,
GHG emission trajectory, emission reductions, and the economic impact of the mitigation actions.
To achieve the objectives of this study, we used the Asia-Pacific Integrated Model/Computable General
Equilibrium (AIM/CGE) model to assess three energy development scenarios (baseline and two
mitigation scenarios). There are two reasons why we chose AIM/CGE. One is that AIM/CGE has
many applications in national-level climate policy assessment. The other is that CGE is suitable to
identify and assess the economic implication of policies. Although CGE models are not able to produce
technology-rich outcomes as bottom-up-type engineering models can, this study would benefit from
the use of CGE. This paper is arranged in six sections. The first is the introductory section. Section 2
describes Indonesias national circumstances. Section 3 describes the methodology and the design of
the mitigation scenarios. Section 4 presents the modeling results. Section 5 presents a discussion of the
modeling results. The main findings of this study are presented in the papers conclusion, Section 6.
 Energies 2017, 10, 52 3 of 15
Energies 2017, 10, 52 3 of 15

mitigation scenarios. Section 4 presents the modeling results. Section 5 presents a discussion of the
modelingEnergy
2. National results. The main findingsand
Circumstances of this study CO
Related are presented in the papers conclusion, Section 6.
2 Emissions

2.1.2.Energy
National Energyand
Resources Circumstances
Trends and Related CO2 Emissions

Indonesia
2.1. is endowed
Energy Resources with a wide range of energy resources (Table 1). Oil, gas, and coal have been
and Trends
intensively exploited to meet domestic and export demands. Besides fueling the countrys economic
Indonesia is endowed with a wide range of energy resources (Table 1). Oil, gas, and coal have
activity, energy resource exploitation also generates government revenues from sales to domestic
been intensively exploited to meet domestic and export demands. Besides fueling the countrys
andeconomic
export markets,
activity, through royaltiesexploitation
energy resource and taxes. also
Currently, the government
generates use of renewable resources
revenues is limited
from sales to
because oil, fuel, and electricity have been heavily subsidized; renewable energy prices cannot
domestic and export markets, through royalties and taxes. Currently, the use of renewable resources compete
with
is subsidized
limited becausefossil-fuel energy.
oil, fuel, and electricity have been heavily subsidized; renewable energy prices
cannot compete with subsidized fossil-fuel energy.
Table 1. Indonesias energy resources [7].
Table 1. Indonesias energy resources [7].
Energy Resource Reserve Resource
Energy Resource Reserve Resource
Oil, billion barrels 7.4 -
Oil, billion barrels 7.4 -
Natural gas, TSCF * 150 -
Natural gas, TSCF * 150 -
Coal, billion tons 29 119
Coal, billion tons 29 119
CBM **, TSCF * - 453
CBM **, TSCF * - 453
Shale gas, TSCF * - 574
Shale gas, TSCF * - 574
Potential
Potential Power
Power
Hydro
Hydro 75,000 MW
75,000 MW
Geothermal
Geothermal 29,000
29,000 MW
MW
Micro-hydro
Micro-hydro 750
750 MWMW
Biomass
Biomass 14,000
14,000 MWe
MWe
Solar 4.80 kWh/m 2 /day
Solar 4.80 kWh/m2/day
Wind
Wind 36 m/s
36 m/second
* *TSCF:
TSCF:trillion
trillionstandard
standard cubic
cubic feet.
feet. **
** CBM:
CBM:coal
coalbed
bedmethane.
methane.

Energy
Energyconsumption
consumptionhas hasgrown
grownwith
with economic andpopulation
economic and populationgrowth.
growth. Between
Between 20002000
andand 2013,
2013,
thethe
total energy
total energy demand
demandgrew,
grew,ononaverage,
average, by 3.6% annually,from
3.6% annually, from104 104million
million tons
tons oil oil equivalent
equivalent
(Mtoe)
(Mtoe) to 164
to 164 Mtoe
Mtoe (Figure1).
(Figure 1).The
Theindustrial,
industrial, residential,
residential,and
andtransport
transport sectors dominate
sectors dominatetotal energy
total energy
consumption (Figure 1a). By fuel type, Indonesian energy demand is still dominated by oil
consumption (Figure 1a). By fuel type, Indonesian energy demand is still dominated by oil (Figure (Figure 1b). 1b).

200 200

180 180 Electricity

Final energy demand (Mtoe/year)

Final energy demand (Mtoe/year)

160 160 Biofuel

140 140 LPG
120 Others
120 Natural Gas
Commercial
100 100
Household Coal
80 80
Transport Oil Fuels
60 60
Industry Industry Biomass
40 40
20 Household
20 Biomass
-
-
2000
2002
2004
2006
2008
2010
2012
2014

2000

2002

2004

2006

2008

2010

2012

2014

(a) (b)

Figure 1. Current energy demands and a breakdown of trends [8]. (a) Total energy demands by sector;
Figure 1. Current energy demands and a breakdown of trends [8]. (a) Total energy demands by sector;
and (b) Total energy demands by fuel type. Mtoe: million tons oil equivalent.
and (b) Total energy demands by fuel type. Mtoe: million tons oil equivalent.
Approximately 10% of Indonesias total energy consumption is in the form of electricity, and
Approximately
different 10% ofplants
types of power Indonesias total
(i.e., coal, energy
gas, consumption
hydropower, is in the
geothermal, andform of electricity,
oil fuels) meet thisand
different
demand types of power
(Figure plants
2). Coal and(i.e.,
gascoal, gas, plants
power hydropower, geothermal,
dominate electricityand oil fuels)in
generation meet
the this demand
country.
(Figure 2). Coal and gas power plants dominate electricity generation in the country. Between 2000
and 2013, the primary energy supply grew at a rate of 3.8% per year, from 145 to 236 Mtoe (Figure 2).
The primary energy supply is dominated by oil, followed by coal and natural gas.
 economy. The fact that Indonesias per capita annual energy and electricity consumption levels are
still low, at 850 kgoe/cap and 787 kWh/cap, respectively, corroborates this interpretation. The per
capita energy and electricity consumption levels of Indonesia compared with those of other countries
are shown in Figures S2 and S3, respectively. As a developing country, Indonesias energy
consumption
Energies 2017, 10, 52will continue to grow. It is expected that Indonesias energy growth will proceed along
4 of 15
a low-carbon path.

250 300

Primary energy supply (Mtoe/year)

200 250
Electricyt (TWh/year)

Biofuel
Other R.E. 200
150 Biomass
Hydropower
Geothermal
Geothermal 150
Hydropower
100 Oil fuels
100 Natural Gas
Natural gas
Oil Fuels
Coal
50 50 Coal

- -

2000

2002

2004

2006

2008

2010

2012

2014
2000

2002

2004

2006

2008

2010

2012

(a) 2014 (b)

Figure 2. Indonesias current power generation and primary energy mix. (a) Power generation mix;
Figure 2. Indonesias current power generation and primary energy mix. (a) Power generation mix;
and (b) primary energy supply. R.E.: Renewable Energy.
and (b) primary energy supply. R.E.: Renewable Energy.

2.2. Greenhouse Gas (GHG) Emissions

With respect to energy intensity, Indonesia is a low-energy-intensity country. In the year 2014,
In 2012, energy-producing activities emitted approximately 508 million tons CO2e and were the
Indonesias energy intensity was 0.09 tons oil equivalent (toe)/US$1000 output, which was lower than
second largest contributors after land use and land-use change as well as forestry (LULUCF) and peat
that of India (0.119 toe/US$1000), Malaysia (0.125 toe/US$1000), and Thailand (0.135 toe/US$1000;
fires, which together emitted 698 million tons of CO2e. Energy sector emissions came primarily from
see Figure S1). The low energy intensity of Indonesia does not, however, necessarily reflect
electricity generation (34%), industry (27%), and transport (26%). The remaining 13% was accounted
Indonesias energy efficiency. It may be interpreted that the Indonesian economy is not dependent on
for by residential and commercial sectors and fugitive emissions from oil and gas production.
energy-intensive industries, but
In 2009, Indonesias rather consists
president announced of traditional agriculture,
a non-binding pledgeextractive
to reduce industries (mineral
the countrys
and energy mining
emissions as wellitsasbaseline
to 26% below oil and emissions
gas) and supports a services-oriented
by 2020 through economy.
the use of domestic The fact
funding. that
The
Indonesias per capita annual energy and electricity consumption levels are still low,
pledge also promised that, with international support, these emission reductions could be increased at 850 kgoe/cap
andto 787
41%.kWh/cap,
In absoluterespectively,
terms, thecorroborates
26% reduction thistarget
interpretation.
corresponds Theto per
an capita
emissionenergy and electricity
reduction of 767
consumption
MtCO2e. Tolevels of Indonesia
achieve compared
the reduction withIndonesia
targets, those of other countries are
has converted theshown
pledgeininto
Figures S2 and S3,
a National
respectively. As a developing
Mitigation Action Plan (known country,
as RANIndonesias energy
GRK [9]). In this plan,consumption
a large part ofwill continue is
the reduction toexpected
grow. It is
expected
to comethat Indonesias
through energy
mitigation growth
actions willthe
within proceed
forestryalong a low-carbon
sector. path. within the energy
Mitigation actions
sector are expected to reduce emissions by 38 MtCO2e below 2020 levels.
2.2. Greenhouse Gas (GHG) Emissions
3. Methodology
In 2012, energy-producing activities emitted approximately 508 million tons CO2 e and were the
second largest contributors after land use and land-use change as well as forestry (LULUCF) and peat
3.1. Model
fires, which together emitted 698 million tons of CO2 e. Energy sector emissions came primarily from
We generation
electricity used the Asia-Pacific Integrated
(34%), industry Model/Computable
(27%), General
and transport (26%). The Equilibrium
remaining(AIM/CGE) model
13% was accounted
for by residential and commercial sectors and fugitive emissions from oil and gas production. and
for this study, which has been widely used in global assessments of climate change mitigation
adaptation policies [1015].
In 2009, Indonesias It isannounced
president a recursivedynamic
a non-binding general
pledgeequilibrium
to reduce the model. Industry
countrys is
emissions
to 26% below its baseline emissions by 2020 through the use of domestic funding. The pledge also
promised that, with international support, these emission reductions could be increased to 41%.
In absolute terms, the 26% reduction target corresponds to an emission reduction of 767 MtCO2 e.
To achieve the reduction targets, Indonesia has converted the pledge into a National Mitigation Action
Plan (known as RAN GRK [9]). In this plan, a large part of the reduction is expected to come through
mitigation actions within the forestry sector. Mitigation actions within the energy sector are expected
to reduce emissions by 38 MtCO2 e below 2020 levels.

3. Methodology

3.1. Model
We used the Asia-Pacific Integrated Model/Computable General Equilibrium (AIM/CGE) model
for this study, which has been widely used in global assessments of climate change mitigation
and adaptation policies [1015]. It is a recursivedynamic general equilibrium model. Industry
is classified into 42 segments (shown in the Supplementary Materials). Details of the model structure
Energies 2017, 10, 52 5 of 15

and mathematical formulas have been described by Fujimori et al. [16]. The model is specified and
solved as a pure mixed complementary problem (MCP). There is a national version of this model,
which was used for this study [1721].
As in most energy-technology-rich CGE models, parameters such as population, gross domestic
product (GDP), energy service demand, extraction costs of fossil fuels, and availability and cost of
renewable energy are exogenously input into the model. Model outputs include energy demand
and supply structure, GHG emissions, and costs of energy and carbon emissions. More specifically,
the production sectors are assumed to maximize profits subject to multi-nested constant elasticity
substitution (CES) functions and relative prices of inputs. Household expenditures on each commodity
are described by a linear expenditure system (LES) function. Savings are the source for domestic and
foreign direct investment. They are exogenously input as a proportion of GDP change relative to
the base year. To balance the saving account, the saving rate is treated as an endogenous variable.
Moreover, the capital formation of each good is determined by a fixed coefficient of total investment.
The Armington assumption is used for international trade, and we assume the current account
to be balanced. In addition to energy-related CO2 emissions, CO2 from other sources, CH4 , and
N2 O (including changes resulting from land use and non-energy-related emissions) are also taken
into consideration.
The constraint on GHG emissions is specified based on the mitigation target. Once the emission
constraint is added, the carbon tax becomes a complementary variable to the emission constraint
and determines the marginal mitigation cost. In an emission-constrained scenario, the carbon tax
increases the price of fossil-fuel-consuming goods, which results in energy savings and substitution
of fossil fuels with lower-emission-energy sources. The carbon tax also acts as an incentive to reduce
non-energy-related emissions. GHGs other than CO2 are weighted by their global warming potential
and summed to estimate total GHG emissions in terms of CO2 equivalents. Households are assumed to
receive revenue from the carbon tax. In the case of the power sector, fired power plants have the option
of using CCS. We assume maximum annual penetration rates for CCS technology. The maximum
annual penetration rate is differentiated across the penetration stages. More specifically, in the early
stage, newly introduced installations are limited (if the share of CCS is under 10%, 2% per annum is
the maximum), but as the technology matures, the penetration speed increases (if the share of CCS is
over 10%, 4% per annum is the maximum).
The costs of wind and solar technologies are assumed to be aligned with the International Energy
Agency (IEA) energy technology perspective report [22]. We changed the input coefficients in the
corresponding production function. Because the output prices of these technologies are endogenously
determined, they are not exactly the same as those reported by the IEA [22]; However, they are
close enough.
The model used in this study assumes profit maximization in industrial activities and utility
maximization in the household sector. This is sometimes unrealistic. Furthermore, a single carbon
price is assumed with a single carbon market in a country. The implementation of carbon pricing (or a
carbon tax) results in the lowest cost CO2 emission reductions. In the meantime, such policies may not
be the priority. Eventually, the real cost of emission reductions may be larger than shown in this study.

3.2. Scenarios

3.2.1. Scenario Frameworks, Socioeconomic Assumptions, and Emission Targets

To investigate the pathways to achieve Indonesias INDC target and to investigate the possibility
of achieving greater emission reductions, we developed three models: baseline, countermeasure 1
(CM1), and countermeasure 2. Business-as-usual (BAU) depicts future Indonesian energy and emission
trajectories where the development of the country continues on its present trajectory, without climate
change mitigation actions. The achievement of emission reductions by mitigation actions is measured
under the baseline scenario. CM1 is the scenario whereby Indonesias development is linked with
Energies 2017, 10, 52 6 of 15

achieving its INDC target (i.e., a 29% reduction by 2030). CM2 is the development scenario that targets
greater emission reductions.
The main inputs of the model are the social accounting matrix (SAM), historical trends, driving
forces of the economy, population growth, technical constraints, and emission constraints. The assumed
growth of the economy (GDP) and the population are 5% and 1.1%, respectively. The fuel share of
the power sector is assumed to follow a utility expansion plan [23]. The emission reduction targets by
2030 for CM1 and CM2 are, respectively, 250 and 470 MtCO2 e.

3.2.2. Power Generation Assumptions

As previously discussed, the major contributor to Indonesias GHG emissions within the energy
sector is the power sector. Therefore, the core of our scenario setting is very closely related to the
scenarios for the power sector. Deploying renewables to substitute for fossil fuels, particularly coal,
would constitute mitigation in the power sector. It is likely that emission reductions will depend on
the share of renewables in the power-generation mix. The shares of power generation by fuel type
for the three scenarios are presented in Table 2. The renewable energy in this study was exogenously
determined based on the governments power plan. However, given the recent rapid increase in
wind and solar power generation, the assumptions for solar and wind may be too pessimistic for the
2030 vision. Since this studys purpose is to evaluate current national policy, we maintained the current
framework. However, more optimistic penetration in solar and wind would contribute to efforts at
reducing emissions.

Table 2. Power generation by fuel type for the three scenarios, in Ktoe (1000 toe)/year. CM1 and CM2:
countermeasure 1 and 2 scenarios.

Baseline CM1 CM2

Power Plant
2020 2030 2020 2030 2020 2030
Coal 18,346 54,855 15,102 37,171 14,277 33,217
Oil 1226 492 1191 464 1165 443
Gas 8606 20,535 8855 21,742 8660 20,795
Geothermal 851 863 2233 5946 2315 6394
Hydropower 1587 1610 3478 7732 3560 8102
Other RE 1098 2068 472 2896 195 1719
Total 31,714 80,423 31,331 75,950 30,172 70,670

3.2.3. Energy Demand Assumptions

Energy demand is mainly altered by three factors. First, GDP growth can increase each industrys
output. Second, price-driven energy efficiency improvement is formulated as a production function
that allows energy and capital substitution. Third, non-price-driven energy improvement is assumed.
This is the so-called AEEI (autonomous energy efficiency improvement) and we assumed a 1.25%
negative number to reproduce governmental energy demand projections. Although this value diverges
from normal CGE studies, we applied it to assess national policy appropriately. The values of the
demand characteristic are captured from SAM and the energy database from the base year (2005).

4. Results

4.1. The Baseline Scenario (Baseline)

Our 2030 comparison of socio-economic, energy, and GHG emission-related factors under the
baseline scenario is summarized in Figure 3. Over the period 20052030, the Indonesian population is
projected to increase 1.3 times, while GDP is projected to increase 4.3 times. Over the same period,
energy demand is expected to increase 2.9 times, while energy supply is expected to increase 3.2 times.
Owing to an expansion in the power-supply infrastructure and increased wealth, energy demand in
Energies 2017, 10, 52 7 of 15

Energies
Energies 2017,10,
2017, 10,5252 7 of 1515
7 of
the form of electricity is projected to increase significantly. Specifically, from 2005 to 2030, electricity
electricity
demand demandto
is expected
electricity demand isisincrease
expectedby
expected to7.2
to increase by
times.by
increase 7.2increase
The
7.2 times.
times. The increase
in energy
The increase in
inenergy
demand demand
and
energy supplyand
demand andsupply
the types
supply
and
ofand
fuels the
theusedtypes
inof
types of
the fuels
energy
fuels used in
usedsystemthe energy system
will result
in the energy will
in awill
system result
4.5-fold in a 4.5-fold
resultincrease increase
in GHG
in a 4.5-fold in GHG
emissions.
increase emissions.
in GHG emissions.

8.0

Relative to 2005
8.0 7.2

to 2005
7.2
7.0
7.0
6.0
6.0
Relative
5.0 4.3 4.5
5.0 4.3 4.5
4.0 3.2
4.0 2.9 3.2
3.0 2.9
3.0
2.0 1.3
2.0 1.3
1.0
1.0
-
-
Population

Supply
GDP

Electricity

GHG
Demand
Population

Supply
GDP

Electricity

GHG
Demand

Energy
Energy

Energy
Energy

Figure
Figure 3. Socio-economicfactors,
3. Socio-economic factors, energy,
energy, and GHG
GHG emissions
emissionsunder
underthe baseline
the scenario
baseline in 2030
scenario in 2030
Figure 3. to
relative Socio-economic
2005. GDP: factors,
gross energy,
domestic and GHG:
product; GHG emissions under the baseline scenario in 2030
relative to 2005. GDP: gross domestic product; GHG: greenhouse
greenhousegas.
gas.
relative to 2005. GDP: gross domestic product; GHG: greenhouse gas.
The projected final energy demands under the baseline scenario are shown in Figure 4a (by
The
Theprojected
projected final energy demands
final under thethe
baseline scenario are are
shown in Figure 4a (by 4asector)
sector) and Figure 4b (byenergy demands
fuel type). under
As expected baseline
in developing scenario
countries, the shown in Figure
fastest growing energy(by
and Figure
sector) and 4b (by 4b
Figure fuel
(bytype).
fuel As expected
type). As expectedin in
developing
developing countries,
countries, the
the fastestgrowing
fastest growingenergy energy
consumers will be the industry and transport sectors, which are projected to grow by 5.4% and 5%
consumers
per year, will
consumers willbebe the
respectively. industry
the industry andtransport
and
By 2030, these transport
two sectors,
sectors,
sectors which
which
will account are
are70%
for projected
projected
of to grow
the total to grow
energy by 5.4%
by demand.
5.4% andBy and
5%
5%perper year,
year,
fuel respectively.
respectively.
type, high demand By 2030,
By 2030,
growth these
these two sectors
two sectors
is expected will account
will account
to occur for 70%
in coal and for 70% of the
of the total
electricity, which total
energy energy demand.
demand.toBy
are expected
Byfuel
fuel
grow type,
type, highdemand
by high
7.9% demand
and 6.5% growth
growth is is
per year, expected
expected to to
respectively. occur
occur inin coal
coal
Despite and
lower and electricity,
electricity,
growth which
which
(compared areare expected
toexpected
coal andto to
grow
grow byby7.9%7.9%
electricity), and 6.5%will
and
oil fuels perremain
6.5% year, respectively.
per year, Despite
respectively.
the dominant source lower
Despite
of growth
energylower (compared
growth
in Indonesia. Theto
(compared coalofand
share to electricity),
oil coal
fuels and
in
oilelectricity),
fuels
terms will remain
oil
of total fuels
energy the
will dominant thesource
remainwill
demand dominant
be aroundof energy
source
45% in energy
of Indonesia.
in 2030. The
in Indonesia.
The shares share
of coal The
and ofelectricity
oil fuels
share of oilinfuels
in terms
terms in of
terms
total of energy
ofenergy
total total energy
demanddemand demand
willare will be45%
be projected
around around
to 45%
increase
in 2030. in
from 2030.
The7% inThe
2005
shares shares
of 17%of
tocoal incoal
and 2030, andand
electricityelectricity
fromin 7%
terms terms
in 2005
of total
oftototal
energy 13% in 2030,demand
energy
demand respectively.
are are projected
projected to increaseto increase
from 7%from 7% in
in 2005 to2005
17%to in17%
2030,in and
2030,from and 7%from in7%2005in 2005
to 13%
to 13% in 2030,
in 2030, respectively. respectively.
400 400

400 400
(Mtoe/year)
Final energy demand (Mtoe/year)

300 300
(Mtoe/year)
Final energy demand (Mtoe/year)

Non-Energy
Electricity
300 Agriculture 300
Non-Energy Biomass
demand

Electricity
200 Commercial 200
Agriculture OilBiomass
Fuels
demand

Household
Commercial 200
Final energy

200 Natural Gas

Transport Oil Fuels
100 Household 100 Coal
Final energy

Industry Natural Gas

Transport
100 100 Coal
Industry
- -
2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030
- -
2005 2010 2015
(a) 2025 2030
2020
(b)
2005 2010 2015 2020 2025 2030

Figure 4. Total energy

(a)demand in the baseline scenario. (a) Total energy demand
(b) by sector, baseline;
and (b) total energy demand by fuel, baseline.
Figure 4. Total energy demand in the baseline scenario. (a) Total energy demand by sector, baseline;
Figure 4. Total energy demand in the baseline scenario. (a) Total energy demand by sector, baseline;
and
The(b)projected
total energy demand by fuel,
development baseline.energy in the baseline scenario is shown in Figure 5a.
of primary
and (b) total energy demand by fuel, baseline.
Supply growth is expected to be high in coal and natural gas, which are expected to increase by 8.7%
andThe
5.5% projected development
per year,development of primary
respectively. Despite energy
lower growthin(compared
the baseline scenario
to coal is shown
and gas), in Figure
the share 5a.
The
Supply projected
growth of primary
is expected to be high energy
in coal and in the
natural gas,baseline
which are scenario
expected is to
shown inofFigure
increase
oil in
by 8.7%5a.
the primary
Supply growth energy
is supply
expected willhigh
to be remain high.
in coal By natural
and 2030, thegas,
share of oilare
which in the primary to energy mix is8.7%
and 5.5% per year, respectively. Despite lower growth (compared to coal expected
and gas), the increase
share of byoil in
and projected
5.5% to be
per year, 36%. The growth
respectively. of
Despiterenewable
lower energy
growth development
(compared is projected
tooilcoal to
andprimary remain
gas), the low.ofBy
share mix oil in
the
2030, the share of all hydro, geothermal, wind, and solar energies combined, in terms of total primaryis
primary energy supply will remain high. By 2030, the share of in the energy
the primary energy supply will remain high. By 2030, the share of oil in the
projected to be 36%. The growth of renewable energy development is projected to remain low. By
primary energy mix is
projected
2030, thetoshare
be 36%.
of allThe growth
hydro, of renewable
geothermal, wind,energy development
and solar is projected
energies combined, to remain
in terms low.
of total By 2030,
primary
 geothermal, wind, and solar) is likely to reach only 4%.
With the progress of socio-economic conditions, and the associated energy development, GHG
emissions from energy-intensive activities in Indonesia are projected to increase (see Figure 6). In the
baseline scenario, energy-sector GHG emissions are projected to grow, on average, by 6.2% per year,
from
Energies 311
2017, 10,MtCO
52 2e in 2005 to 1409 MtCO2e in 2030. In terms of emission intensity, Indonesias GHG
8 of 15
emissions are projected to increase from 1.11 kgCO2/USD (US dollar) GDP in 2005 to 1.25 kgCO2/USD
GDP in 2030. The increase in emission intensity indicates that, in the baseline scenario, Indonesias
the share
energy of system
all hydro,
is geothermal, wind,more
likely to become and solar energies combined,
carbon-intensive. in terms
The average of total
growth of primary energy,
emissions is
will projected
be less than to be approximately
2%. Biomass use 6.2% per year,
(in rural which is
residential higher
areas), than the is
however, average growth
expected of GDPsignificant.
to remain (5.5%).
This the
In 2030, alsoshare
indicates that Indonesias
of biomass energy
in the total system
primary is becoming
energy supplymore
will carbon-intensive.
be around 11%.
Energies 2017, 10, 52 8 of 15
600 90
Other R.E.
energy, will be less than 2%. Biomass use (in rural residential 80 areas), however, is expected to remain

Electricity generation (Mtoe/year)

Primary energy supply (Mtoe/year)

500
significant. In 2030, the share of biomassHydropower
in the total primary70energy supply will be around 11%.
Other R.E.
During the period 20052030, electricity
400 Geothermalsupply under 60 the baseline scenario is projected to
Hydropower
increase 7.2 times, from 11 Mtoe (127 TWh) Biomassin 2005 to 78 Mtoe50 (910 TWh) in 2030. Figure 5b shows
300 Geothermal
the projected Indonesian electricity supply inGas
Natural this baseline scenario.
40 One can see from the figure that
Natural Gas
Indonesias
200
future electricity generationOilis expected to rely30on coal and natural gas power plants.
From 2005 to 2030, the provision from coal and gas plants is20projected to grow rapidly, byOil11% Fuels
and
Coal Coal
10% 100
per year, on average, respectively. By 2030, the share of coal and gas in the power supply mix
10
will reach 70% and 26%, respectively. Oil fuels will no longer be used for power generation. The share
- -
of renewables
2005 2010in 2015
the future
2020 2025will2030
remain the same. By 2030,2005 the2010
share
2015 of
2020all
2025renewables
2030 (hydro,
geothermal, wind, and solar) is likely to reach only 4%.
(a) (b)
With the progress of socio-economic conditions, and the associated energy development, GHG
emissions
Figurefrom energy-intensive
5. Primary energy supplyactivities in Indonesia
and electricity are projected
generation to increase
projections under the (see Figurescenario.
baseline 6). In the
Figure 5. Primary energy supply and electricity generation projections under the baseline scenario.
baseline scenario,
(a) Primary energy-sector
energy supply; andGHG emissions
(b) power are projected to grow, on average, by 6.2% per year,
generation.
(a) Primary energy supply; and (b) power generation.
from 311 MtCO2e in 2005 to 1409 MtCO2e in 2030. In terms of emission intensity, Indonesias GHG
emissions are projected to1600 increase from 1.11 kgCO2/USD (US dollar) GDP in 2005 to 1.25 kgCO2/USD
1.30
During
GDP the period
in 2030. 20052030,
The increase in electricity
emission supply
intensity under that,
indicates the baseline
in the scenario
baseline is projected
scenario, to increase
Indonesias

EMission intensity (kg CO2/USD GDP)

1400 1.25
7.2 times, from 11 Mtoe (127 to
TWh) in 2005 Emission
to 78 Mtoe (910 TWh)
energy system is likely become more carbon-intensive. Theinaverage
2030. Figure
growth 5b of
shows the projected
emissions is
1200 Intensity
Indonesian
projected electricity supply
to be approximately in6.2%
this per
baseline scenario.
year, which Onethan
is higher canthe
seeaverage
from1.20the figure
growth that (5.5%).
of GDP Indonesias
Emission (MtonCO2e)

futureThis also indicates

electricity that Indonesias
generation 1000
is expectedenergyto system
rely oniscoal
becoming more carbon-intensive.
and natural gas power plants. From 2005 to 1.15
2030, the provision from coal800 and gas plants is projected to grow rapidly, by 11% and 10% per year, on
600 90 1.10
average, respectively. By 2030, 600 the shareOther
of coal
R.E.
and gas in the power supply mix will reach 70% and
Electricity generation (Mtoe/year)

80
Primary energy supply (Mtoe/year)

26%, respectively. Oil fuels will

500
400
no longer be used for power generation.
Hydropower
1.05The share of renewables in
70
the future400will remain the same. By 2030, the share of all renewables (hydro, Other R.E. wind, and
geothermal,
200 Geothermal 60 1.00
Hydropower
solar) is likely to reach only 4%. Biomass 50
0 0.95 Geothermal
With300the progress of socio-economic2005
conditions,2020
Natural
2010 Gas2015
and40the2025
associated
2030
energy development, GHG
Natural Gas
emissions200from energy-intensive activities Oil in Indonesia are
30 projected to increase (see Figure 6). In the
Oil Fuels
baseline Figure
scenario, energy-sector
6. GHG emissions and GHG emissions
emission
Coal are
intensity, projected
baseline
20 to grow,
scenario. USD; onUS average,
dollars. by
GDP;
Coal
6.2% per
Gross year,
100
from 311domestic
MtCO2Production.
e in 2005 to 1409 MtCO2 e in 2030. In terms 10 of emission intensity, Indonesias GHG
emissions are- projected to increase from 1.11 kgCO2 /USD (US - dollar) GDP in 2005 to 1.25 kgCO2 /USD
4.2. Mitigation Scenarios
2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030
GDP in 2030. The increase in emission intensity indicates that, in the baseline scenario, Indonesias
energy system is likely to become(a) more carbon-intensive. The average growth (b) of emissions is projected
to be approximately 6.2%
Figure 5. Primary per year,
energy supplywhich is higher
and electricity than the
generation averageunder
projections growth of GDPscenario.
the baseline (5.5%). This also
(a) Primary energy supply; and (b) power generation.
indicates that Indonesias energy system is becoming more carbon-intensive.

1600 1.30
EMission intensity (kg CO2/USD GDP)

1400 1.25
Emission
1200 Intensity
Emission (MtonCO2e)

1.20
1000
1.15
800
1.10
600
1.05
400

200 1.00

0 0.95
2005 2010 2015 2020 2025 2030

6. GHG
Figure
Figure emissions
6. GHG and
emissions andemission
emission intensity, baselinescenario.
intensity, baseline scenario. USD;
USD; US US dollars.
dollars. GDP;GDP;
GrossGross
domestic
domestic Production.
Production.

4.2. Mitigation Scenarios

Energies 2017, 10, 52 9 of 15

Energies
4.2. 2017, 10, 52
Mitigation Scenarios 9 of 15

4.2.1. Overall Results

Based on the mitigation scenarios
scenarios described
described in in this
this study,
study, CM1 and CM2 both result in GHG
emission reductions. The general outcomes of the mitigation scenarios in terms of change with respect
to values
values in
in the
the baseline
baselinescenario
scenario(baseline)
(baseline)inin2030
2030 are summarized
are summarized in in
Figure
Figure7. The GDP
7. The changes
GDP changesare
positive: 0.6% and 0.3% for CM1 and CM2, respectively. This is
are positive: 0.6% and 0.3% for CM1 and CM2, respectively. This is counterintuitivecounterintuitive because emission
reductions usually
reductions usuallygenerate
generatenegative
negativeimpacts
impacts on on
thethe
macroeconomy.
macroeconomy. ThisThis
pointpoint
is discussed later. Total
is discussed later.
energy and primary energy both decrease from the baseline year. The larger
Total energy and primary energy both decrease from the baseline year. The larger the emission the emission reductions,
the larger the
reductions, theenergy demand
larger the energy and supply.
demand Forsupply.
and example,Forprimary
example,energy
primary levels in CM1
energy levelsand CM2and
in CM1 are
0.7% and
CM2 8.6%and
are 0.7% less 8.6%
than less
in the baseline
than in thescenario,
baseline respectively. The magnitude
scenario, respectively. of the energy
The magnitude reduction
of the energy
reduction is less than the GHG emission reductions. For instance, the GHG emission reduction in27.2%,
is less than the GHG emission reductions. For instance, the GHG emission reduction in CM2 is CM2
whereas
is 27.2%, the decrease
whereas thein primaryinenergy
decrease primaryis 8.6%. This
energy is implies thatimplies
8.6%. This GHG emission
that GHG reductions
emissionare realized
reductions
by realized
are both energy consumption
by both reduction reduction
energy consumption and fuel andmixfuel
changes (this will
mix changes (thisbewill
discussed later).later).
be discussed The
magnitude of these reductions may give the impression that they are low, but the
The magnitude of these reductions may give the impression that they are low, but the reason for this reason for this would
be the relatively
would large change
be the relatively in power
large change ingeneration assumptions
power generation in the CM
assumptions in scenarios.
the CM scenarios.

5%
Change rate relative to baseline (%)

0%

-5%

-10%

-15%

-20%

-25%

-30%
Electricity
Final Primary GHG
GDP Generatio
Energy Energy Emissions
n
CM1 0.58% -4.25% -0.92% -5.71% -15.36%
CM2 0.32% -13.13% -8.71% -9.82% -27.20%

Percentchange
Figure7.7.Percent
Figure changeininGHG
GHGemissions,
emissions,energy,
energy,and
andGDP
GDPby
by2030
2030(relative
(relativeto
tobaseline
baselinevalues).
values).

4.2.2. Final Energy

The degree
degreeofoftotal
totalenergy
energydemand
demand reduction
reductionfor the
for two mitigation
the two scenarios
mitigation is shown
scenarios in Figure
is shown in
8a,b. From
Figure 8a,b. Figure 8a, it 8a,
From Figure canit be
canseen that,that,
be seen for for
thethe
twotwomitigation
mitigationscenarios,
scenarios,primary
primarytotal
total energy
reductions are likely to occur in oil and coal. With regard to sector, the major major demand reduction is
expected to occur within the countrys major energy-consuming sectors, namely, the industry and
transport sectors (see Figure 8b).
8b).

4.2.3. Electricity
400 and Primary Energy Mix Changes 400
FInal energy demand (Mtoe/year)

FInal energy demand (Mtoe/year)

15
350 67 350 23 14
The
300
role of fuel switching
64 in power generation in reducing GHG emissions20is shown
61
14
20
in Figure 9a.
300 83
62 80 Non Energy
In the 250
CM1 scenario, emission 63 reductions would be achieved
Electricity 250
through the reduction75 of gas use and
63 Agriculture
the increased
200 use of geothermal and hydropower,
Biomass while 200
in the CM2 scenario
79 they
73 would be achieved
136 66 Commercial
126
through150 the reduction of electricity
114 demand
Oil Fuels(efficiency150
measures), a switch from conventional coal
9 5
3 Household
and gas100to hydropower
47 51and 44
geothermal
37
plants,
Natural Gasand the deployment
100 49 of CCS
170 in164
coal power plants.
Transport 153
50 52 Coal 50 30
13 60 60 58 41 Industry
- 9 0
2005 2030 2030 2030 2005 2030 2030 2030

BAU CM1 CM2 BAU CM1 CM2

(a) (b)
 4.2.2. Final Energy
The degree of total energy demand reduction for the two mitigation scenarios is shown in Figure
8a,b. From Figure 8a, it can be seen that, for the two mitigation scenarios, primary total energy
reductions are likely to occur in oil and coal. With regard to sector, the major demand reduction is
expected to occur within the countrys major energy-consuming sectors, namely, the industry and
Energies 2017, 10, 52 10 of 15
Energies 2017, 10, 52 10 of 15
transport sectors (see Figure 8b).

Figure 8. Reduction in total energy demands. (a) Reduction in total energy demands by fuel type; and
400 400
FInal energy demand (Mtoe/year)

FInal energy demand (Mtoe/year)

(b) reduction in total energy demands by sector. BAU: business-as-usual
350 350
15
14
67 23
64 20 14
300 61 300 83 20
62 80 Non Energy
4.2.3. Electricity
250 and Primary63Energy
63
MixElectricity
Changes 250 75
Agriculture
200 200 Biomass
73 79
The role of fuel switching
136 126 in powerOil generation in reducing GHG emissions is shown
66 in Figure
Commercial
150 114 Fuels 150
9a. In the CM19 scenario, emission reductions would be achieved 5
3 through the reduction of gas use
Household
100 47 Natural Gas 100 49
51 44 37 170 164 Transport
and the50increased
52
use of geothermal and Coal
hydropower, 50while 30
in the CM2 scenario they would be
153

achieved - through
13
9 the60 reduction
60 58
of electricity demand 0 (efficiency
41 measures), a switch Industry
from
conventional coal and2030
2005 gas to2030hydropower
2030 and geothermal plants, 2005 and the deployment
2030 2030 2030 of CCS in coal

power plants. BAU CM1 CM2 BAU CM1 CM2

The extents of primary (a) energy reduction and fuel switching that result (b) in emission reductions
for the CM1 and CM2 scenarios are presented in Figure 9b. The figure indicates that, to achieve
8. Reduction
Figurereductions
emission in in totalthe
both energy
CM1demands.
and the CM2 (a) Reduction in atotal
scenarios, energy
switch fromdemands by fuel
fossil fuels to type; and
renewable
(b) reduction
energy in total
(most notably energy demands
geothermal) by sector. BAU: business-as-usual.
is necessary.

60 600

Primary energy supply (Mtoe/year)

50 500
Power generation (Mtoe/year)

Hydropwer
40 Geothermal 400 Biomass
Gas+CCS Geothermal
30 300
Oil+CCS Hydropower
Coal+CCS 200 Natural Gas
20 39 38
Natural Gas Oil
28
10 Oil 100 Coal
Coal
4 -
-
2005 2030 2030 2030 2005 2030 2030 2030

BAU CM1 CM2 BAU CM1 CM2

(a) (b)
Figure 9. Electricity and primary energy supply by fuel type. (a) Electricity supply; and (b) primary
Figure 9. Electricity and primary energy supply by fuel type. (a) Electricity supply; and (b) primary
energy supply. CCS: carbon capture and storage.
energy supply. CCS: carbon capture and storage.

4.2.4. Mitigation Costs

The extents of primary energy reduction and fuel switching that result in emission reductions for
The deployment of low-carbon energy systems to reduce GHG emissions requires larger
the CM1 and CM2 scenarios are presented in Figure 9b. The figure indicates that, to achieve emission
technology investments than in the baseline scenario. The carbon price in the CM1 scenario is US$19
reductions in both the CM1 and the CM2 scenarios, a switch from fossil fuels to renewable energy
(2005)/tCO2, while that in CM2 is much higher (i.e., US$63/tCO2).
(most notably geothermal) is necessary.
The GDP changes in both of the CM scenarios relative to baseline are positive. This is
counterintuitive
4.2.4. Mitigation Coststo the expectations of a normal climate mitigation study. The main factor generating
these results is the combination of the assumptions for power generation and coal mining
The deployment
productivity. of low-carbon
Power generation energy systems
in all scenarios to energy
and for all reduce sources
GHG emissions
is fixed in requires
this studylarger
to
technology investments than in the baseline scenario. The carbon price in the CM1
assess the national energy development plan. There is a large increase in the use of coal in the baseline scenario is US$19
(2005)/tCO
scenario and2 , while that in CM2 is much
this assumption forcedhigher (i.e.,model.
into the US$63/tCO 2 ).
However, as shown in Figure 10, the
The GDP
coalmining changes
sector has ainlarge
bothshareof the in CM
termsscenarios relativeindustries
of value-added to baseline andare positive.a low-
represents This is
counterintuitive to the expectations of a normal climate mitigation study.
productivity sector. If coal use can be reduced in such mitigation scenarios, the total factor The main factor generating
these results is the
productivities cancombination
increase. Figureof the 11 assumptions for power
illustrates industrial generation
sector shifts dueandtocoal mining
emission productivity.
constraints.
Clearly,
Power coal-related
generation industries
in all scenarios induce
and for negative impacts
all energy while
sources renewable
is fixed in thisand service
study sectors
to assess theinduce
national
positive ones. Notably, the results of our study imply that investments in low-carbon
energy development plan. There is a large increase in the use of coal in the baseline scenario and this technologies
are cancelled
assumption isout by that
forced intofactor.
the model. However, as shown in Figure 10, the coalmining sector has a
large share in terms of value-added industries and represents a low-productivity sector. If coal use
can be reduced in such mitigation scenarios, the total factor productivities can increase. Figure 11
illustrates industrial sector shifts due to emission constraints. Clearly, coal-related industries induce
negative impacts while renewable and service sectors induce positive ones. Notably, the results of our
study imply that investments in low-carbon technologies are cancelled out by that factor.
Energies 2017, 10, 52 11 of 15
Energies 2017, 10, 52 11 of 15
Energies 2017, 10, 52 11 of 15
0.8
0.8
0.7

(-) (-)
0.7

to Output
0.6

to Output
0.6
of Value-added 0.5
0.5
0.4
of Value-added

0.4
0.3
0.3
0.2
Ratio

0.2
Ratio

0.1
0.1
0

Forestry

& processing
Agriculture
Hydropower
generation

generation

& production

Services
generation

Manufaturing

Construction

Transportation
Geothermal

& production

& transformation
0

Forestry

& processing
Agriculture
Hydropower
generation

generation

& production

Services
generation

Manufaturing

Construction

Transportation
Geothermal

& production

& transformation
electricity

electricity
electricity

mining

exploration
exploration
electricity

electricity
electricity

mining

exploration
exploration

distribution
distribution
Oil Oil

CoalCoal
GasGas
CoalCoal

Oil Oil

GasGas

GasGas
BaU
BaU
Figure 10. Share of value-added output.
Figure 10.Share
Figure10. Share of value-addedoutput.
of value-added output.
10
to Baseline(-)

10
to Baseline(-)

5
relative

5
relative
Value-added

0
Value-added

Forestry

power
Windpower
power

& processing
Hydropower

Agriculture
generation

generation

Services
Solarpower

& production
generation

Geothermal

Nuclearpower

Manufaturing

Construction
Transportation
& production

refinery

transformation
transformation

& transformation

0
Forestry

power
Windpower
power

& processing
Hydropower

Agriculture
generation

generation

Services
Solarpower

& production
generation

Geothermal

Nuclearpower

Manufaturing

Construction
Transportation
& production

refinery

transformation
transformation

& transformation
BioBio

biomass
Pertoleum

CM2
biomass

-5
electricity

electricity
electricity

Pertoleum

CM2
CM1
mining

exploration
exploration

-5
electricity

electricity
electricity

Biomass
Coal

Advanced

CM1
mining

exploration
exploration

distribution
Biomass
Coal

Advanced
distribution
Oil Oil

Coal
GasGas
Coal

-10
Coal
Coal

Oil Oil
GasGas

-10
GasGas

-15
-15

-20
-20
Figure 11. Sector-wise value-added output in 2030 relative to the baseline year.
Figure 11. Sector-wise value-added output in 2030 relative to the baseline year.
Figure 11. Sector-wise value-added output in 2030 relative to the baseline year.
5. Discussion
5. Discussion
5. Discussion
5.1. The Role of Low-Carbon Energy Systems
5.1. The Role of Low-Carbon Energy Systems
5.1. The Role of Low-Carbon
Analysis Energy
of the modeling Systems
results provides insight into the role of a low-carbon energy system in
terms of achieving Indonesias GHG emissioninsight
Analysis of the modeling results provides into the
reduction role To
target. of aachieve
low-carbon energy system
a moderate emissionin
Analysis
terms of of the modeling
achieving Indonesiasresults
GHG provides
emission insight
reduction into the role
target. To of a low-carbon
achieve a moderateenergy system
emission
reduction target (e.g., a 15% reductionCM1), implementation of energy efficiency measures
in terms of achieving
reduction Indonesias GHG emission reduction target. of To achieveefficiency
a moderate emission
combined target (e.g.,
with deployment a 15%of reductionCM1),
renewable energy implementation
would be sufficient.energyIn CM1, energy measures
efficiency
reduction
combinedtarget (e.g.,
with a 15% reductionCM1),
deployment of renewable implementation of energy efficiency measures combined
measures would eliminate 40.2 Mtoe/yearenergy
of totalwould
annual be energy
sufficient. In CM1, energy
consumption, a 4% efficiency
reduction
withmeasures
deployment wouldof renewable
eliminate energy
40.2 would
Mtoe/year be
of sufficient.
total annual In CM1,
energy energy efficiency
consumption,
overall. This emission reduction would also be met through electrification of end-user consumption, a measures
4% would
reduction
overall.
eliminate
whereby This emission
40.2deploying
Mtoe/year reduction would
of total annual
renewables also be
energy
for power met through
consumption,
generation electrification
would adecarbonize of
4% reduction end-user consumption,
theoverall. Thissupply.
electricity emission
whereby
reduction deploying
would
Electrification also
of renewables
be
end-usermet for power
through
consumption generation
electrification
is indicated would in
byofincreases
end-user decarbonize
share ofthe
consumption,
the electricity
whereby
electricity supply.
deploying
within total
Electrification
renewables of end-user
for power consumption
generation is indicated bythe
would decarbonize increases in the
electricity share of
supply. electricity within
Electrification total
of end-user
consumption is indicated by increases in the share of electricity within total energy consumption.
Energies 2017, 10, 52 12 of 15

In CM1, the share of electricity in terms of total energy consumption is 12.7% in 2030, while in the
baseline scenario it is only 7.2%. This increase in electricity share contributes to emission reductions
since in CM1 the electricity would be supplied by power plants using higher shares of renewables, as
compared to the baseline case. In the baseline scenario, the share of renewables in the power supply
would only be 4%, while in CM1 it would be 16%.
To achieve relatively large emission reductions (i.e., a 27% reductionCM2), more mitigation
measures would be required than in CM1. In addition to energy efficiency measures and deployment
of renewables, coal and CCS power plants would be introduced under the condition of a high carbon
price. Moreover, CM2 requires greater energy efficiency measures. In this scenario, the measures
result in a 60.5 Mtoe total energy demand cut, or 17% less than the baseline energy demand. The share
of electricity within total energy demands is larger in CM2 than in baseline, namely, 14% vs. 7%.
To decarbonize the electricity supply, the share of renewables in the power mix would increase to 22%,
and 12% of coal power plants would be equipped with CCS systems. The decarbonization technologies
rely heavily on commercial activities and the government should frame policies considering actual
implementation [24]. Indonesia is endowed with the capacity to produce many types of renewable
energy, such as geothermal, hydropower, solar energy, and bioenergy. Geothermal energy has
particularly large potential and is a unique opportunity for Indonesia. Japan and New Zealand
also have large potentials in geothermal and have therefore pursued technological development.
Indonesia could thus benefit from technology transfer from these countries. Green general-purpose
technologies, including Information and Communication Technology (ICT), would also contribute to
CO2 emission reductions, and it is critical to consider these options [25,26].
The emission reductions that result from the mitigation actions in this modeling study are
lower than the emission reduction targets for Indonesias energy sector (as proposed in the sectoral
breakdown of Indonesias Nationally Determined Contribution (NDC)) [27]. A comparison between
the results of our study and the sectoral breakdown of Indonesias NDC is presented in Table 3.

Table 3. Comparison of Indonesias sectoral breakdown with Indonesias Nationally Determined

Contribution (NDC).

NDCEnergy Sector Present Study

Scenario Emission in Reduction from Baseline Emission in Reduction from Baseline
2030 MtCO2 e MtCO2 e % 2030 MtCO2 e MtCO2 e %
Baseline 1444 - - 1403 - -
Unconditional (CM1) 1191 253 17.5% 1193 216 15.4%
Conditional (CM2) 972 472 32.7% 1026 383 27.2%

As in the case of our study, Indonesias INDC was also estimated using economic and population
growth as the driver of energy development. Despite using the same assumptions for economic
development and population growth, the INDC estimates larger baseline emissions. The reason for
this difference cannot be analyzed because the corresponding energy level and energy mix in 2030 are
not provided in the INDC document. In terms of emission levels under conditional and unconditional
scenarios, the results of our study are similar because those are exogenous assumptions. However,
without details of INDC energy levels in these scenarios, we cannot analyze the reason for the similarity.
It is probably a coincidence.
As previously mentioned, the results of our study indicate that mitigation measures will lead to
some improvement (compared to the baseline scenario) in economic development (i.e., 0.6% for CM1
and 0.3% for CM2). After observing the spread of value-added output across the economic spectrum,
it is likely that economic development improvements will be a result of a shift in economic activities
from the fossil-fuel energy industry to industries that have higher value-added output. It should be
noted, however, that the economic gain calculation only takes into account the impact of mitigation
actions such as technology investment, taxes, and redistribution among economic sectors. Gains
Energies 2017, 10, 52 13 of 15

resulting from avoiding climate change impacts or risks (floods, droughts, etc.), adaptation costs,
and the costbenefits of improved public health due to cleaner energy systems are not incorporated
in this study. However, such implications are worthy of analysis and should be discussed further.
As mentioned in the previous section, two elements impact on the results of our study, namely, strong
assumptions regarding coal power plants and low productivity in coal-related industries. SAM is
the basis of CGE modeling and we should be attentive to the accuracy and reliability of SAM (or the
input-output table).
Compared to Indonesias previous pledge (i.e., RAN GRK, which targeted a 38 MtCO2 reduction
by 2020), the new target (INDC), which aims for 250 MtCO2 by 2030, is a big jump for the energy
sector. Such a change poses significant technical and economic, as well as psychological, challenges.
An important step that must be taken to achieve the reduction target is to prepare appropriate and
concrete mitigation action implementation strategies and plans. Since most of the necessary emission
reductions would come from the power sector (via a fuel switch from fossil fuels to renewables), the
main component of government mitigation action should be linked to PLN (Plan PT Perusahaan Listrik
Negara; the state-owned electric utility). A key factor for success in achieving the reduction target will
be cooperation between the government and PLN.

5.2. Limitations
There are several limitations to this study. Firstly, the trigger or shock factor in a low-carbon
energy system is a carbon tax. In a country such as Indonesia, where industries have experienced
energy subsidies for years, implementing a carbon tax would be difficult, but not impossible.
Secondly, our study considers the country as a point in space, rather than as a spatial region.
Therefore, distances between energy resources and demand locations are not considered. In reality,
there are many renewable energy resources for grid electricity (such as geothermal and hydropower)
that are located in areas far from the demand centers and are often separated by seas and other
water bodies. Therefore, exploitation of these resources would depend on practicality, advances in
technology, and the economics of submersible electricity transmission systems.
Thirdly, to achieve the higher reduction target (CM2), advances in technologies such as CCS
would be required. In reality, CCS technology is still in its infancy with regard to development.
Therefore, implementation of CCS in Indonesia will depend on the logistical and economic advances
in this technology.
Although the insights of this study are meaningful, there should be discussions on the problems
that face this transitionthese could be better elaborated on in future. Firstly, power generation is
exogenously given in this study, considering the current power development plan, but it would be
beneficial to have the flexibility to suggest broader energy system changes in future studies; Secondly,
mitigation efforts would result in losers and winners in society. The potential losers tend to lobby
for climate policy, so special treatment or strong political will would be needed; Thirdly, Indonesia
is unique in the sense that its many islands are separated, and this would be a challenge for the grid
system. The variable renewable energy amount in this study is small. However, if the cost reduction
is so dramatic that the penetration of such renewable energy greatly increases, how to manage the
variability would be a key challenge in a future low-carbon society.

6. Conclusions
Two options for low-carbon energy development in Indonesia were analyzed using an AIM/CGE
model. These scenarios were simulated using socio-economic assumptions that were in accordance
with the actual situation of the country. Analysis of the simulation results suggests that Indonesias
low-carbon energy system in 2030 could be achieved with two pillars, namely, energy efficiency
measures and the deployment of fewer carbon-emitting energy systems (i.e., renewable energy in the
power and transport sectors, and natural gas in the power and transport sectors). Emission reductions
Energies 2017, 10, 52 14 of 15

would also be met through the electrification of end-user consumption, whereby deploying renewables
in power generation would decarbonize the electricity supply.
In a moderate emission reduction scenario (CM1 scenario), a 15.5% emission reduction target
(compared to the baseline scenario) could be achieved. This reduction could be achieved using
efficiency measures that reduce total energy demand by 4%, with six times greater deployment of
geothermal power plants than at baseline and four times greater use of hydropower than in the
baseline scenario. For further carbon reductions (CM2), a 27% reduction could be achieved with
similar measures but with more intensive penetration: a total energy demand cut of 13%, seven times
greater deployment of geothermal power plants compared with baseline, and five times the amount
of hydropower than in baseline. To decarbonize the electricity supply, the share of renewables in the
power mix should be increased to 20%, and 4% of fossil-fueled power plants should be equipped with
CCS systems.
In CM1, GHG reductions in 2030 will cost US$16 per ton of CO2 . Further emission reductions
(i.e., the CM2 scenario) would have a much higher cost (US$63 per ton of CO2 ). The low-carbon energy
development of Indonesia will, surprisingly, have positive macro-economic implications; there are
likely to be some small improvements (compared to the baseline scenario) with regard to economic
development (a 0.6% increase for CM1 and a 0.3% increase for CM2).
The INDC emission reduction target of 250 MtCO2 e by 2030 is a lofty goal compared to the
countrys previous reduction target of only 38 MtCO2 e by 2020. This large increase poses technical and
financial, as well as psychological, challenges. Therefore, to reach the target, greater focus and effort
are required. As the majority of the emission reductions would come from the electricity sectors, it is
necessary for the government to develop a cooperative relationship with the PLN (the state-owned
electric utility).

Supplementary Materials: The following are available online at www.mdpi.com/1996-1073/10/1/52/s1.

Acknowledgments: This work was supported by JSPS KAKENHI, Grant Number JP16K18177, and the Global
Environmental Research Fund 2-1402 of the Ministry of Environment, Japan.
Author Contributions: Bintang B. Yuwono operated the model simulation and Ucok W.R. Siagian wrote the
manuscript. Shinichiro Fujimori and Toshihiko Masui supported the modification and improvement of this paper.
All authors contributed in structuring the study.
Conflicts of Interest: The authors declare no conflict of interest.

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