Did Indonesia Just Lock Itself Into an Energy Future It Can’t Afford? |
The Debate | Opinion | Southeast Asia
Did Indonesia Just Lock Itself Into an Energy Future It Can’t Afford?
Indonesians cannot afford to buy U.S. oil and gas because they can’t afford to keep paying for their own destruction.
If Indonesian President Prabowo Subianto’s promises meant anything, Indonesia’s energy independence should have been non-negotiable. Few will forget his grand vision of “energy self-sufficiency,” delivered with such conviction in his inaugural speech. The vision is a sound one – in a volatile, crisis-ridden world, it makes little economic or political sense for a country as populous and resource-rich as Indonesia to depend on foreign energy supplies.
But the Indonesia-U.S. trade deal, which resulted in a commitment to import $15 billion worth of oil and gas from the United States each year, is raising doubts about the government’s commitment to this vision.
The Agreement on Reciprocal Trade was originally intended as a strategic barter to avoid U.S. President Donald Trump’s protectionist tariffs. But when the U.S. Supreme Court overturned the legal basis for these tariffs within hours of the deal’s signing, it was as if Indonesia had fallen victim to an embarrassing geopolitical prank. Among other trade concessions, Jakarta locked itself into a contract to purchase billions of dollars worth of fossil fuels – all to avoid tariffs that are now legally void. It reflects a failure in diplomatic intelligence, if not outright recklessness.
But more than that, it is a costly miscalculation that chains Indonesia to an outdated energy system it can’t afford. Fossil fuel energy is expensive – even more so when supplies are shipped from halfway around the world. Imported LNG leaves Indonesia at the mercy of price spikes fueled by volatile markets, currency fluctuations, and geopolitical shocks.
Since 2020, coal and gas purchase costs by the national electricity utility PT Perusahaan Listrik Negara (PLN) have increased significantly. To keep energy bills artificially low, the PLN relies heavily on government subsidies. These fossil fuel subsidies are estimated to cost Indonesia around $60 billion through the next decade. Whether through these industry handouts or higher energy bills, consumers will pay the price of continued reliance on fossil fuels.
On top of the hefty import bill, Indonesia will also be forced to build and maintain fossil fuel infrastructure to accommodate large-scale U.S. oil and gas shipments. These infrastructure investments, such as LNG receiving terminals and gas pipelines, risk becoming debt burdens and stranded assets as the world accelerates toward decarbonization. If Indonesia expands its gas plant capacity, the actual generation cost of electricity could potentially double.
U.N. Secretary General Antonio Guterres was correct to describe the fossil fuel age as “flailing and failing.” Planet-heating fossil fuels no longer represent the cheapest, fastest path to energy security – they are now the biggest obstacles to securing clean, affordable energy for all. Globally, solar and wind have displaced fossil fuels as the lowest-cost energy sources, and are expected to become even cheaper. If the United States had to resort to arm-twisting to get Indonesia to buy its oil and gas, it is perhaps the clearest sign yet that companies are struggling to sell fossil fuels on their own merits.
Indonesia has a treasure trove of renewable energy sources that have yet to be optimized. The country’s water, wind, and solar energy potential reaches up to 3,686 GW. But as long as the government sacrifices energy sovereignty at the altar of trade deals, investments in domestic renewables technology will continue to be sidelined.
A recent survey of business executives in 15 major economies and emerging markets, including Indonesia, shows that an overwhelming 97 percent support the transition away from fossil fuels to renewable energy. A majority is advocating for this shift within the next 10 years. Where the energy future points to is clear; whether the Prabowo administration is headed towards it is less so.
Prabowo can still rewrite this deal. The U.S. Supreme Court has already cut the legal basis for Trump’s tariffs and Washington has lost its leverage – what remains is a choice that is entirely Indonesia’s to make. Will Prabowo take this chance to build energy self-sufficiency based on the archipelago’s natural potential and the needs of its people? Or will he choose to cater to the demands of fossil fuel interests and foreign leaders?
The final cost of this deal cannot be measured in dollars. Indonesia knows better than most countries what a highly devastating climate disaster looks like. Economists can put a figure on loss and damage in tragedies like Sumatra, but the cost of lives and communities lost to climate breakdown cannot truly be accounted for.
Indonesians cannot afford to buy U.S. oil and gas because they can’t afford to keep paying for their own destruction.
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If Indonesian President Prabowo Subianto’s promises meant anything, Indonesia’s energy independence should have been non-negotiable. Few will forget his grand vision of “energy self-sufficiency,” delivered with such conviction in his inaugural speech. The vision is a sound one – in a volatile, crisis-ridden world, it makes little economic or political sense for a country as populous and resource-rich as Indonesia to depend on foreign energy supplies.
But the Indonesia-U.S. trade deal, which resulted in a commitment to import $15 billion worth of oil and gas from the United States each year, is raising doubts about the government’s commitment to this vision.
The Agreement on Reciprocal Trade was originally intended as a strategic barter to avoid U.S. President Donald Trump’s protectionist tariffs. But when the U.S. Supreme Court overturned the legal basis for these tariffs within hours of the deal’s signing, it was as if Indonesia had fallen victim to an embarrassing geopolitical prank. Among other trade concessions, Jakarta locked itself into a contract to purchase billions of dollars worth of fossil fuels – all to avoid tariffs that are now legally void. It reflects a failure in diplomatic intelligence, if not outright recklessness.
But more than that, it is a costly miscalculation that chains Indonesia to an outdated energy system it can’t afford. Fossil fuel energy is expensive – even more so when supplies are shipped from halfway around the world. Imported LNG leaves Indonesia at the mercy of price spikes fueled by volatile markets, currency fluctuations, and geopolitical shocks.
Since 2020, coal and gas purchase costs by the national electricity utility PT Perusahaan Listrik Negara (PLN) have increased significantly. To keep energy bills artificially low, the PLN relies heavily on government subsidies. These fossil fuel subsidies are estimated to cost Indonesia around $60 billion through the next decade. Whether through these industry handouts or higher energy bills, consumers will pay the price of continued reliance on fossil fuels.
On top of the hefty import bill, Indonesia will also be forced to build and maintain fossil fuel infrastructure to accommodate large-scale U.S. oil and gas shipments. These infrastructure investments, such as LNG receiving terminals and gas pipelines, risk becoming debt burdens and stranded assets as the world accelerates toward decarbonization. If Indonesia expands its gas plant capacity, the actual generation cost of electricity could potentially double.
U.N. Secretary General Antonio Guterres was correct to describe the fossil fuel age as “flailing and failing.” Planet-heating fossil fuels no longer represent the cheapest, fastest path to energy security – they are now the biggest obstacles to securing clean, affordable energy for all. Globally, solar and wind have displaced fossil fuels as the lowest-cost energy sources, and are expected to become even cheaper. If the United States had to resort to arm-twisting to get Indonesia to buy its oil and gas, it is perhaps the clearest sign yet that companies are struggling to sell fossil fuels on their own merits.
Indonesia has a treasure trove of renewable energy sources that have yet to be optimized. The country’s water, wind, and solar energy potential reaches up to 3,686 GW. But as long as the government sacrifices energy sovereignty at the altar of trade deals, investments in domestic renewables technology will continue to be sidelined.
A recent survey of business executives in 15 major economies and emerging markets, including Indonesia, shows that an overwhelming 97 percent support the transition away from fossil fuels to renewable energy. A majority is advocating for this shift within the next 10 years. Where the energy future points to is clear; whether the Prabowo administration is headed towards it is less so.
Prabowo can still rewrite this deal. The U.S. Supreme Court has already cut the legal basis for Trump’s tariffs and Washington has lost its leverage – what remains is a choice that is entirely Indonesia’s to make. Will Prabowo take this chance to build energy self-sufficiency based on the archipelago’s natural potential and the needs of its people? Or will he choose to cater to the demands of fossil fuel interests and foreign leaders?
The final cost of this deal cannot be measured in dollars. Indonesia knows better than most countries what a highly devastating climate disaster looks like. Economists can put a figure on loss and damage in tragedies like Sumatra, but the cost of lives and communities lost to climate breakdown cannot truly be accounted for.
Indonesians cannot afford to buy U.S. oil and gas because they can’t afford to keep paying for their own destruction.
Jeri Kusuma Asmoro is an Indonesia campaigner for the global climate justice group 350.org. An environmental activist specializing in the just energy transition, he is pursuing a master’s degree in Environmental Management and Development at Brawijaya University.
Indonesia energy policy
Indonesia energy subsidies
Indonesia-U.S. relations
Indonesia-US relations
Trump tariffs Indonesia