Indonesia clings to coal despite green vision for economy

Even as Indonesia wins cautious praise from some green groups for ambitious plans to cut carbon emissions, the world’s biggest exporter of thermal coal shows no sign of weaning itself off the polluting fuel any time soon.

Indonesia, the eighth-biggest carbon emitter, recently brought forward its goal for net zero emissions from 2070 to 2060 or sooner, ahead of the United Nations Climate Change Conference in Glasgow in November, and joined a U.S.-led Global Methane Pledge.

It also plans to stop commissioning new coal-fired power plants and phase out coal for electricity by 2056 under a new, greener long-term economic vision. But - as with other coal producers such as Australia and India - Indonesia is wrestling with how to balance its environmental targets with the cost of pulling the plug on an industry that contributed $38 billion in export earnings in the first seven months of 2021.

“We are phasing out coal power plants. But if you ask whether we’re closing down mines, we have the coal and there are other utilisation options,” Dadan Kusdiana, the energy ministry’s head of renewable energy, told Reuters.

The UN’s climate change report warned that global warming was dangerously close to being out of control in what has been described as “a death knell for coal and fossil fuels”.

Still, Indonesia is exploring ways to keep consuming and extracting value from coal by using carbon capture and storage (CCS) technology, although environmentalists say CCS is unproven and expensive.

With nearly 39 billion tonnes of reserves, coal remains the economic backbone of parts of Indonesia and miners are among the biggest taxpayers.

The government has been encouraging miners to invest in production of dimethyl ether (DME) from coal. Under new laws passed in 2020, it no longer requires them to pay royalties to the government on such processes, and their mine permits can be extended.

It has touted DME as a replacement for imported liquefied petroleum gas and a feed stock for chemicals and fertilizer.

Making DME requires burning coal, so it needs to be paired with CCS to be environmentally friendly, Dadan said.