A Conversation with Mr Eka Chandra Buana The Director of Macro Planning and Statistical Analysis, Bappenas
The Government of Indonesia, together with the leaders of the International Partners Group (IPG), launched a Just Energy Transition Partnership (JETP) during the Partnership for Global Infrastructure and Investment (PGII) event at the G20 Summit, taking place on 15-16 November 2022 in Bali. The Just Energy Transition Plan recognised the need for accelerated action to reduce emissions and hasten renewable energy deployment.
On 24 November, just one week after the G20 Summit, the Ministry of National Development Planning/Bappenas, with support from the European Union-funded ARISE+ Indonesia, hosted an international economic modelling forum aiming to introduce the integrated economics-environmental analysis tool to assess the impact of the energy transition on macroeconomic indicators entitled "Sustainable Growth through Harnessing Energy". The analysis tools should assist the central and local governments in formulating an economic development plan incorporating the energy transition plan.
We had the honour to discuss with Mr Chandra on Indonesia's Just Energy Transition Plan and the key takeaways of the Economic Modelling Forum.
The following is the excerpt from our interview.
Q: Before we discuss the recent Bappenas economic-environmental analysis tool, could you please briefly tell us about the Just Energy Transition Plan agreed upon between Indonesia and the International Partners Group?
A: The Just Energy Transition Plan (JETP) is an agreement between Indonesia and G20 leaders to accelerate the energy transition from fossil fuel to renewable energy sources. With a total of USD 20 billion, JETP will help Indonesia reduce power sector emissions, hasten the renewable energy expansion strategy, and phase down the coal.
A: Considering Indonesia's current macroeconomic situation, what would be the priority issues that need to be addressed to steer Indonesia's long-term growth trajectory while implementing Indonesia's low-carbon emission and climate resilience goals?
Q: The priority issue we need to focus on is addressing structural problems. Indonesia's economic growth has been stagnant at 5 per cent per year during the pre-COVID pandemic, and our industrial sector contribution to the economy shows a decreasing trend.
Therefore, Indonesia's development towards structural transformation will focus on developing downstream industries, sustainable industries, and increasing the role of the digital economy.
Improving our human resources also becomes our focus. To expedite the energy transition process, we will need quality human resources and extensive innovation in energy technology.
Indonesia's long-term development is expected to boost Indonesia's sustainable growth through increased investment in the Green sector, Green jobs, and Green investment and shift the development path to a greener economy.
Currently, Bappenas is redesigning the economic formula to apply the Green Economy in all aspects and sectors. We're targeting to launch the formula in early 2023 to feed the background study of the Long-term National Development Planning (RPJP) 2025-2045.
Certainly, the transition process will need big investments. Therefore, we will make priorities and implement the energy transition plan gradually. The first thing we'll do is to ensure that we have the regulations. We are now in the process of comparing existing regulations so that we can produce quality, coherent and consistent policies. The regulations should support the acceleration of the transition process and not be counterproductive.
For example, we had issued President Instructions on Electric Vehicles (EVs). However, when we develop EVs, we must also build the ecosystem, such as the infrastructures, to ensure the transition to EVs will run smoothly. EVs will require energy, but we have to pay balance attention between upstream and downstream preparations. We have to develop both downstream and upstream industries.
In addition to that, we also need to ensure policy consistency between central and regional governments. The local governments play a strategic role in steering the developments at the regional level. Let's say we need to do reforestation. However, the provincial governments need to build factories, malls and others that will change the land use and have an impact on the increased emissions. Thus, we need to find win-win solutions.
To successfully implement the JTEP, we need to have the same perspective, a strong commitment and support from all stakeholders and ensure policy consistency between the central leadership and local authorities. In addition to that, we also need to encourage investments in renewable energy. We need to mobilise support from the private sector.
Q: Bappenas, in close collaboration with ARISE+ Indonesia and Oxford Economics, developed an integrated tool to assess the impact of the energy transition on the economy. Could you please briefly tell us about this tool and how it would help the central and local governments to incorporate Indonesia's energy transition plan in economic planning?
A: This integrated economics-environmental data analysis tool aims to assess the impact of the energy transition on macroeconomic indicators. Surrounded by high uncertainty, measuring and analysing the global impact on the real economy is very challenging. This economics-environment model is helpful for us to predict, analyse, and make optimal policy option that has the greatest benefit. The analysis tools will support us in designing an effective and efficient policy for the energy transition in Indonesia.
The economic model serves as a tool for policymakers to:
- Assess trade-offs between industry competitiveness and carbon emissions from implementing carbon taxes, including how carbon tax revenues can be allocated to boost productivity.
- Assess the impact of the strategies that will be implemented in an effort to increase investment in renewable energy.
- Simulating alternative economic development for Indonesia and compliance with NDC (Nationally Determined Contributions) commitments.
Q: In your view, what are the main takeaways of the Harnessing Energy for Sustainable Economic Growth Forum? Based on those, what are the next steps that Bappenas should take to ensure a smooth energy transition and an effective economic transformation?
A: First, the discussion was very good, insightful, and beneficial for Bappenas, especially since we are tasked with compiling a background study starting in 2023 for developing the 2025-2045 long-term development plan. So this discussion could be the embryo for the background study.
And secondly, the forum was a perfect platform for knowledge sharing and dialogue on the Green Economy development in Indonesia. We could hear the stakeholders' views on Green Economy. We gathered insights and sought joint solutions to minimise the trade-off between emissions and economic growth.
We have this 2045 Vision to become one of the ten largest economies in the world, so we need to pick up our development pace to become an industrialised country. Especially if we want to get out of the middle-income trap, like it or not, we have to be an industrialised country. However, as you can see, most industries are still using coal. Sol, this is a challenge for us. As stated by the Deputy in her keynote speech during the forum, the challenge would be balancing environmental and economic aspects.
So the forum was a good opportunity and an important step we needed to take to build strong commitment and collaboration among stakeholders to institutionalise the energy transition into planning documents and related regulations at the national, regional and sectoral levels and ensure a smooth energy transition.
Q: What do you think of ARISE+ Indonesia programme activities supporting Bappenas in national development planning?
A: It's good and very useful for us to help our work on the modelling macroeconomics indicator and environment analysis, including forecasting development targets for Indonesia's national goals on long-term and mid-term development plans. The Project captures our need to formulate planning that must adapt to changes. We are happy with tools developed together with Oxford Economics and facilitated by ARISE+ Indonesia because this economic modelling is tailored-made to Indonesia. ARISE+ Indonesia also provided capacity building for our team to develop better policies. So, thank you.