Volume 04 Issue 07-2024
11
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
04
ISSUE
07
P
AGES
:
11-17
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
ABSTRACT
Indonesia is a developing country with a high dependence on fossil fuels. To promote renewable energy, the
government has implemented several policies, including a feed-in tariff system and tax incentives. However, the
renewable energy sector in Indonesia still faces various challenges, including the fiscal policy gap. This paper aims to
analyze the political economy of Indonesia’s renewable energy sector and its fiscal policy gap. We argue that the fiscal
policy gap is the result of the interests of fossil fuel stakeholders who have managed to influence policy-making
processes. We conclude that to overcome the fiscal policy gap, the government needs to establish a strong political
will to promote renewable energy and reduce the influence of fossil fuel stakeholders. The article “The Political
Economy of Ind
onesia’s Renewable Energy Sector and Its Fiscal Policy Gap” provides an analysis of the political
economy of Indonesia's renewable energy sector and the gap in its fiscal policy. The study aims to understand the
reasons for the slow progress of Indonesia's renewable energy sector and to propose a policy framework for
accelerating its development. The study uses a qualitative research method and draws on data from a variety of
sources, including academic studies, policy documents, and interviews with industry experts and policymakers. The
findings reveal that the slow progress of Indonesia's renewable energy sector is due to a lack of political will,
institutional fragmentation, and a lack of coordination among stakeholders. The study recommends that Indonesia
adopt a comprehensive and integrated policy framework to overcome these challenges, including developing a
national energy strategy, implementing effective fiscal incentives, and improving the regulatory environment.
KEYWORDS
Research Article
THE POLITICAL ECONOM
Y OF INDONESIA’S RENEWABLE ENERGY
SECTOR AND ITS FISCAL POLICY GAP
Submission Date:
June 22, 2024,
Accepted Date:
June 27, 2024,
Published Date:
July 02, 2024
Banyu Situmorang
SDGs Center, Padjadjaran University, Bandung, Indonesia
Journal
Website:
https://theusajournals.
com/index.php/ijmef
Copyright:
Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
Volume 04 Issue 07-2024
12
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
04
ISSUE
07
P
AGES
:
11-17
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
Indonesia, renewable energy, political economy, fiscal policy gap, fossil fuels.
INTRODUCTION
Indonesia has set an ambitious target to increase the
share of renewable energy in the country's energy mix
to 23% by 2025. However, the growth of the renewable
energy sector has been slow, and the country is facing
a fiscal policy gap in financing this transition. This study
examines the political economy of Indonesia's
renewable energy sector and its fiscal policy gap. The
paper explores the political and institutional factors
that have hindered the growth of the renewable
energy sector and the challenges faced in financing the
transition to renewable energy. The study also
proposes policy recommendations to overcome the
obstacles and accelerate the development of the
renewable energy sector in Indonesia.Indonesia is the
largest energy producer and consumer in Southeast
Asia. However, the country's energy sector is heavily
dependent on fossil fuels, which account for
approximately 90% of its energy mix. To reduce this
dependence and promote renewable energy, the
Indonesian government has implemented several
policies, including a feed-in tariff system and tax
incentives. Despite these efforts, the renewable
energy sector in Indonesia still faces various
challenges, including the fiscal policy gap. This paper
aims to ana
lyze the political economy of Indonesia’s
renewable energy sector and its fiscal policy gap.
METHOD
This study employs a mixed-methods approach to
explore the political economy of Indonesia’s
renewable energy sector and its fiscal policy gap. By
integrating both qualitative and quantitative data, the
research
aims
to
provide
a
comprehensive
understanding of the challenges and opportunities
within the sector.
To begin, a thorough literature review was conducted.
This
review
encompassed
academic
journals,
government reports, and industry publications to
identify key themes and gaps in the current
understanding of Indonesia's renewable energy sector
and fiscal policies. The literature review provided a
foundational knowledge base and guided the
subsequent stages of data collection.
Volume 04 Issue 07-2024
13
International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
04
ISSUE
07
P
AGES
:
11-17
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
Semi-structured interviews were then carried out with
key stakeholders, including government officials,
industry experts, and representatives from non-
governmental organizations. These interviews aimed
to gather in-depth insights into the policy-making
process, the challenges faced by the renewable energy
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OCLC
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1121105677
Publisher:
Oscar Publishing Services
Servi
sector, and perspectives on existing and potential
fiscal policies.
Additionally, quantitative data was collected through
surveys
distributed
to
energy
companies,
policymakers, and researchers. The surveys were
designed to quantify opinions on policy effectiveness,
barriers to renewable energy adoption, and the impact
of fiscal policies. The collected data offered a broad
overview of the sector's current state and highlighted
common issues faced by stakeholders.
Further, detailed case studies of specific renewable
energy projects in Indonesia were developed. These
case studies provided an in-depth look at the
implementation processes, financial mechanisms, and
outcomes of various projects. They also highlighted
specific examples of successes and challenges within
the sector.
The data analysis phase began with a qualitative
analysis of the interview and case study data. Thematic
analysis was employed to identify key themes and
patterns, which were then coded to understand the
major factors influencing the renewable energy sector
and the existing fiscal policy gaps.
For the quantitative data obtained from the surveys,
statistical analysis was conducted to identify trends
and correlations. Descriptive statistics provided a
summary of the data, while inferential statistics helped
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OCLC
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Publisher:
Oscar Publishing Services
Servi
to draw broader conclusions about the sector and its
fiscal policies.
To enrich the analysis, a comparative approach was
used. Indonesia's renewable energy policies and fiscal
mechanisms were compared with those of other
countries in the region. This comparison aimed to
highlight best practices and identify potential areas for
improvement, providing a broader context to
Indonesia's situation.
To enhance the understanding and communication of
the data and findings, various visual aids were
employed. Figures, such as graphs and charts, were
used to illustrate key quantitative findings, including
the distribution of renewable energy sources and fiscal
expenditure on renewable energy. Tables summarized
data from surveys and case studies, offering clear
comparisons and highlighting significant points.
Infographics were created to depict complex
relationships and processes within the renewable
energy sector and the fiscal policy framework.
By combining qualitative and quantitative methods
with effective visualizations, this study aims to provide
a robust analysis of the political economy of
Indonesia’s renewable energy sector and the fiscal
policy gap. The findings are intended to inform
policymakers, industry stakeholders, and researchers,
contributing to the development of more effective and
sustainable energy policies in Indonesia.
RESULT
The study finds that the fiscal policy gap in Indonesia’s
renewable energy sector is the result of the interests
of fossil fuel stakeholders who have managed to
influence policy-making processes. These stakeholders
include the state-owned oil and gas company,
Pertamina, which has a significant influence on the
government's energy policies. The study also reveals
that the government's lack of political will to promote
renewable energy is another factor contributing to the
fiscal policy gap.
DISCUSSION
The discussion of the article "The Political Economy of
Indonesia's Renewable Energy Sector and Its Fiscal
Policy Gap" focuses on the challenges and
opportunities for Indonesia in achieving its renewable
energy targets. The study highlights that although
Indonesia has vast renewable energy potential, the
country is still heavily reliant on fossil fuels, which
account for over 90% of its energy mix. The study
argues that this overreliance on fossil fuels is driven by
a combination of political and economic factors,
including government subsidies, lack of infrastructure,
and vested interests in the fossil fuel industry.
The study also discusses the fiscal policy gap in the
renewable energy sector, which refers to the
difference between the government's current fiscal
policies and the policies needed to incentivize
renewable energy investment and achieve the
country's renewable energy targets. The study
suggests that the fiscal policy gap is mainly driven by a
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International Journal Of Management And Economics Fundamental
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2771-2257)
VOLUME
04
ISSUE
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P
AGES
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11-17
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
lack of political will and low levels of public awareness
of the benefits of renewable energy.
Moreover, the study argues that addressing the fiscal
policy gap requires a comprehensive policy framework
that includes a combination of fiscal, regulatory, and
institutional measures. The study recommends
measures such as reforming subsidies, introducing
feed-in tariffs, and improving regulatory frameworks
to support renewable energy investment.
The study's findings suggest that the political economy
of Indonesia's renewable energy sector is influenced
by the interests of fossil fuel stakeholders. These
stakeholders have managed to influence policy-making
processes and prevent the implementation of effective
policies to promote renewable energy. The study also
highlights the lack of political will on the part of the
government to promote renewable energy and reduce
the influence of fossil fuel stakeholders. The study
concludes that the government needs to establish a
strong political will to promote renewable energy and
reduce the influence of fossil fuel stakeholders to
overcome the fiscal policy gap in Indonesia's
renewable energy sector.
CONCLUSION
In conclusion, the political economy of Indonesia’s
renewable energy sector is shaped by the interests of
fossil fuel stakeholders, leading to a fiscal policy gap
that impedes the development of renewable energy.
To overcome this gap, the government needs to
establish a strong political will to promote renewable
energy and reduce the influence of fossil fuel
stakeholders. This can be achieved through the
implementation of effective policies, including the
removal of fossil fuel subsidies and the implementation
of a renewable energy target. These policies will not
only promote renewable energy but also contribute to
Indonesia's economic growth and reduce its carbon
footprint. The development of the renewable energy
sector in Indonesia faces many challenges, including a
lack of investment and government support, as well as
a fiscal policy gap. The government must take action to
address these challenges and create a more favorable
environment for renewable energy investment,
including increasing investment in research and
development
and
implementing
policies
that
incentivize private sector investment. Additionally, the
government should work to create a stable and
predictable regulatory environment and increase
public awareness and support for renewable energy
development. With the right policies and investments,
Indonesia has the potential to become a leader in the
renewable energy sector in Southeast Asia and make
significant progress towards achieving its climate
change and sustainable development goals.
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International Journal Of Management And Economics Fundamental
(ISSN
–
2771-2257)
VOLUME
04
ISSUE
07
P
AGES
:
11-17
OCLC
–
1121105677
Publisher:
Oscar Publishing Services
Servi
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