Just Transition.

Ensuring a Just Transition: The Path to a Low-Carbon Economy

As the world intensifies efforts to combat climate change, the shift toward a low-carbon economy is inevitable. However, without careful planning, this transition risks deepening social inequalities, particularly for workers and communities reliant on fossil fuel industries. To address these challenges, the concept of a “just transition” emerged, initially championed by Trade Unions in the 1980s to protect workers affected by environmental regulations. Today, a just transition ensures that the move to a net-zero future is fair, inclusive, and beneficial for all, creating decent jobs, fostering economic resilience, and preventing vulnerable communities from being left behind.

Indonesia’s Challenge: Balancing Growth and Sustainability

Indonesia faces challenges in defining a just transition that aligns with its unique socio-economic landscape as a major fossil fuel exporter. To capture potential, minimize impacts, and maintain public support for the ongoing energy transition, the country must ensure an inclusive and equitable shift to renewable energy. The Institute for Essential Services Reform (IESR) proposes a shift to a low-carbon system that addresses socio-economic challenges, mitigates risks, and ensures equitable benefits, particularly in coal-producing regions such as East Kalimantan, Central Kalimantan, North Kalimantan, and South Sumatra.

Recognizing these priorities, the Indonesian government, through the Ministry of National Development Planning/Bappenas Republic of Indonesia , integrates just transition principles into its Long-Term Development Plan (RPJPN) 2025-2045, prioritizing low-carbon development as a key component of economic transformation within the green economy framework.

The Financing Hurdle: Unlocking Investment for Energy Transition

A major obstacle in Indonesia’s energy transition is the availability of affordable funding. Without adequate financing, progress will be difficult. To support its climate initiatives, Indonesia secured a $20 billion commitment from the Just Energy Transition Partnership (JETP) during the G20 summit. Unlike conventional energy transition efforts, JETP places a strong emphasis on justice—ensuring an inclusive process that considers the needs of all stakeholders.

To guide its implementation, the JETP Secretariat has developed the Comprehensive Investment and Policy Plan (CIPP), using the JET Framework for Indonesia as the foundation. Achieving JETP targets is projected to bring significant public health benefits, potentially preventing USD 150 billion in health costs and avoiding 240,000 premature deaths from air pollution by 2050.

The Role of Strong Leadership in a Just Transition

Indonesia’s shift to a low-carbon economy demands strong government leadership to ensure fairness and accountability throughout the transition. IESR points out that efforts should go beyond infrastructure development to include broader socio-economic considerations, particularly for communities in coal-mining regions. A just transition must be holistic—balancing environmental goals with social and economic resilience.

Key Takeaways: Indonesia’s Landscape

1. Emission Reduction Goals – Indonesia targets a 31.89% emissions reduction by 2030 (or 43.2% with international support), requiring a transition from fossil fuels to renewable energy.
2. Net-Zero Roadmap – By 2060, Indonesia aims for complete reliance on renewable energy and other low-emission resources, ceasing new fossil fuel power plant development by 2030, with challenges related to grid stability.
3. Investment Needs – The transition requires USD 1,108 billion by 2060 (USD 28 billion annually), primarily for power plant development and transmission system improvements.
4. Financing & Policy Barriers – Limited bankable projects and financial sector expertise pose funding challenges, necessitating innovative financing mechanisms and regulatory reforms.
5. Key Solutions – Advancing energy efficiency, storage systems, economic integration near power sources, and strengthened regulations can facilitate a smoother transition.

Conclusion

Indonesia’s journey toward a low-carbon future is filled with challenges, but a well-executed just transition can create economic opportunities, protect livelihoods, and strengthen environmental resilience. By ensuring fair policies, securing investment, and prioritizing community well-being, Indonesia can pave the way for a sustainable and inclusive energy transformation.

Sources:

https://climatepromise.undp.org/news-and-stories/what-just-transition-and-why-it-important?

https://iesr.or.id/en/defining-just-transition-for-indonesian-context/?

https://pse.ugm.ac.id/__trashed/?

https://iesr.or.id/en/identify-funding-needs-for-the-just-transition/?

https://iesr.or.id/en/the-just-principle-in-financing-just-transition-in-indonesia/?

https://www.energytransitionpartnership.org/wp-content/uploads/2024/04/Grid-Financing-Challenges-for-Energy-Transition-in-Indonesia.pdf?

Senang Eco Services is a Bali-based sustainability consultancy dedicated to driving sustainability transformation. We offer consultancy and advisory services, a research innovation lab, and certification guidance to help businesses and communities adopt sustainable practices that benefit people, the planet, and profitability.