Indonesia's focus on natural resources

Indonesia had been relying largely on coal and gas to meet its electricity demands. Both raw materials are available in great quantities, are dispatchable, and the corresponding power plants can be built cheaply. Furthermore, coal in particular can be used to promote Indonesia's export business and support remote areas in their economic development. Coal mining has therefore been a cornerstone of politics and a likely target for government interventions. In 2020, coal mines were obliged to sell 25 percent of the production volume on the domestic market and the state-owned electricity supplier PLN received a maximum price of 70 U.S. dollars per ton of coal purchased.

Coal production outlook

Not surprisingly, coal producers expected a thriving market in Indonesia. However, the coal industry has also been affected by the COVID-19 pandemic and it is therefore unlikely that the coal output will have increased further in 2020. And yet, according to the Department of Energy, the minimum target of 550 million metric tons has been met and the demand for coal is expected to rise again due to a cold winter in China and the Chinese ban on Australian coal. A flourishing export market is important as around 70 to 75 percent of Indonesia’s coal production is exported abroad. The main export countries include China, India, Japan and South Korea. In 2018, about one third of the global coal exports was exported from Indonesia, making it the largest coal exporting country in world. However, the Indonesian energy program could turn the industry into an internal market. For that reason, and to achieve independence from the global market, several large Indonesian mining companies have expanded directly into the energy sector in order to become an integrated energy company that uses its own coal.

Coal's impact on the environment

On the other hand, the production of coal and especially electricity generation from coal does have an impact on the environment. Back in 2016, it was estimated that the emissions of carbon dioxide amounted to 4.6 billion metric tons in Southeast Asia. Taking current developments in Indonesia and other countries into account, not less, but more is to be expected.

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