Understanding the Multi-Faceted Drivers of Increasing Coal Consumption in Indonesia

To meet the Paris Agreement’s climate mitigation objectives, there is an urgent global need to reduce coal combustion. Yet coal usage, particularly in the power sector, is rising in many developing countries. Indonesia is a notable example. While government policy is widely considered as the principle driver of Indonesia’s increasing coal consumption, studies have largely overlooked the influence of socioeconomic forces. To understand these effects, we utilize a decomposition analysis to capture the individual effect of five drivers of coal consumption in Indonesia over 1965 to 2017: (1) the energy mix, (2) energy intensity of GDP, (3) population, (4) urbanization, and (5) urban incomes. Results show the energy mix has exerted the largest effect on coal consumption. In addition, by accounting for other socio-economic influences, we found that other less appreciated factors have contributed to rising coal consumption. In order of contribution these were the urban economic effect, the growing relative share of urban population, and the population increase itself in absolute terms. We thus demonstrate that the drivers of growing coal consumption are multi-faced, complex and intertwined. Our findings show that developing nations such as Indonesia share a need to decouple urban population growth and increasing per capita wealth from fossil fuel (and coal) emissions.