Inclusive and Just Energy Transition Policies in South Sumatra (ID0168)

Project Overview:

Local governments play a strategic role in advancing a just energy transition through multi-stakeholder forums in South Sumatra. Grounded in open government principles and extractive industry standards, this commitment seeks to develop participatory and democratic energy transformation guidelines. Its primary focus is to strengthen transparency, access to information, and cross-sectoral collaboration to support the transition of coal-producing regional economies toward a sustainable green economy that benefits all segments of society.

Targeted Issues

The Paris Agreement is a global commitment to limit the temperature increase to 1.5°C. Indonesia ratified the Paris Agreement on April 22, 2016 through Law No. 16 of 2016 demonstrating its commitment to reduce emissions in the Nationally Determined Contribution (NDC). In order to achieve NDC targets, the role of local governments is crucial in accelerating just energy transition at the local level, given that each region has diverse renewable energy potential. The diversity of renewable energy potential between regions provides an opportunity to accelerate the national energy transition and solve the challenge of uneven energy distribution. However, in practice, the involvement of local actors and affected communities still needs to be strengthened, especially in regions with high dependence on coal. For example, Muara Enim Regency, which in 2023 recorded a GRDP of IDR 118.52 trillion, with 72.26% coming from the mining sector, requires strong energy transition regulations. Economic transformation and social justice are critical for coal-dependent regions. Developing economic transformation strategies and strengthening collaboration between local governments and affected communities are essential to ensure inclusive participation in a just and inclusive energy transition.

Causes of the Problem

Immediate Causes
Limited awareness and capacity of local governments and affected communities regarding the issue of a just energy transition, both in terms of access to information and knowledge. In addition, technical capacity and supporting infrastructure for the utilization of renewable energy remain insufficient. Access to information, planning capacity, and financing are critical for optimizing regional energy potential; however, these elements are not yet adequately in place. Furthermore, the absence of a regulatory framework for energy transition at the local level constitutes a significant constraint. There are currently no specific regulations mandating local governments to plan and implement energy transition measures, despite Indonesia’s existing Nationally Determined Contribution (NDC) commitments.

Underlying Causes
Limited economic incentives for research, development, and deployment of renewable energy continue to impede the energy transition. Fossil fuel subsidies, relatively stable domestic coal prices, and limited fiscal incentives hinder the reallocation of investment toward renewable energy. In addition, public participation in energy policymaking remains limited due to centralized and top-down planning processes, resulting in the insufficient incorporation of the aspirations and socio-economic needs of affected communities.

Root Cause High economic dependence of subnational regions on the coal sector. In Muara Enim Regency, more than 70 per cent of Gross Regional Domestic Product (GRDP) is derived from the mining sector. Many regions also rely heavily on coal-related revenue-sharing funds (Dana Bagi Hasil/DBH), which account for up to 20 per cent of subnational budgets (APBD) to finance development activities. This dependency incentivizes local governments to prioritize the coal sector in order to maintain revenue streams, employment, and short-term economic stability, thereby constraining efforts toward a just and sustainable energy transition.

Proposed Solutions

Under this commitment, ICEL proposes to collaborate with the Extractive Industries Transparency Initiative (EITI) Indonesia Secretariat to establish a multi-stakeholder forum involving the Central Government, local governments, civil society organizations, and academia in South Sumatra Province. The forum will also engage local governments in regions with the highest coal production, namely Musi Banyuasin Regency and Muara Enim Regency. The forum aims to facilitate dialogue on the challenges of achieving a just energy transition, to formulate economic transformation strategies for affected communities, and to identify local-level policy needs to support an inclusive and equitable transition process. While multi-stakeholder forums have previously been held in South Sumatra, this initiative differs in scope and approach. It will involve a broader range of government agencies that have not been systematically engaged in earlier processes, including agencies responsible for manpower, women’s empowerment and child protection, micro, small, and medium enterprises (MSMEs), social affairs, and the environment, as well as relevant agencies at the local and municipal levels. This expanded engagement recognizes that local governments are among the most affected stakeholders and hold strategic authority in sustainable development planning. In the first year, the forum is expected to identify priority policy needs related to a just energy transition. In the second year, a draft subnational policy on just energy transition will be developed through a participatory mechanism, beginning from the planning stage.

Relevance to 5 OGI Strategic Issues

The proposed solutions are aligned with OGI’s strategic issue on Energy, Environment, and Natural Resources, as this commitment seeks to formulate inclusive policies to advance a just energy transition. In addition, the proposed commitment addresses cross-cutting issues, particularly access to justice and inclusive public services. The development of equitable energy transition policies is expected to take place at the local level.

Relevance to the Government's Priority Agenda

This commitment is in line with President Prabowo's priority agenda in Asta Cita II and V, namely accelerating the green economy and strengthening governance reform. This program supports regional economic transformation based on renewable energy with community participation and protection of vulnerable groups. Through integration into the RAN OGP, this program promotes transparency and collaboration between the central and regional governments to reduce dependence on coal, in line with the current government's vision of sustainable development.

Expected Outcome

The desired outcome of implementing this commitment is the formulation of a Policy Draft at the provincial or district level related to a just energy transition. To achieve this, this commitment encourages a change in perspective that energy transition is not merely a sectoral and technical issue, and targets broader involvement of local government institutions outside the planning and energy sectors, such as employment, women's and children's empowerment, community empowerment, cooperatives and MSMEs, the environment, and social issues. With a bottom-up approach from the planning stage and the participatory involvement of affected communities, the policy is expected to be locally adaptive and inclusive, with a gradual transition from fossil fuels to renewable energy and the protection of workers' rights through retraining and new job placements. This policy is also expected to integrate a gender perspective, encourage women's participation, and emphasize sustainable economic transformation through investment in green infrastructure, environmentally friendly technology, and the empowerment of local communities and MSMEs so that the benefits of energy transition are felt by all levels of society

Commitment Plan

Results Indicators | Output | Timeline

An economic transformation guideline for coalproducing regions developed through multi-stakeholder consultation forums. | A report on dissemination and consultations with stakeholders at the local and national levels | Estimated end-of-year-1 (B-12) output
A final guideline document on economic transformation for coal-producing regions, discussed and submitted to the Provincial Government of Sumatra. | Estimated end-of-year output (B-24)