Gradual Removal of Energy Subsidies
Policy measure

The government has sought to gradually remove energy subsidies, for example, fuel subsidies for electricity generation and industry have been removed (APERC, 2009).


Nevertheless, substantial government subsidies continue to be applied to lower octane gasoline (RON 88 octane), which is the gasoline grade most widely consumed in Indonesia; diesel fuel for transport; kerosene for households, as the government is expanding the kerosene-to-LPG conversion programme in households; and subsidies to certain classes of electricity of low capacity supply contracts in households and small businesses, a group which constitutes a large share of electricity demand (APERC, 2010).

Implementation
No identified implementation measures.
Challenges
No identified challenges.
Outcomes

Although no precise number on the effects of subsidy cuts on energy consumption, including the removal of the fuel subsidies, exists, the industrial sector’s energy consumption – which accounted for 35 percent of total energy consumption in 2003 – dropped by 7 percent from 2001 to 2002 and an additional 3.7 percent from 2002 to 2003 (USAID, 2007).

References

USAID (US Agency for International Development), 2007. Annex 3: Indonesia Country Report – From Ideas to Action: Clean Energy Solutions for Asia to Address Climate Change. Washington, DC.


APERC (Asia-Pacific Energy Research Centre), 2010. Compendium of Energy Efficiency Policies of APEC Economies – Indonesia. Tokoy. Available at: www.ieej.or.jp/aperc/CEEP/2010/Indonesia_2010.pdf.