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Indonesian bill turns coal-derived fuels clean by ignoring true scale of emissions

Coal barge, Central Kalimantan. Indonesia, a top producer and exporter of coal, has been pushing gasification at home as an alternative to expensive imports of liquid natural gas and to boost demand for the commodity. Image by Andrew Taylor/WDM via Flickr (CC BY 2.0).

  • A bill being considered by Indonesia’s parliament defines fuels derived from coal as being “new energy” with “minimal” carbon emissions.
  • Energy experts have slammed this dissonance, pointing out that producing and burning gasified coal, for example, emits more emissions than simply burning the solid coal for the same amount of energy.
  • The bill also calls for the adoption of costly and largely unproven technologies to help coal-fired power plants run “cleaner,” including carbon capture and storage.
  • But experts say it would be far more cost-effective to invest in truly renewable energy, and call into question Indonesia’s commitment at last year’s climate summit to phase out coal from its energy mix.

JAKARTA — Indonesia looks set to continue its heavy reliance on coal in its energy mix under a legislative sleight of hand: it will define fuels derived from coal as “new energy” and ignore any carbon emissions associated with them as “minimal.”

The proposal has drawn heavy criticism from energy experts, who say it contradicts the Indonesian government’s pledge at last year’s COP26 climate summit in Glasgow to phase out its use of coal.

The fossil fuel accounts for the majority of Indonesia’s current energy mix, and now looks set to eclipse renewable alternatives under a proposed bill on new and renewable energy.

At a hearing on March 17, parliament presented the latest draft of the bill, which formally defines hydrogen, coal bed methane, liquified coal, and gasified coal — all products of the fossil fuel — as “new” energy, alongside nuclear.

Eddy Soeparno, deputy chair of the parliamentary commission on energy affairs, said these “downstream coal products” will be processed in such a way as to eliminate their carbon content.

“Therefore, the carbon content in the coal is very minimal,” he said as quoted by Indonesian news portal

But this kind of reasoning ignores the emissions from turning the coal into its gas or liquid fuel forms, according to the Institute for Essential Services Reform (IESR), a Jakarta-based energy policy think tank.

The government is betting big on coal gasification, which can be used to produce both hydrogen and dimethyl ether (DME), the latter being a gas that can replace liquified petroleum gas (LPG). And while burning DME produces less in the way of emissions and particulate matter than burning coal, this doesn’t include the emissions associated with the gasification process.

Over the life cycle of turning coal into DME into energy, the process emits 1,031 grams of carbon dioxide equivalent per kilowatt-hour of electricity generated, according to the IESR. That’s higher than the carbon intensity from simply burning coal for electricity, which is less than 1,000 gCO2e/kWh. The carbon intensity of DME is also more than 25 times the life cycle emissions from renewable energy such as solar power, according to the IESR.

Allowing for such dissonance in the energy bill shows parliament’s “lack of understanding of the need for energy development in the context of the energy transition,” Fabby Tumiwa, executive director of the IESR, said in a statement. He added that parliament is “accommodat[ing] the interests of the coal industry, which wants to continue to gain market share when the coal market for electricity generation declines. The entry of new energy technologies such as coal downstream will make Indonesia trapped with fossil energy infrastructure.”

View of Suralaya coal power plant in Cilegon city, Banten Province, Indonesia. Image © Kasan Kurdi / Greenpeace.

‘Black hole’ of funding

There’s also the problem of the cost of gasification projects, which the Indonesian government has severely underestimated, according to the Institute for Energy Economics and Financial Analysis, another think tank.

The government has set a price of $378 per metric ton for DME, fixed for 20 years. But a recent IEEFA analysis shows that a more realistic price, assuming the coal suppliers and DME plant operators are expected to turn a profit, is more like $601 per metric ton.

“The findings concluded that the DME project in its current form would not be profitable, and that Indonesia’s downstream coal plans add up to a black hole,” the IEEFA said. It added that “for DME to make economic sense, it would still require heavy government subsidies.”

Other potential “black holes” into which the new energy bill calls for throwing money are various technologies to make new and existing coal-fired power plants “cleaner.” These include carbon capture and storage (CCS) technology, and replacing a portion of the coal with wood pellets, a technique known as biomass co-firing.

But by promoting efforts to prolong the use of coal plants, the Indonesian government is casting doubt on its own commitment to phasing out coal, said Deon Arinaldo, energy transformation program manager at the IESR.

“The support for fossil energy or non-renewable energy in the new and renewable energy bill will give a signal to maintain the [coal-fired] power plant in the energy system for longer, instead of retiring [them] earlier as has been discussed in recent months,” he said in the statement.

The IESR also notes that technologies like CCS are prohibitively expensive and largely unproven at scale, making them “a relatively expensive option compared to developing renewable energy.”

“To achieve carbon neutrality, the most cost-effective greenhouse gas mitigation should be considered, which according to our analysis is renewable energy,” Deon said. “With regulatory support, renewable energy can be built and renewable energy funds can be used effectively to encourage the preparation of massive renewable energy projects.”

Coal Mining in East Kutai, East Kalimantan. Coal is the major fossil fuel that drives Indonesia’s economy. Image by consigliere ivan via Wikimedia Commons (CC BY 2.0).

Incentives for coal

Despite the widespread criticism against coal gasification, the government has prepared a slate of incentives to develop the coal gasification industry. Non-fiscal incentives include granting coal-mining licenses that remain valid as long as there are still reserves in the ground. Previously, mining licenses were capped at 20 years.

Fiscal incentives include an exemption from having to pay royalties for coal destined for gasification and other downstream uses. This change means less revenue for local and national governments, while ensuring a windfall for miners, and cost savings for gasification plant operators.

The government’s flagship coal gasification project is a plant in Tanjung Enim, South Sumatra province, that’s slated to begin operations in late 2024. The government has appointed a consortium led by state-owned coal miner PT Bukit Asam to build and operate the plant, which will produce DME.

A 2020 study by Action for Ecology and People’s Emancipation (AEER), an Indonesian NGO, warns that the $2.4 billion project will produce 4.26 million metric tons of CO2 equivalent per year, or five times more than producing the same volume of LPG.

Given all the problems associated with coal, the fossil fuel should have no place in the renewable energy bill, according to Grita Anindarini, a program director at the Indonesian Center for Environmental Law (ICEL).

“Can this energy that we have extracted for such a long time be called new energy?” she said during a recent online press conference.


Banner image: Coal barge, Central Kalimantan. Indonesia, a top producer and exporter of coal, has been pushing gasification at home as an alternative to expensive imports of liquid natural gas and to boost demand for the commodity. Image by Andrew Taylor/WDM via Flickr (CC BY 2.0).


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