First name: Sena
Last name: Sugiono
Class Year: 2025
Advisor: Cary Krosinsky
Essay Abstract:
This paper attempts to quantify the impact of replacing Indonesia’s existing Domestic Market Obligation with a Renewable Subsidy Program. The DMO is a market-altering regulation requiring domestic coal producers to sell some of the annual production domestically under a price cap. The paper proposes a subsidy program design and analyzes how the subsidy program will impact the government’s bottom line and provide additional environmental benefits.
The analysis shows that replacing the DMO with an RSP will result in a net benefit of up to $40.0 billion. That nominal amount is ~30% of Indonesia’s current climate funding gap to meet its 2030 goals. The RSP also results in an additional 42.4 GW of renewable generation capacity and cumulative emissions reductions of at least 1,596 mtCO2.
The RSP is expected to contribute to the creation of 560,000 jobs, including 84,500 jobs in the domestic renewables supply chain. This amount is more than 10 times the jobs lost in the coal industry (52,500jobs). By creating an RSP that provides $22.7 billion in subsidies, the government will be able to attract $93.5 billion in total investments—4.1x that of the initial government investment.