Economic, Social, and Environmental Impact of Renewable Energy Investment: Empirical Study of Indonesia

Stipulated by the Paris Agreement, the Indonesian government has committed to reducing CO2 emissions from the power generator sector by achieving a national renewable energy mix share of 23 percent by 2025. Although the environmental impact may be obvious, there is a potential trade-off in environmental and social aspects of the energy mix transition that should be considered. This study aims to identify the effect of renewable energy investment in the power sector based on economic, social, and environmental aspects. This was assessed through the examination of several indicators, including Gross Domestic Product (GDP), household income in rural and urban areas, employment, and CO2 emissions. Using Social Accounting Matrix (SAM) analysis, two scenarios are simulated in this study (1) we identify which renewable energy investment has the most significant impact (2) we examine the impact of non-renewable energy investment substitution to renewable energy investment. The result shows that the construction of hydropower plants generates the least emission but also moderate impact on socio-economic aspects compared to other renewable energy. In addition, emissions may be reduced higher if coal power plants are being substituted to only hydro and geothermal power plants.