Phasing out energy subsidies to improve energy mix: A dead end

Djoni Hartono, Ahmad Komarulzaman, Tony Irawan, Anda Nugroho

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

A major energy transformation is required to prolong the rise in global temperature below 2°C. The Indonesian government (GoI) has set a strategy to gradually remove fuel subsidies to meet its 2050 ambitious energy targets. Using a recursive dynamic computable general equilibrium (CGE) model, the present study aimed to determine whether or not the current energy subsidy reforms would meet the targets of both energy mix and energy intensity. It also incorporated the environmental aspect while developing a source of a detailed database in the energy sector. The energy subsidy reform policy (followed by an increase in infrastructure and renewable energy investments) could be the most appropriate alternative policy if the government aims to reduce energy intensity and emission, as well as improve energy diversification without pronounced reductions in the sectorial and overall economy. However, all simulations suggested that the removal of energy subsidy does not enough in attaining the targeted energy mix and energy intensity goals. Thus, the Indonesian government should also introduce progressive programs in renewable energy.

Original languageEnglish
Article number2281
JournalEnergies
Volume13
Issue number9
DOIs
Publication statusPublished - May 2020

Keywords

  • Computable general equilibrium
  • Energy intensity
  • Energy mix
  • Energy subsidy
  • Environment
  • Renewable energy

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