On 15 June 2026 CPD co-convened a high level roundtable with colleagues from the Institute for Essential Services Reform (IESR) in Jakarta to discuss how to reform Indonesia’s fossil fuel subsidy settings.
The roundtable built on recent complementary work from each institute, including CPD’s report Redirecting Our Energy, which lays out a practical, phased pathway to reform household subsidies to better serve their purpose of making fuel accessible to those who can afford it. CPD’s research estimates that reforms would save the government IDR 95.97 trillion (USD 5.8 billion) per year, improve the purchasing power of low income households, and level the playing field for renewable energy.
The Roundtable also drew from a recently released inventory from IISD measuring the suite of fossil fuel support measures in Indonesia, which estimates the total cost at IDR 713.5 trillion (USD 45 billion) in 2024, as well as research from IESR on how to reform Indonesia’s ‘domestic market obligation’ policy to level the playing field between fossil fuels and renewables.
The discussion brought together around 25 participants including officials from a range of ministries, parliamentarians, experts from think tanks and financial institutes. Discussions took place under the Chatham House Rule of non-attribution, but key themes discussed included:
Subsidy settings are increasingly unsustainable. Reforming energy subsidies is no longer a question of “why” but “how”.
Subsidies and compensation payments are leading to increasing pressure on the budget. Their benefits are also significantly skewed to higher-income groups, they reduce the fiscal space for productive investment in education, health, infrastructure, and clean energy and do not incentivise energy efficiency. Nearly two decades of policy discussions, studies, and reform experiences have already generated sufficient evidence to justify action, and so discussions turned to the concrete reform mechanisms proposed.
Indonesia has the tools it needs to tackle reform while maintaining social protection.
Indonesia now possesses many of the enabling conditions that were absent during earlier reform efforts. These include data registries like DTSEN, stronger national social protection systems; higher levels of financial inclusion and use of digital payments and e-wallets, developments in effective biometric identification systems and interoperability among government databases. Participants emphasised the need to shift from subsidising energy commodities to directly supporting eligible citizens.
The main challenges remain public communication and the political strategy.
Political pushback and fear of negative electoral consequences have to date hindered reform. Several in the room emphasised that successful reform will require a compelling narrative and public communication campaign centred on fairness, protection of vulnerable households, and tangible public benefits. This will be an area of ongoing work for CPD and partners.
CPD and colleagues in the ETP Forum are continuing to advocate for fossil fuel subsidy reform over the coming months. CPD Senior Adviser Dr Ruddy Gobel also was quoted in this Jakarta Globe article about the importance of reforming the energy subsidy, arguing that the current administration has the necessary tools it needs to achieve reform.
The ETP Forum comprises CPD, Climateworks Centre, the Indonesian Research Institute for Decarbonisation, the Institute for Essential Services Reform, the Purnomo Yusgiantoro Centre and the International Institute for Sustainable Development, and was established in 2022. The ETP Forum helped coordinate support to Indonesia’s G20 Presidency in 2022 and ASEAN Chairship in 2023.
