Redirecting our Energy: A practical pathway for energy subsidy reform in Indonesia is a report from the Centre for Policy Development that lays out a practical, phased pathway to reform Indonesia’s costly household fossil fuel subsidies to better serve their purpose of making fuel accessible to those who can’t afford it.
The report argues that shifting from subsidising LPG and electricity products to supporting people directly 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 report lays out how this transition can happen, and highlights that the government already has the tools needed to reform the system.
Redirecting our Energy is a report from the Centre for Policy Development that lays out a practical, phased pathway to reform Indonesia’s costly household fossil fuel subsidies.
Redirecting our Energy goes beyond making the case for why subsidy reform is needed to laying out how this could be done.
Indonesia now spends IDR 203.5 trillion (USD 12.2 billion) each year on household LPG, electricity and fuel energy subsidies alone—around 40% of total social assistance spending, nearly 6% of the state budget, and roughly equivalent to the entire health budget.
While framed as a policy to support low-income households, the subsidies disproportionately benefit the wealthy. At the same time, artificially low prices are locking Indonesia into a fossil-fuel dominated energy mix—slowing growth in the clean energy sector and weakening Indonesia’s ability to meet its emission reduction goals.
The report continues the work started in the 2024 policy brief on Why Energy Subsidy Reform is Crucial for a Just Transition in Indonesia, and deploys the just transition framework CPD developed in the 2025 report Powering Prosperity.
Redirecting our Energy lays out a practical, phased pathway to shift from subsidising energy products to supporting people directly. Recommendations include:
While the government has the necessary tools at its disposal, successful implementation will require political will, bold leadership and strong public engagement. Resistance is likely from households and businesses that currently benefit from subsidised LPG prices, making clear communication about the broader societal and economic benefits essential.
Indonesia has long relied on energy subsidies to reduce poverty, expand access to modern energy and support industrial development. However the current system disproportionately benefits the wealthy, and distorts the energy market, slows renewable investment and locks Indonesia into a fossil fuel dominated system.
The government has set ambitious goals for emissions reduction and building a world-leading clean energy industry. Reforming energy subsidies is essential to achieving both. This would not only be a fairer and more effective way to support Indonesia’s most vulnerable citizens—it would help build a more productive, resilient and prosperous economy.
