G20 Countries Agree to Cut Fossil Fuel Subsidies

Jokowi Officially Closed Indonesia's G20 Long Event

G20 Indonesia has ended by producing the Leaders’ Declaration. One of the declaration contents is the agreement of the G20 countries to cut fossil fuel subsidies

The use of fossil fuels encourages wasteful consumption. This is following the commitment that has been initiated since the declaration in Pittsburgh, United States of America in 2009.

The 12th point of the Bali Leaders Declaration states, “We will increase our efforts to implement the commitment made in 2009 in Pittsburgh to eliminate and rationalize, in the medium term, the inefficiencies of fossil fuel subsidies that encourage wasteful consumption and are committed to achieving the goals this, while providing targeted support to the poorest and most vulnerable countries,”.

Efforts to cut fossil fuel subsidies are carried out as one of the efforts to run low-carbon energy or an energy transition so that it can reduce the impact of global climate change.

“We will accelerate the transition and achieve our climate goals by strengthening energy supply chains and energy security and diversifying energy mixes and systems. We will rapidly increase the deployment of zero and low-emission power generation, including renewable energy sources, and measures to improve energy efficiency, emission reduction technologies, and emission elimination technologies, taking into account national circumstances.”

Nevertheless, efforts to implement the energy transition or low-carbon energy are considered to need joint support, especially from developed countries. The reason is, this will also be related to affordable energy prices in each country.

“We are committed to promoting sustainable investment in infrastructure and industry, as well as innovative technologies and a range of fiscal policies, market mechanisms, and regulations to support the clean energy transition, including, where appropriate, the use of carbon price and non-pricing mechanisms and incentives, while providing appropriate support targeted at the poorest and most vulnerable.”

On the other hand, Indonesia is actually one of the countries with the most “bloated” fossil energy subsidies, especially fuel oil (BBM) and electricity. In fact, in 2022 alone energy subsidies and compensation, both fuel and electricity, are estimated to reach IDR 502.4 trillion.

The estimated amount of energy subsidies and compensation is contained in Presidential Regulation No. 98 of 2022 concerning the Revision of the State Revenue and Expenditure Budget (APBN).

The estimated amount of subsidies until the end of 2022 has jumped from the initial estimate in the 2022 State Budget of IDR 152.5 trillion. The Rp. 502.4 trillion in subsidies and compensation consists of Rp. 208.9 trillion in subsidies, Rp. 149.4 trillion for fuel and LPG subsidies and Rp. 59.6 trillion for electricity subsidies.