Chasing volume, losing value: the cost of coal over expansion in Indonesia

Indonesia is entering a defining phase in shaping the future of its energy sector. Years of rapid coal expansion have boosted short-term revenues but also contributed to global oversupply, eroded company profits, and intensified methane emissions. Without decisive policy intervention, these economic and environmental costs are likely to escalate. A forward-looking, transition-oriented coal strategy is needed to steer the industry and support coal-producing regions in adapting to the evolving energy landscape. Indonesia’s recently submitted Second NDC, which includes commitments to coal mine methane mitigation, provides an important policy anchor for implementation.

Dody Setiawan
‍Senior Analyst Climate and Energy, Indonesia, Ember

Indonesia’s coal sector now stands at the intersection of two realities – shrinking global demand and rising methane emissions. The path forward is not to extract more but to measure, manage, and mitigate better. Recognizing coal mine methane as both a climate liability and an opportunity for innovation can turn today’s oversupply challenge into tomorrow’s transition advantage. In 2024, Indonesia’s coal mine methane emissions reached an estimated 722 kilotonnes of CH₄, equivalent to about 20 million tonnes of CO₂-equivalent, nearly the entire annual emissions of Sweden. Without mitigation, these emissions could rise by 25% by 2030, consuming a measurable share of the remaining global carbon budget. By tackling CMM through stronger measurement, reporting, and capture initiatives, Indonesia can contribute to safeguarding that global carbon space, enhance mine safety, and attract transition-aligned investment. Methane management is no longer peripheral to climate action, it is central to global credibility, economic resilience, and a just energy transition

Indonesia’s coal regions will need to prepare for declining coal revenues very quickly – as soon as public budgets decrease it will be harder to diversify the local economies.

Timon Wehnert
‍Co-Head of Research Unit International Energy Transitions, Wuppertal Institut

Coal production in Indonesia has steadily increased in recent years, providing Indonesia with substantial revenue for the country. However, aggressive coal extraction has significantly elevated methane emissions which contribute to climate change. From a market standpoint, demand for Indonesian coal is declining, particularly from key buyers like China and India, as both nations advance their commitments to clean energy. This report provides a comprehensive overview of Indonesia’s coal sector landscape, highlighting the environmental and economic implications. It also presents recommendations on how to limit coal production as well as reducing the methane emission to support a more sustainable energy future.

Mutya Yustika
‍Research & Engagement Lead, Indonesia Energy Transition, Institute for Energy Economics and Financial Studies (IEEFA)