From expansion to transition: key actions to build a resilient and low-carbon economy

Indonesia needs to realise that expanding coal production to boost revenues is counter-productive: it inflates oversupply risks, fuels methane emissions, and delays the shift to a low-carbon economy. Instead, the government should establish a long-term production cap, strengthen emissions management and guide coal regions through a just transition.

Coal is no longer a reliable revenue pillar for Indonesia as the global energy system shifts towards cleaner and more affordable renewable energy sources. The Indonesian government must strengthen coal governance while ensuring that existing permits are managed sustainably. 

This chapter outlines four key recommendations to support Indonesia’s transition toward a low-carbon economy. These include controlling coal production, improving CMM MRV, implementing CMM mitigation, and developing a just transition pathway.

4.1
Coal production control

Controlling coal production is crucial to manage oversupply, avoid stranded assets, and manage rising methane emissions. 

One key step is to impose a moratorium on new coal mining permits, especially as existing production capacity already exceeds domestic and export demand. Additionally, the government should re-consider its plan to expand licenses to cooperatives and small enterprises that often lack the technical and financial capacity to operate safely and responsibly. 

The priority for the government should be ensuring the implementation of good mining practice and environmental compliance for current licensees. MEMR recently suspended 190 licenses due to non-compliance with the reclamation obligations and approved production plans. This enforcement approach should be expanded to include emissions monitoring and management as key criteria for future production plan approvals.

Additionally, a long-term production limit is needed. This limit should be incorporated into the annual production quota approval process (RKAB) to ensure coherence between short-term targets and long-term transition goals. This policy would create clearer signals for industry to manage production and plan for business diversification.

4.2
Improving CMM MRV

Methane emissions are often overlooked in Indonesia’s coal sector. The absence of specific emission factors, emissions reporting procedure and lack of awareness from the industry have made coal mine methane management less prioritised. Understanding coal mine methane profile will help the government and industry design strategy to manage these emissions. 

Therefore, a key priority is to strengthen the national CMM emissions inventory by developing Indonesia-specific emission factors and improving data collection systems. These emission factors should reflect variations in coal basins, mine depth, and coal quality to provide more accurate estimates. For underground mines, where methane also becomes a key safety concern, emissions should be based on direct measurements to minimise uncertainty.

In addition, facility-level emissions reporting should be required for all mining licence holders as part of the production plan approval process (RKAB). Integrating emissions reporting into this process would enhance transparency and accountability. Similar reporting frameworks are already in place in Australia and the United States.

4.3
CMM capture and utilisations

Methane capture and utilisation is one of the most cost-effective strategies to reduce emissions while enhancing safety and improving operational efficiency. In many coal-producing countries, underground mine drainage projects have been widely adopted. In China, for example, underground coal mines with concentration above 8% are required to capture and utilise the methane gas. 

Indonesia could start by prioritising underground mine drainage. This strategy offers a high-impact measure that can deliver substantial methane reductions from just a few high-emitting mines. The recently submitted Second NDC already includes fugitive methane reduction from coal mining, providing a basis for targeted action. Beyond emissions reduction, this strategy could improve safety and operational efficiency. 

In addition, the government should initiate feasibility studies and pilot projects for other mitigation technologies, such as ventilation air methane (VAM) oxidation and pre-mine drainage for open cut coal mines. The New South Wales Environmental Protection Agency is currently developing a mitigation guide for coal mines which could be a reference for implementation stages.

4.4
Facilitating just transition in coal-producing regions

Coal regions cannot be left behind in the transition. Unfortunately, the Just Energy Transition Partnership (JETP) has so far focused on the power sector, leaving transition issues in coal mining regions largely unaddressed. 

To bridge this gap, the government should establish an institutional framework to coordinate just transition planning across ministries, regional governments, and industry stakeholders. Such a framework should include regional transition roadmaps, along with programs for workforce retraining, economic diversification, and social protection. These initiatives could be financed through coal revenues, royalties, or climate finance mechanisms.