0:04

I think the developed countries which have been trying

0:06

to tell us to phase down and phase

0:08

out are discovering it's not

0:11

easy, it's very complex and it's very

0:13

costly, and the transition is

0:15

very different in developing countries compared to

0:17

developed countries. Indonesia's economy

0:19

is closely tied to its natural

0:21

resources. It is the

0:23

world's fourth largest producer of coal

0:26

and Southeast Asia's largest gas supplier.

0:28

But even with its connection to

0:31

fossil fuels, the country's population strongly

0:33

supports climate goals. In

0:35

this year's presidential election, every

0:37

candidate advocated for the energy transition

0:40

and more renewables. At

0:42

the same time, like many

0:44

other developing countries, Indonesia needs energy

0:46

security, increased access to energy

0:48

and affordability. These factors

0:51

complicate the energy transition and

0:53

could prolong the use of existing

0:55

fossil fuel infrastructure and abundant

0:58

coal resources. So

1:00

how can Indonesian policymakers balance

1:02

economic development and the energy

1:05

transition? What is the

1:07

role of renewables in meeting the country's growing

1:09

energy demands? And how can

1:11

Indonesia collaborate in energy with other

1:14

Asia nations? This

1:20

is Columbia Energy Exchange, a weekly

1:22

podcast from the Center on Global

1:24

Energy Policy at Columbia University. I'm

1:27

Bill Loveless. Today

1:35

on the show, Mari Pangestu. Mari

1:38

is a distinguished visiting fellow at the

1:40

Center on Global Energy Policy. From

1:42

2020 to 2023, she served

1:44

as the managing director of development

1:47

policies and partnerships at the World

1:49

Bank. Prior to joining

1:51

the bank, Mari served as Indonesia's

1:53

Minister of Trade and as Minister

1:56

of Tourism and Creative Economy. I

1:59

sat down with Mari for a few minutes. an interview at the

2:01

Center on Global Energy Policy in New York. We

2:03

discussed her work in the Indonesian government

2:06

and her views on economic development in

2:08

the country. We talked

2:10

about the public support for decarbonization

2:12

and how it is influencing energy

2:15

policy and how Indonesia is using

2:17

its natural resources to build a

2:19

stronger presence in global energy markets.

2:22

I hope you enjoy our conversation. Marie,

2:24

Elga, Pangestu, welcome to Columbia Energy

2:27

Exchange. Thank you, Bill. Great to

2:29

have you here in New York and have

2:31

this discussion. Your country is just so fascinating,

2:35

the development that's taking place there,

2:37

and so significant, too, when we

2:39

talk about the energy transition, not

2:42

only for itself, but for the region and, quite

2:44

frankly, for the world. But before we

2:46

get into that, tell us a

2:48

little bit about yourself. You've held some prominent

2:51

roles in government and even in Washington, but

2:53

tell us a little bit about your background

2:55

and your schooling and how you

2:57

got to where you are today. I'm

3:00

from Indonesia. Many people don't know

3:02

it's a big country. We're the fourth largest country

3:04

in the world in terms of population, and

3:07

we have 17,000 islands. I

3:10

like to start with that because a lot of people who

3:12

are not familiar with Indonesia don't understand how big of

3:14

a country we are. It's almost incomprehensible if you're not

3:17

familiar with it. If you look at the map

3:19

for the first time and see how spread out

3:21

and how big it is. It takes

3:23

you longer to get from one

3:25

end of Indonesia to another than it is from

3:27

San Francisco to New York. Wow.

3:29

That gives you a perspective. I'm Indonesian,

3:31

but I happen to spend a lot

3:33

of time abroad because of

3:35

my father's work. Which was?

3:37

What kind of work did you get? He was actually an

3:40

economist. He taught at different universities,

3:42

so I ended up spending a

3:44

lot of my life being

3:46

educated in Singapore, Australia, and

3:48

then finally in the US to do

3:52

my PhD. Basically, I'm an economist

3:54

by training, and I always wanted to

3:56

work in academia. That's where I started

3:58

my career, teaching. and working

4:01

in Indonesia in the university.

4:04

And then somehow, you know,

4:06

I was at a time

4:08

in Indonesia where I was

4:11

advocating for good policy. And

4:13

I kind of became known for

4:15

that and labeled as

4:17

being vocal, although I didn't think that was very

4:20

vocal. And that's how probably

4:22

when we had the change in

4:24

government and, you know, democracy and all that,

4:27

I became part of the reform movement at the

4:29

time. And that's how I ended up in government, actually,

4:32

because we were all part of a reform

4:34

movement that ended up in government. Where you

4:36

held a couple of positions, trade minister and

4:38

tourism. Tourism and creative economy. So I was

4:41

in government for 10 years. And

4:44

sort of, you know, when I was an

4:46

academic, doing policy, good policy is important work.

4:48

You know, you've got, oh, you've got to

4:51

change the world. And then when you actually

4:53

have to implement policy reforms, you

4:55

find it's not that easy. So

4:58

even if you could achieve 20% of

5:00

what you thought should be done, that's already,

5:02

you should declare victory, right? So

5:04

that was a kind of huge learning experience.

5:06

And then I ended up also at the

5:10

World Bank as the

5:12

managing director of knowledge or

5:14

what we call development policy and partnerships.

5:17

So that's another learning experience

5:19

because you're not just dealing with the development

5:21

of your own country, but the development of

5:23

many, many other countries with very, very different

5:25

levels of development as well as different initial

5:28

conditions. So I think I've learned a lot

5:30

now about- Taken a lot from your, all the

5:32

work you did in Indonesia. You took it to

5:34

the World Bank and you're continuing today

5:37

in important roles. Your

5:40

country is so vast, as you mentioned,

5:42

and it's known for

5:44

its rich culture, its significant economic

5:46

growth, but it faces

5:49

a critical challenge in balancing its

5:51

energy needs with its environmental

5:54

and economic sustainability.

5:58

How is it going about- doing that? That's

6:01

a really good question. I

6:03

think things have changed in the last five,

6:06

eight years. Prior to that, I think most

6:09

developing countries, including Indonesia, their answer

6:11

when we are asked about climate

6:14

action is, climate is a luxury

6:16

for developing countries. We need to

6:18

grow first and we worry about climate later.

6:21

But now, I think we do see a

6:23

change in the government as well

6:26

as in the people's attitudes where

6:28

there is much more pressure

6:31

to deal with the

6:33

climate change. I would say one

6:35

important turning point was forest fires

6:37

because Indonesia was always looking

6:40

bad because of the forest fires from

6:42

the pitlands. In

6:45

2015, it really affected the

6:47

country very much and

6:50

lots of strong reaction from

6:52

the population which led to

6:54

very strong government action, including

6:58

moratorium on the

7:00

use of pitland for agriculture. I

7:02

think that led to quite a big change.

7:05

Now, I think our forest

7:07

fire issue and deforestation

7:09

issue has much, much reduced.

7:12

Now we are much more serious about

7:14

addressing more broadly the

7:17

issue of climate because we are

7:19

also facing frequency of

7:21

disasters, droughts, high temperatures,

7:24

pollution. That's the other big

7:26

thing that really hit the population more recently.

7:30

So I think we are going to be very serious about

7:32

addressing it. It's interesting you say

7:34

how it affects the people and raises concerns

7:36

and prompts the government response. We've seen that

7:39

very same thing happening in China. For example,

7:41

where pollution, particularly around Beijing, is

7:44

a big concern for the government there. We've

7:47

seen a lot of public attitudes about these

7:49

things when people get upset, when they are having trouble

7:51

breathing. They blame the

7:53

government. The government there is a big

7:55

issue for them. You see the same thing happening in your

7:57

country as well. Yes, most definitely, especially in the last few days.

8:00

last few years and we just had elections and

8:02

for the very first time all three candidates

8:05

in their platform had something

8:07

about climate change. Interesting. Yeah.

8:10

So, and we do review, you know,

8:13

the issues and how young people

8:15

feel about it and it did come out that

8:17

young people actually felt very strongly about the

8:20

environment. So I think... It would not be

8:22

that surprising, right? Young people you would expect

8:24

to be concerned it's their future but,

8:26

you know, we've seen in other countries Europe

8:29

for example where say farmers that's been, you

8:31

know, environmental policies have been a big concern

8:33

among farmers who are pushing back over

8:35

changes to older people like that. Right. But

8:38

you're seeing rather broad support for it. Yeah. So

8:41

I think they must have read all

8:43

the surveys as well, right? And realize

8:45

that they have to say

8:48

something about climate and about the

8:50

importance of environment and so on. So they all three...

8:52

This is the very first time and, you

8:55

know, we've had democracy now for 20 years. So

8:57

it's the very first time that is on the

8:59

platform. So I think that's a positive sign. But

9:02

it does not reduce the

9:05

complexity of the question you asked about how

9:07

do we balance reducing

9:09

our CO2 emission from coal fired power

9:12

plants because that's still the majority of

9:15

our source of power and

9:17

how do we balance that with the

9:19

need for affordable and just emission

9:23

from this coal-based fire plant.

9:25

Yeah, it's coal, it's oil.

9:28

The country has been an

9:30

oil exporter. Industries

9:33

on which its economy has been heavily

9:35

dependent. I

9:37

would think the transition from

9:40

those traditional fuels, given the

9:42

reliance of Indonesia on them, would

9:44

be as difficult there as

9:46

it is in so many other places around

9:48

the world. Yeah. So that's

9:50

what it is. And it's also the issue that

9:52

we still subsidize electricity

9:56

as well as fuel

9:58

consumption. So the relative...

10:00

price of carbon, if you like, is not

10:02

correct. And this is very

10:04

different from the other Southeast Asian countries,

10:06

which already have the

10:08

energy price linked to world prices.

10:10

You know, so we are still

10:12

carrying this subsidy, which

10:14

affects consumption on the other one

10:17

side. And then whenever the energy

10:19

price strikes, your subsidy goes

10:22

up tremendously. And that reduces the amount

10:24

you can spend on other things, right?

10:26

So it's one of

10:28

those things, one of the big reforms that

10:31

need to happen if we are talking about

10:33

how to have an energy

10:36

transition. And the other thing

10:38

is how do you accelerate

10:40

renewable energy deployment? That's

10:43

the other big challenge for Indonesia.

10:46

And we have been

10:48

asked by developed countries by

10:50

G7, there's this just energy

10:52

transition platform, which the G7

10:55

have tried to work with

10:59

South Africa, Indonesia and Vietnam to

11:01

reduce the coal fired power

11:03

plants, phase down the coal

11:05

fired power plants, and then

11:08

accelerate the renewable energy. But the

11:10

accelerate the reducing or the phasing

11:12

down of the coal plants is

11:14

very, very difficult and very costly.

11:16

To what extent is Indonesia reliant

11:19

on coal fired electricity? And how

11:21

does it compare historically? It's

11:23

about 60 to 70 percent and

11:25

it's increased in the last 15

11:28

years. It's increased. Yeah, before that it was

11:30

more fuel based and then it switched to

11:32

coal because coal is cheaper,

11:34

right? And we do have coal. So that's

11:37

why we ended up having

11:39

this dominance of coal. And

11:42

we also export, we're also exporting coal

11:45

as well. So coal is a very

11:47

important component of the economy and

11:49

also providing revenues to the government.

11:51

So whatever you do with coal

11:55

has to be done in a way

11:57

which is not going to cause

11:59

disruption. in many

12:01

ways, and affect the price, right?

12:03

Because it's also about affordability for

12:06

the people. I'm going to ask you in

12:08

a minute how you go about doing that if you

12:10

were still in government, but also I

12:13

want to just touch on petroleum. To what

12:15

extent petroleum plays a big role

12:17

in the country's economy? It

12:20

used to be very dominant, like back in the

12:22

80s, 80% of our

12:24

government budget as well as our government,

12:28

as well as our foreign exchange, came from

12:30

oil. That was in

12:32

the 70s into the

12:35

early 80s. Then you had the collapse of

12:37

the price of oil, which

12:39

was a big wake-up call for Indonesia,

12:41

and then they start diversifying. Unfortunately,

12:45

we didn't also increase the

12:47

investments with oil

12:49

and gas. Now we are

12:51

actually a net oil importer.

12:54

But if you put oil and gas together, we are still

12:56

a net oil and gas exporter. But

12:58

we are a net oil importer. That's

13:02

also another reason why there was

13:04

this switch to coal as well.

13:07

You mentioned before the challenge facing

13:09

the government in terms of guiding

13:12

a sustainable transition

13:16

to clean the forms of energy. You

13:19

mentioned how the most recent election

13:21

indicated there is broad support in

13:23

the country for policies

13:25

that would address climate change. Then

13:30

how do you get at these very real challenges

13:32

that you kind of laid out just now with

13:34

the reliance on coal, probably

13:36

standing out most prominently among them?

13:39

What is it a government official can

13:41

do? Perhaps the new

13:44

government has the new government suggested steps it

13:46

might take? Basically, this

13:48

government as well as the incoming

13:50

government, which they have

13:53

been saying they are continuing the policy of

13:55

this government, they've done a couple of things.

13:57

One is they've put a moratorium on new.

14:00

coal-fired power plants since 21 or 22.

14:04

But the reality is that you've

14:06

got about 13 gigawatts incoming, those

14:10

which already have a concession and which

14:12

will be built. So you've got another

14:15

13 gigawatts coming on stream. And

14:18

you also have what's called captive

14:20

coal-fired power plants, which

14:23

are linked to industry, including

14:25

for our nickel smelters and nickel

14:27

processing. So that's still

14:29

another source of

14:32

coal-fired power plants. So

14:35

we still are going to be relying on coal

14:37

for at least another, I mean, new

14:42

sources of energy coming

14:44

from coal, at

14:46

least for the next 5, 10 years, right? So

14:50

the challenge of reducing

14:54

and phasing out is very difficult,

14:57

because basically you have to pay

15:00

for an early shutdown, which is a financial cost,

15:04

and you also have to break a contract,

15:06

which also has legal

15:09

implications. So I think the

15:11

developed countries which have been trying to tell

15:13

us to phase down and phase out, a

15:16

big discovery, it's not easy. It's very

15:18

complex and it's very costly. And

15:20

the transition is very different in developing

15:23

countries compared to developed countries. The average

15:25

age of a coal-fired power plant in

15:27

advanced countries is like 40, 50 years.

15:30

It's close to having to be closed. In

15:33

a country like mine, it's like 10, 15 years. So

15:36

this is another 20 years or 30 years ago. So

15:41

what we are going to try to do is

15:43

obviously have some phase down or reducing

15:47

the existing capacity. But what

15:49

is going to be more

15:51

important is to accelerate the

15:53

renewable energy deployment. And it

15:56

would seem too that you need to address

15:58

the subsidies too at some point. Right,

16:00

because unless the right price signals are

16:02

sent, consumers are not...

16:05

You can't expect consumers to respond to

16:08

the changes that you anticipate are needed. Yeah, absolutely.

16:10

Is there much talk about doing that? That's a

16:12

tough one. Always. There's

16:15

always talk about it. And every new government

16:17

that comes in, that removes the

16:19

subsidy. So when I was in government

16:21

in 2004, in 2005, we removed the subsidy. But

16:26

then what we didn't do was link the

16:28

price, domestic price to

16:31

international price. Same

16:33

thing happened in 2015 with this

16:36

incoming government. They also removed the

16:38

subsidy and reallocated it to infrastructure

16:40

and social needs. But again,

16:43

they didn't link it to international

16:45

prices. So then it balloons up again. What

16:49

needs to happen, we hope, in the next

16:52

government is that they will see, especially if

16:54

the price of energy goes up with the

16:56

current tensions in the Middle East, they're going

16:58

to find that because we are importing oil

17:02

and we will have to

17:04

address the subsidy issue again.

17:07

And this time, please link it to

17:10

international prices. And if your concern

17:12

is affordability for the lower income

17:14

groups, you can give cash transfer.

17:17

Or for electricity, you can

17:19

do differentiated pricing for

17:22

the lower income households. So you

17:24

do a targeted subsidy, not an

17:26

overall subsidy. All the analysis

17:28

actually show that the beneficiaries of

17:30

the subsidy are actually the middle

17:32

income and upper middle

17:34

income. It's not the lower income. So

17:36

we really need to get

17:39

this right and really have

17:41

the price of fuel reflect the

17:44

relative price of carbon. Because otherwise, both

17:46

on the behavior change as well as the

17:49

incentive to go to renewable energy is not

17:51

going to be there. So that's really one

17:53

of the big reforms that

17:55

needs to happen for us to really

17:57

have a good energy

18:00

transition plan. And it's one again

18:02

where it can be, you talk about the public

18:04

approval of a lot of the things that are

18:06

going on and yet if you don't

18:08

do that properly, you risk

18:13

stirring up public dissent over

18:15

the higher prices among the middle

18:17

class. Yeah, remember the yellow

18:20

jackets. That's right. This

18:22

is what most governments sort of think about when

18:24

they do that. In 2005 when we raised the

18:26

price of fuel, 130%, but at the same time

18:28

we did cash transfer compensation

18:34

to the lower households

18:36

for I think three to six months.

18:38

And it was by household, by

18:41

poor households per

18:44

household. And it was very

18:47

effective. And

18:49

we did a lot of communications to

18:53

reduce the political pushback.

18:55

But it does require you to think

18:57

about those impacts very

18:59

carefully and compensate and

19:02

manage politically. There's a

19:04

track record then for dealing with

19:06

this sort of thing. Yes, it can be

19:08

done. You just have to make sure you do

19:10

it in a comprehensive and correct way. I'd like

19:13

to talk about renewable energy. I

19:15

understand that hydro and

19:17

geothermal energy is promising

19:20

or are promising options in

19:23

Indonesia. How

19:25

is Indonesia's energy sector

19:27

benefiting from technical breakthroughs,

19:29

especially among these renewable

19:31

energy opportunities? Yes,

19:34

I think we have a number of

19:36

potential sources of renewable energy. We have

19:39

a lot of geothermal. Now

19:41

the challenge with geothermal is the infrastructure,

19:44

the pipeline infrastructure, to get

19:46

the energy to where it should go. Same

19:49

thing with hydro. Where the

19:51

hydro is is not necessarily where the

19:53

needs by population or by

19:55

industry are. So there are a couple of areas

19:59

outside. of Java. So it's

20:01

going to be a lot of things will

20:03

happen outside of the major population,

20:07

where the population are in

20:09

Java, like in Kalimantan, where

20:12

the hydro is. That's also where the

20:14

nickel is. Sorry, Sulawesi is where the

20:16

nickel is. And Kalimantan also,

20:19

Northern Kalimantan is going to be

20:21

the new area of industrial development,

20:24

including with the minerals, because there's

20:26

hydro there. Yeah. But that

20:28

will take time. Therefore,

20:31

solar wind, floating solar

20:34

wind, and other

20:36

sources of energy also need to

20:38

be deployed at the

20:41

same time, because they would

20:43

take not as long as

20:45

having to do hydro or geothermal.

20:48

And what needs to happen is the renewable

20:50

energy law needs to be passed so that

20:53

the feed-in tariffs are

20:55

attractive enough. And earlier we

20:57

talked about how vast Indonesia

20:59

is. So it's really

21:01

difficult to say what is the

21:03

solution. There is no one-size-fits-all solution

21:05

for a country like Indonesia. So

21:07

Java Bali, because it's where most

21:10

of the population live, that's going to be

21:12

the large-scale power plants,

21:14

whether getting out of coal

21:16

and going into probably have to have natural

21:19

gas as a transition fuel. But

21:22

if you talk about the outer islands, it can

21:24

be solar, it can be wind, it can be

21:26

biomass, depending on

21:29

the geographical location. And even

21:31

though our electrification rate is quite high

21:34

overall, but if you talk

21:37

about the remote areas, it's still very low,

21:39

right? So we still have access problem at

21:41

the same time having a transition problem.

21:44

So it really requires a good

21:47

mapping of the

21:50

potential. And a floating solar,

21:52

because we have so much ocean, is probably

21:55

one of the options. And

21:58

we are even exporting electricity. to

22:00

Singapore from the Riau Islands.

22:03

This is a new initiative. In

22:05

the past, Singapore was quite wary

22:07

about importing electricity. But

22:09

now, because of the energy crisis, it opened

22:11

up the opportunity for regional cooperation

22:14

in energy. And this is solar power

22:16

that's being exported? Yes, floating solar. Floating

22:18

solar? Yes. From the islands, there

22:21

are a number of islands off Singapore,

22:23

which are part of Indonesia. And

22:25

so the floating solar are in these islands,

22:27

and it's being exported to Singapore through

22:29

a pipeline under the sea.

22:32

You mentioned the feed-in tariff option among

22:35

policies. What has

22:37

encouraged the development of the geothermal so

22:39

far, for example, the floating solar? And

22:43

what more will it take? Is the feed-in

22:46

tariff a policy that would adopt a feed-in

22:48

tariff for the developers, something

22:50

that's essential? Yeah, I think that's one

22:53

of the essential factors,

22:55

because at the moment, what we hear

22:57

is that the feed-in tariffs are not

22:59

attractive enough. And it's partly

23:01

because the state-owned electricity

23:04

utility company, which has a monopoly

23:07

on production, distribution, and transmission,

23:10

they have excess supply

23:13

of electricity, still based

23:15

on coal-fired power plants because of COVID,

23:18

you know, having lowered the

23:20

demand projections, and they also

23:22

made miscalculation on the projection. So

23:25

with that excess supply, you know,

23:27

they are not in a hurry to deploy

23:29

renewable energy, right? So that's been one of

23:32

the issues. Whereas, you know, in

23:34

about five years' time, the excess supply will

23:36

be reduced. So if you want to have

23:38

a replacement

23:41

for the new energy sources

23:43

to be coming from renewable

23:45

energy, you have to start now, right? The

23:47

investments need to start now. And

23:49

they have started now to some extent. Yeah,

23:51

but one issue is the feed-in tariffs.

23:53

The second issue is local

23:56

content requirements. So the

23:58

government has a policy. The where

24:00

your case you gonna build a

24:03

solar power plants are? You have

24:05

to earth procure solar panels locally

24:08

but we don't have a local.

24:10

Industry well developed enough or that,

24:12

right? So there has to be

24:14

some flexibility given up That and

24:17

then the last issue is of

24:19

course the Pln A as as

24:21

the monopoly utility company there has

24:23

to want to buy. And absorb

24:25

the excess supply of renewable is

24:28

your inner is the renewables are

24:30

being used for industry purposes or

24:32

even households solar. Panels on

24:34

the roof. The excess needs to

24:36

be sold back to Pln. Right

24:38

now they're not a they don't

24:40

They are very excited about buying

24:42

back the excess as happens with

24:45

utilities everywhere. Get. Mining.

24:47

Forestry, Agriculture. There are some of

24:49

the sectors of the Indonesian economy

24:51

and which the country's most dependent

24:54

tends to fit in these crucial

24:56

areas. How can the government bounce

24:58

a compromise between the need for

25:01

environmental sustainability and economic growth? Yeah,

25:03

I think I think we have. A

25:06

at least in the last ten years I

25:08

would say learnt that. You know, exploitation

25:10

of our natural resources needs to. Be

25:12

done in a sustainable way so that

25:15

there. Are regulations regarding.

25:18

Environment Sustainability but always

25:20

the. Issue is enforcement. Ah, and

25:22

you know being able to really

25:24

go to some of these remote

25:26

areas and make sure that this

25:28

is being. Done and A We have

25:31

had a policies for the last ten.

25:33

Years on what we call

25:35

increasing value added of the

25:37

mineral resources. We don't wanna

25:39

be exploiting primary commodities anymore

25:41

or mineral or six. we

25:43

want to have processing and

25:45

we ban the export of

25:48

nicole in twenty nineteen and

25:50

that led to a large

25:52

amount of investments in smelters

25:54

as well as in the

25:56

processing of nicole and stainless

25:58

steel but dead There has been

26:00

criticism as to whether this has been done in an

26:04

environmentally sustainable way, and whether

26:06

it's actually benefited the regions

26:08

that have these resources.

26:11

So this is one of the criticisms that emerged

26:13

actually during the elections, it did come out as

26:16

an issue. So I do believe

26:18

that the government will have to take this

26:21

issue very seriously, because we now

26:23

also ban the export of bauxite

26:25

as well as copper. And

26:28

there are a number of other minerals

26:30

that we want to supposedly

26:33

increase the value added of. And

26:36

I think we need to have a more

26:38

comprehensive policy while recognizing we

26:40

want to increase value added on the one

26:42

hand, but we've got to do it A,

26:45

in an environmentally sustainable way. We

26:47

have to do it in an economically and commercially

26:49

viable way, because the moment

26:51

you ban something, there are the

26:53

risks of substitution emerging. And

26:57

it's not necessarily that you will be

26:59

able to do all the

27:01

downstreaming in your country. Like

27:04

the idea about the nickel processing was

27:07

that the batteries and the EVs would

27:09

then also be built in Indonesia. That's

27:12

not necessary if you don't have

27:14

the ecosystem that supports the development

27:16

of further downstreaming in that particular

27:18

industry. How long has the ban on

27:21

exports of nickel been in place? I

27:23

believe it was 2019, maybe announced that

27:26

they had another two years before it

27:28

would actually be totally banned. Yeah,

27:31

that's interesting. It was recent

27:34

that the ban was put in place. As

27:38

a former minister of trade, you

27:40

have a comprehensive understanding of Indonesia's

27:42

economic landscape. What

27:45

impact does Indonesia's nickel industry have on

27:47

the national economy? You mentioned this ban's

27:49

in place. The thought was that more

27:51

nickel would be processed there, but there's not

27:54

the infrastructure to do that. And yet, there

27:56

is this critical demand for

27:58

nickel as well as other. critical

28:00

minerals for electric batteries and so many

28:02

other things in the renewable energy field.

28:05

Yeah, so in fact, I mean,

28:08

the government did declare success on this. And

28:10

I could say there is some positive

28:13

benefit from what happened, even though, you know,

28:16

it was done in a kind of maybe

28:19

using export restrictions is a rather blunt instrument.

28:21

You could have used export tax instead, for

28:23

instance. But anyway, the export

28:25

ban led to the

28:27

increase in processing to ferronickel as well as

28:29

the stainless steel. And if you

28:31

look at the amount of

28:34

exports that are nickel based, it went from

28:36

something like $3 billion to $30 billion over,

28:40

you know, five years period. And

28:43

the investment, amount of investments also went

28:45

up. So in

28:47

terms of foreign exchange and

28:50

investment flows, it had

28:52

a positive benefit. But then

28:54

the criticism is more about, OK, did

28:56

it really benefit the people in

29:00

that location? Their income per

29:03

capita went up, but did it really create

29:05

jobs because it was capital intensive?

29:08

And also, there was a lot of

29:10

tax holidays given. So, you

29:12

know, net, what's the net income that

29:14

stayed in Indonesia? You know, I think

29:16

that this is still being analyzed.

29:21

We don't quite know the answer yet.

29:23

But more importantly, I think, is

29:26

the fact that the government actually

29:29

wants to go further downstream from

29:32

the beyond stainless

29:34

steel, which is using the nickel, which

29:36

is a critical mineral for the production

29:38

of EV batteries. But

29:41

of course, the thing about

29:43

wanting to do EV batteries, you

29:46

don't nickel is not the only critical mineral

29:48

you need. You need lithium and other

29:50

minerals. And we don't have lithium,

29:52

so you'd have to import. Right. And

29:54

China, for example, has such a head start.

29:56

Yeah. And so it's

29:58

unless you have the ecosystem. And

30:02

it does require a lot of capital and a lot of

30:04

energy. You're going to

30:06

have to use coal to be able

30:08

to produce these batteries. So I

30:10

think these are issues that we need

30:12

to face moving forward. But I do,

30:15

I think the idea

30:17

of having increasing value added is a

30:19

valid one. It's more about how do

30:22

you achieve that. And what you can do

30:25

in nickel, Indonesia is the second largest producer

30:27

of nickel, might not necessarily be true for

30:29

bauxite. We are probably number six or

30:31

number seven producer of bauxite. Similarly

30:33

with copper, it's not all minerals

30:35

that you could actually do this

30:37

kind of policy. So I'm

30:39

more in favor of developing regionals

30:41

in the supply chain for

30:44

whether it's batteries or critical minerals

30:47

value chain because we

30:50

recognize that there's this whole diversification

30:54

from China, the concentration from

30:56

China, which is very dominant

30:58

in critical minerals. That's kind

31:00

of a valid diversification objective.

31:03

So I think what should happen is regional

31:05

supply chain within

31:08

ASEAN, Southeast Asia or

31:12

within East Asia, including Australia and

31:14

New Zealand because Australia has lithium.

31:17

So you can think

31:19

about a regional supply chain

31:21

on critical minerals supply and

31:24

having the kind

31:26

of production and processing could

31:29

be done in different places,

31:31

including the battery

31:33

production, including the EV

31:35

production. Not every country

31:37

should be trying to develop their own value

31:39

chain on batteries and EV. That's interesting. In

31:43

effect then, Indonesia at some point

31:45

could export its nickel as

31:47

part of this value chain for the region. That's

31:50

right. Yeah. Because what

31:52

you need is scale with all

31:54

these capital intensive processes.

31:59

And you need scale. Yeah, EV needs scale

32:01

for you to be competitive. So

32:04

that's why I'm really pushing the

32:06

idea that there should be region,

32:08

we should be developing regional supply

32:10

chains. This exactly happened with combustible

32:12

engine vehicles back in the

32:14

80s and 90s. Every

32:18

ASEAN country wanted their own national

32:20

car. Of course, none of them work.

32:23

And the moment Thailand opened up and said, okay,

32:25

we welcome everybody. I think Taksin's

32:28

line was, we want to be the Detroit of

32:30

Asia. So he opened up the

32:32

sector and then all the investors came in

32:35

and then Indonesia saw, okay, we better do the

32:37

same. So in the end, Toyota,

32:39

for instance, they specialize, right? Because

32:41

you want scale. They produce the

32:43

sedans in Thailand and they produce

32:46

the SUVs in Indonesia. And then

32:48

you exchange as well as exporting to the

32:50

rest of ASEAN and the rest of the world.

32:53

What about carbon removal?

32:56

Is there this concept of

32:58

net zero entails balancing

33:01

greenhouse gas emissions with

33:03

removals by using

33:05

technologies like carbon offsets or carbon

33:08

capture? How feasible do you believe it

33:11

is for Indonesia to achieve net

33:13

zero emissions given

33:16

its diverse geography and its

33:19

social economic challenges? That's

33:23

definitely in the strategy of

33:25

the government. There

33:27

are two areas where we could think about

33:30

carbon capture, if you like, to use that

33:32

word. One is actually still

33:34

in the energy sector itself. So in

33:36

the coal fire power plants, we just

33:38

passed regulation on CCS. Carbon

33:41

capture. Yeah, carbon capture

33:43

and storage. And

33:45

then the other one is CCUS, right? The

33:49

U is the usage part. So we just

33:51

passed the regulation on that. So I think

33:53

we can foresee that the coal phase down

33:56

or the coal exit is not going to

33:58

happen anytime soon. So in the meanwhile... Can

34:01

we actually increase

34:04

energy efficiency? Can we at least

34:06

make the coal fire power plants as

34:08

clean as possible with all this technology

34:10

that's available? So that's really definitely something

34:13

that needs to happen, as well as

34:15

modernizing the grid. That's one

34:17

part of it. The other part of it is what we

34:19

call the carbon sink. Indonesia

34:22

has mangroves. Indonesia has

34:24

coral reefs. So mangroves

34:28

absorb four times more carbon

34:30

than forest, than tropical

34:32

forest. So we have actually

34:35

a big

34:37

project to replant and restore

34:40

mangroves across Indonesia.

34:43

400,000 hectares or something

34:45

along those lines, something

34:47

very huge. And

34:50

that is what we call a triple win. We're

34:53

creating jobs in the process of

34:55

restoration and replanting. And

34:58

that improves the ecosystem so that the

35:00

fish come back and it's

35:03

also used for ecotourism. And

35:05

you can absorb carbon. So you

35:07

can have a net zero outcome.

35:10

So these what we call nature-based

35:12

solutions is also another

35:14

big area for Indonesia, also in

35:16

the tropical forest. Yeah. What

35:18

about indigenous people? There's concerns in Indonesia

35:21

as well as elsewhere to make

35:23

sure that a sustainable transition is

35:25

sustainable for those who are often

35:28

most impacted, but least assisted

35:32

in a transition. What sorts

35:34

of policies has the government

35:36

considered there? Okay. You're

35:38

bringing me back to something I did in

35:41

my younger days, which was I

35:44

had an NGO that advocated

35:46

for indigenous peoples. And one of the

35:48

things that we did advocate for was

35:51

their land rights, because actually

35:53

they didn't have land rights, because they have

35:55

communal rights, it's not individual rights. So

35:57

there was a law that was passed to recognize that.

36:00

recognize communal rights of the

36:02

indigenous people. And about

36:04

five or eight years ago, we

36:07

have been, I think, recognized

36:09

for this. We have defined what's

36:11

called social forests. What's a social

36:13

forest? A social forest is where

36:15

the indigenous people have the right

36:17

for that particular area and the forest. And

36:20

so they have the right to develop it in

36:22

the way that it's sustainable. And

36:25

we recorded our

36:27

NGO that was working on this 20, 25

36:30

years ago, we recorded that actually indigenous

36:32

people have local wisdom

36:34

in terms of how they can

36:37

retain the sustainability of the forest

36:39

or of the ocean because it's

36:41

their livelihood, right? So they

36:43

have the right to develop that social

36:45

forest in accordance with the

36:48

way the communal rights and

36:50

communal local wisdom have come about.

36:52

And the government can work together with

36:55

the indigenous

36:57

people who

37:00

are managing the social forests. You

37:05

can introduce modern ideas

37:08

or modern technology, but it has to

37:10

be done together with the community. And

37:13

so this has been underway for some sort

37:15

of approach has been underway for some time.

37:17

Yeah. 20, 25 years. I

37:20

think this social forest idea has

37:22

been a bit of a revolution,

37:24

I would say. It's an ongoing process.

37:27

I don't think we can declare victory

37:29

yet, but there are good examples where

37:32

this has actually worked. And

37:34

it may in fact be a model for other countries.

37:36

Yes. Because others share many

37:38

of those very same challenges. You were

37:41

with the World Bank for several

37:48

years in Washington. I'm

37:52

interested in sort of your worldview

37:55

or maybe I should say region

37:57

view of Southeast Asia in

37:59

terms of the energy transition. You

38:02

described what's going on in your own country, which in fact

38:04

is, you know, rather progressive in some

38:06

aspects. And you talk about the public support there.

38:08

You talk about the ongoing reliance on coal, the

38:13

reuse of gas as a transition, and, you

38:16

know, a ways to go, I guess, on

38:19

renewables, but it's dotted. You're exporting some solar

38:21

now. How

38:23

does Indonesia fit in with the region as

38:25

a whole? Yeah, I think

38:28

we used to talk

38:30

a lot about how there should be

38:32

regional cooperation in energy, but it was always

38:34

on paper. But

38:36

I think the energy crisis that

38:38

happened with the invasion of Russia

38:41

in Ukraine and, you know, everything being

38:43

upended on the energy and the food security

38:46

has actually heightened again

38:49

the need for regional cooperation in energy.

38:51

So we had this program called the

38:54

ASEAN Energy Grid for a long time,

38:56

but it never happened. But

38:59

more recently, there have been two

39:01

projects that have come about trying

39:04

to implement and

39:06

realize this so-called ASEAN Energy Grid.

39:09

One is a hydropower project in Laos,

39:11

which goes through various countries and ends

39:13

up being sold to Singapore. It's

39:16

still only 100 megawatt, but it's

39:18

the beginning, right? Because you're talking

39:20

about having interoperability between grids and

39:23

crossing countries, right? So you need

39:25

to figure out how that works.

39:28

And then the other one was the one I just mentioned about

39:30

selling our solar energy to

39:32

Singapore, which is very new, because Singapore

39:35

in the past was not open to

39:37

the idea of importing energy. So

39:40

I think moving forward,

39:42

I believe we

39:44

should be working on a concept

39:46

of energy

39:48

supply. And Diwan, which

39:51

is regional in focus, because a

39:53

lot of our countries are like

39:56

neighboring. And so you could be closer

39:58

to your neighboring country. to the

40:00

rest of your own country, right? So,

40:02

and that happens also not just in

40:05

Southeast Asia but in Africa. Say Mozambique

40:07

has a lot of gas which they should

40:09

be exporting, they do export to South Africa

40:11

but they should also be exporting to other

40:14

parts. Egypt, same thing. So I

40:16

think the notion of regional energy

40:18

grids and energy supplies

40:23

can be an

40:25

answer to our

40:27

sustainable energy and transition

40:30

energy energy transition issues.

40:34

Yeah, and of course the elephant in the room in

40:36

terms in the region of course the big is China

40:39

which is so dominant so many ways in

40:41

terms of renewable energy, critical minerals and all

40:43

of those sorts of things. What's the play

40:45

vis-a-vis between Southeast Asia and China

40:48

when it comes to energy security in that region?

40:51

Well, a lot of the power

40:54

plants are being built by China and

40:57

with Chinese development financing.

41:00

So I think

41:03

we learned at least

41:05

when talking from my end

41:07

as being formerly in the government,

41:09

the first 10,000 megawatt

41:12

which we got from China, we

41:14

had lots of issues and problems. It

41:17

was coal-fired power plants. So this

41:19

government in the next 10,000 megawatt learned

41:22

the lesson about quality. It's

41:25

about the quality issue of, okay,

41:27

it might be coming from China,

41:30

it's coming with concessionary

41:32

finance from their development banks. It's

41:34

not clear whether it's commercial or

41:37

not commercial but we require

41:39

quality and we require them

41:43

to fulfill the environmental

41:45

regulations and as much as

41:47

possible procure locally. So

41:50

I think those are kind of

41:53

learning curves but the dominance of

41:55

China in critical minerals, solar

41:58

panels, wind turbines and EV

42:00

batteries and anything battery related

42:02

to EVs. It's a

42:05

reality and we

42:07

need to cooperate and get

42:11

parts of the Chinese value

42:14

chain either

42:16

to start investing in the

42:18

different parts of our region

42:21

and diversify if you

42:23

like or deconcentrate. But I don't

42:25

think you can decouple

42:28

from China because if

42:30

you really want accessible and affordable

42:32

green transition, you will have

42:35

to rely on a lot of the

42:37

technologies that have developed in China because China actually,

42:40

because of its scale in

42:43

solar for instance or even in wind, they

42:45

were the ones that brought down the price,

42:47

right? There was the price effect and the

42:49

diffusion of technology effect which is

42:52

now being affected by

42:54

a lot of the geopolitical tensions

42:56

as well as the security issues

42:58

around it. But I think for

43:01

developing countries, it

43:03

would be disservice to want to decouple

43:05

just because it's geopolitically

43:07

not correct because we still need

43:09

to develop, we still need to

43:11

have transition and we want to

43:14

do it in as affordable way

43:16

as possible. So we

43:18

should be seeing China as a partner but

43:20

also a partner that can develop our own

43:24

renewable energy sector. Before

43:26

you go, I'd like to ask you just

43:29

what sort of is your own outlook these

43:31

days on the energy transition? It sounds

43:33

like you're reasonably optimistic about what's taken

43:35

place in your own country, Indonesia. Tell

43:39

me if I'm wrong but that's an impression

43:41

I got. But what is sort of your

43:43

outlook? How do you feel about this as

43:45

you've come off a couple of important roles

43:47

you've played in your own government as well

43:50

as at the World Bank? Are you optimistic

43:52

about the future going forward or

43:54

something short of that? I'm

43:57

not sure I'm reasonably optimistic about energy transition

43:59

in my opinion. own country for

44:01

the same reason that I would answer the

44:03

second part of your question about how

44:05

optimistic am I on the outlook globally. Because

44:08

I think what we

44:10

need, I mean, the actual process

44:13

of energy transition is very complex

44:15

because you're talking about the cold

44:17

exit, you're talking about the investments

44:19

needed for renewable energy and the

44:21

grid, the just transition component, and

44:23

the policy reforms that need to

44:25

happen at the same time and

44:28

the scale of financing that's needed.

44:30

And this is where it

44:33

can only happen if you have private sector

44:35

coming in. Maybe

44:38

one third or even less can

44:40

come from government funding and concessionary

44:43

funding from multilateral development banks. Two

44:45

thirds has to come from the

44:47

private sector. This

44:49

is the big question everybody's trying to answer. How

44:52

do you mobilize the private sector in

44:54

this space? And

44:56

that's where I'm not yet optimistic because

44:58

there's so much work

45:00

that needs to be done about the

45:02

transition finance taxonomy, about

45:04

the de-risking instruments, the guarantee instruments

45:07

that I needed, and how does

45:09

this all come together is still

45:13

trying to happen. But

45:15

I do hope that we

45:17

can all work together on this. The

45:20

multilateral development banks are being, what

45:23

do you call it, criticized

45:25

as well as being pushed. Your

45:28

catalytic financing from your concessional

45:30

funding needs to do more to

45:33

mobilize private capital. At

45:35

the moment, it's like $1 concessional

45:37

finance is only mobilizing less than $1 private

45:39

capital. It needs

45:41

to be five times of that. $1

45:44

of catalytic needs to mobilize $5 of private capital. How

45:48

can we make this happen? And this

45:50

is really the challenge, big challenge for all

45:52

of us. That's a question you must have

45:54

raised frequently at the World Bank in Washington

45:56

when you were there. Well,

45:59

Marie. Thank you very much for taking the

46:01

time to join us today. It's

46:04

your country, Indonesia, as we've said,

46:06

is certainly a fascinating one. There's

46:09

so much interesting that's happening there and so much

46:12

potential for more, but as you know, challenges

46:14

for Indonesia as well as for

46:16

other countries in Southeast Asia. Thank

46:18

you for joining us on Columbia

46:20

Energy Exchange. Thank you, Bill. That's

46:28

it for this week's episode of Columbia

46:30

Energy Exchange. Thank you again,

46:32

Mari Pangestu, and thank you for listening.

46:35

This show is brought to you by

46:37

the Center on Global Energy Policy at

46:39

Columbia University School of International and Public

46:41

Affairs. The show is hosted

46:43

by Jason Bordoff and the Bill Loveless.

46:46

The show is produced by Aaron

46:48

Hardick from Latitude Studios. Additional

46:50

support from Lily Lee, Caroline Pittman,

46:53

and Q. Lee. Roy

46:55

Campanella is the sound engineer. For

46:58

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47:00

or the Center on Global

47:02

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47:07

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47:20

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47:23

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