Research by the Center of Economic and Law Studies (Celios) and Greenpeace shows the number of villages across Indonesia using solar energy among households declined by more than a quarter between 2021 and 2024.
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Eco-Business
Fossil fuel subsidies, high costs slow energy transition in rural Indonesia
Abatify Summary
Nature & Climate Perspective
**The regression of rural solar adoption in Indonesia reinforces reliance on carbon-intensive energy sources, delaying the transition to decentralized LULUCF-compatible energy systems. **
- Continued dependence on fossil-fuel-heavy grids increases localized emissions and particulate matter, negating the air quality benefits of decentralized renewables.
- Stalled solar deployment limits the growth of low-carbon livelihoods that typically reduce human encroachment on high-biodiversity areas and forest carbon sinks.
- The decline in household solar usage undermines the long-term environmental stability required for community-led nature-based solutions to thrive without energy-driven deforestation.
Market & Policy Outlook
**Pervasive fossil fuel subsidies create a market distortion that directly challenges ICVCM Core Carbon Principles regarding additionality and financial viability for renewable energy projects. **
- The price floor set by subsidies makes the generation of I-RECs and the authorization of ITMOs under Article 6.2/6.4 difficult, as renewable projects cannot demonstrate financial additionality against artificially cheap coal.
- High capital expenditures (CAPEX) for rural solar, coupled with subsidy-driven price competition, prevents corporate entities from effectively leveraging Scope 3 decarbonization within Indonesian supply chains.
- Current regulatory frameworks favoring fossil fuels present a significant policy risk for SBTi-aligned corporations seeking to transition their emerging market operations to 100% renewable energy.
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