Designing and implementing a high-level quantitative model helped Indonesia understand the magnitude of the potential negative socio-economic consequences of the early retirement of coal-fired power plants.
The Government of Indonesia, together with the ADB needed to understand more concretely which sectors or stakeholders were the most vulnerable amid Indonesia’s efforts to retire its Coal-Fired Power Plant (CFPP) fleet. This will help the government define the most relevant and appropriate actions to mitigate the negative impacts of early CFPP retirement.
Neyen designed a high-level quantitative model to measure the direct, indirect, and induced impacts of early CFPP retirement. It showed implications for employment and aggregated income along the CFPP value chain, as well as the impact on government revenues at the national level.
By implementing the methodology, we estimated the potential impacts that different scenarios of CFPP retirement might have, identifying workers most affected, regions and communities bearing the highest costs, and other main aspects to mitigate in order to foster a just transition.
Using the results of the model, we were able to quantify the number of jobs at risk and variations at the government revenue level, identify which region is most vulnerable and link it to social groups most exposed amid early CFPP retirement.
Since an important aspect of carrying out a just transition in climate action is the mitigation of its potential socio-economic impacts, understanding and measuring the scope within the country context can help ensure that time, money, and efforts are being directed towards actions that will have a substantial effect on the economy and vulnerable stakeholders.
In addition, given energy transitions happening around the world, the methodology developed for this high-level quantitative model could be applied in other countries, facilitating the scale up of the energy transition assessment thus accelerating future efforts to characterize negative impacts of climate actions to design mitigation actions.
The most vulnerable sectors and stakeholders may not always be obvious when investigating qualitative information; quantification is necessary to estimate how the main costs are distributed among the affected parties.
Results were shared in focus group discussions in the country, facilitated by the development bank that oversaw the project.