Coal Economy Growing Fragile, Energy Transition Urgent

REPUBLIKA.CO.ID, JAKARTA — Indonesia’s dependence on coal is assessed as increasingly fragile amid global pressures and changes in the world’s energy system direction. Energy transition is now an urgent necessity to maintain economic stability while reducing long-term risks.

The Indef research institute assesses that coal is still positioned as a buffer when oil and gas prices fluctuate due to geopolitical conflicts. However, that role is becoming more limited because it only applies to high-quality coal, while Indonesia’s production is dominated by low-calorific value coal that is more vulnerable to price pressures.

Indef notes that in March 2026, the Newcastle reference coal price once rose to around $129 per tonne. Nevertheless, the medium-term trend shows a decline, from around $201 per tonne in 2023 to about $109 per tonne in 2025.

This decline directly impacts state revenues. Non-tax state revenue from the mining sector fell from around Rp173 trillion to Rp138 trillion, reflecting high fiscal dependence on coal commodities.

“The character of the coal economy is high revenue volatility and low fiscal resilience,” writes INDEF in its report titled “Removing the Blinders: The Illusion of the Coal Economy Amid Global Pressures,” quoted on Friday (10/4/2026).

Indef emphasises that when coal prices fall, state revenues are also pressured without much fiscal protection room.

Pressure also comes from the global demand side. In the first five months of 2025, China’s thermal coal imports fell by nearly 10 per cent compared to the same period the previous year. Global buyers are now increasingly selective and tend to choose coal with higher calorific value.

In this context, Indonesia’s position becomes more vulnerable because around 65 per cent of coal production is intended for export. When demand weakens and prices fall, the impact is directly felt on export performance and state revenues.