Waste: Problem or Commodity?

While the Presidential Regulation on Extended Producer Responsibility (EPR), which would mandate producers to be responsible for their packaging waste, remains pending, emergencies are met with investment. The root causes are left unaddressed.

The Real Emergency, Solutions in Need of Testing

The emergency is real. Bantargebang TPST emits 6.3 tonnes of methane per hour. Two-thirds of administrative regions are in a waste emergency. Serious EPR measures may take 5-10 years to show results. In a crisis, the logic of emergency management holds: extinguishing the fire is more urgent than fixing the electrical installation.

But extinguishing the fire also requires the right tools. The wrong tools not only fail to put out the fire; they leave behind large bills to be paid later. There is nothing wrong with paying a price to address a crisis. The problem arises when that price is paid for infrastructure that financially fails to resolve the crisis.

Lessons from Past Failures

Of the 12 cities designated for PSEL sites under Presidential Regulation 35/2018, only two were successfully built and operated: Benowo in Surabaya and Putri Cempo in Surakarta. Both failed. The precedent: zero out of two.

Benowo PSEL was designed to process incoming daily waste, not to clear existing stockpiles. Even for this limited task, it failed. The technical issue: Indonesian waste has 50-65% moisture content, far exceeding optimal gasification thresholds. Plant availability was only 40-60% of the 90% target. Actual revenue was a third of projections. The crisis remains unresolved; the costly intervention has collapsed.

Putri Cempo PSEL presents a deeper irony: it directly mirrors the design of Presidential Regulation 109/2025; without a tipping fee, it relies entirely on PLN tariffs. After two years of operation, its actual capacity is 50-80 tonnes per day against a target of 389 tonnes. In March 2026, the Environment Minister announced an investigative audit and opened the possibility of shutdown due to ineffectiveness.

The failures were no coincidence. Indonesian waste does not meet optimal technical specifications, the financial model depends on subsidies that can be withdrawn at any time, and long-term contracts directly conflict with upstream waste reduction policies. Technology can be replaced; these three factors cannot.

And when all three factors align, there is no cheap exit. Closing them harms investors; continuing them drains subsidies. Presidential Regulation 109/2025 is replicating the same dilemma across 34 projects with 15 times the investment.

Waste as a Commodity, Not a Problem

Presidential Regulation 109/2025, instead of treating waste as a symptom of production-consumption system failures that must be addressed at source, turns it into a new energy business commodity. Waste is not returned to the production cycle as material; it is burned to generate electricity at fixed tariffs.

This scheme creates perverse incentives: as primary revenue comes from the volume of waste burned, more waste entering PSEL means greater business profit. The incentive is not to reduce waste, but to maintain high volumes. Existing waste mountains remain untouched as all PSEL capacity is absorbed by daily intake.

When Success Becomes a Violation

PSEL does not merely compete with EPR; it renders it a violation.

Presidential Regulation 109/2025 mandates local governments to supply a minimum of 1,000 tonnes of waste daily. If EPR succeeds and sorting is implemented, waste volumes will drop—and that drop would violate the regulation. Local governments break the regulation when their citizens sort waste effectively.

And deeper technical flaws exist. PSEL requires high-calorie plastics and paper for efficient combustion. EPR targets both for recycling. EPR’s success threatens PSEL’s viability—a design contradiction that should have been anticipated from the start.

Questionable Fiscal Burden and Governance

From the 20 sen tariff PLN pays per kWh, around 14 sen is a market-price differential compensated by the state budget to PLN. For every rupiah of investor income over 30 years, 70% comes from government subsidies. Cipolla, via The Basic Laws of Human Stupidity, warns that the most damaging policies are not malicious ones, but those causing widespread harm without proportional benefit. The state bears subsidies, the waste crisis remains unresolved, old waste mountains untouched; while investors enjoy regulated returns.

As a sovereign wealth fund, Danantara should adhere to the Santiago Principles; international governance standards emphasising independent investment decisions based on market risk-return, not reliance on state regulation and subsidies. Danantara’s actions in PSEL are the opposite: investing in schemes that cannot generate returns without state subsidies. This is not sophisticated investment; it is a cradle: the state guarantees income to its own investment agency, then labels the results as strategic returns.

Danantara also plans to IPO PT Denera on the Indonesia Stock Exchange in 2028. Before this happens, one question needs answering: how can Danantara offer the public a portfolio that is already theirs?

This is not metaphorical. Seventy percent of PT Denera’s income comes from state budget subsidies; from every Indonesian taxpayer. When Denera lists, the public will be offered shares in a company that is technically already theirs via subsidies. They will pay twice: first as taxpayers covering the subsidies, second as investors buying the shares. Beyond legality, ethics cannot be ignored.

Time remains

Presidential Regulation