Abstract

Abstract: A major energy transformation isrequired to prolong the rise in global temperature below 2 ◦C. The Indonesiangovernment (GoI) has set a strategy to gradually remove fuel subsidies to meetits 2050 ambitious energy targets. Using a recursive dynamic computable generalequilibrium (CGE) model, the present study aimed to determine whether or notthe current energy subsidy reforms would meet the targets of both energy mixand energy intensity. It also incorporated the environmental aspect whiledeveloping a source of a detailed database in the energy sector. The energysubsidy reform policy (followed by an increase in infrastructure and renewableenergy investments) could be the most appropriate alternative policy if thegovernment aims to reduce energy intensity and emission, as well as improveenergy diversification without pronounced reductions in the sectorial andoverall economy. However, all simulations suggested that the removal of energysubsidy does not enough in attaining the targeted energy mix and energyintensity goals. Thus, the Indonesian government should also introduceprogressive programs in renewable energy

Keywords: EnergySubsidy; Energy Intensity; Energy Mix; Environment; Renewable Energy;Computable General Equilibrium