Effect of COVID-19 on Energy Consumption and Carbon Dioxide Emissions in Indonesia (2021)



Despite the pandemic’s negative effect on the economy, it can help reduce emissions from energy consumption activities in line with the Paris Agreement, especially for high-emitter countries such as Indonesia. However, the policy response to COVID-19 may rebound the emissions to their pre-pandemic levels. To design an efficient policy that considers both economic and environmental variables, this study uses a computable general equilibrium model that assesses how COVID-19 and its stimulus policy will affect the macroeconomic indicator, energy consumption, and emissions at the national and regional levels. The results show that macroeconomic indicators generally performed worse with the current stimulus policy in the short run than in the long run. Refined petroleum energy consumption took the highest hit, followed by coal-based energy consumption and overall electricity demand. The pattern in emissions reduction is similar to the pattern of gross domestic product declination as well. The Sulawesi region particularly experienced the largest decrease in refined petroleum energy consumption. In contrast, the Java-Bali and Sumatra regions experienced the most coal-based energy consumption reduction and the largest emissions reduction. Should COVID-19 provide the impetus to develop more environmentally sound economic development, we would need better policy to address the recovery. Returning to pre-pandemic development will not lead to long-term environmental gain. This study offers policy recommendations for economic recovery and environmental improvement. The government should promote low-carbon technology, clean energy transition, more energy efficiency, and sustainable development to avoid the rebound effect of energy consumption and carbon emission. Coordination between central and local governments is also needed to formulate a fiscal policy inclined toward low-carbon pathways.

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