Indonesia to curb coal output to protect price

Indonesia has ordered coal mines to cut their output not out of environmental concern but because record exports last year reduced prices.

The authorities in Jakarta have set a production target at 550 million tonnes for 2020, 9.8 per cent lower than the 610 million tonnes produced last year. 

Energy minister Arifin Tasrif said domestic consumption of the dirtiest fossil fuel rose by 12 per cent to 155 million tonnes. 

The minister insisted that producers must stick to the limits as the government “doesn’t want coal production to be too massive and drive prices lower and cause government revenue to drop”, Tasrif told the media in Jakarta. “We will implement the domestic market obligation as well.” Coal firms are required to sell 25 per cent of their output domestically at a fixed price.

The Indonesian government said it was motivated by financial concerns rather than any obligation to cut carbon emissions. 

An estimated 36 per cent of the world’s energy is still produced by coal, although it is the largest contributor to climate change and responsible for around 46 per cent of global carbon-dioxide emissions. 

A 2019 International Energy Agency’s (IEA) World Energy Outlook report said the world’s coal mines emitted around 40 million tonnes of methane each year. 

While methane dissolves faster than carbon dioxide, it has 30 times the warming impact of carbon dioxide in the atmosphere over a century.

The agency estimated that the coal sector produced methane emissions of around 1,200 million tonnes of carbon dioxide equivalent per year, similar to the combined annual emissions of the global aviation and shipping industries.

But demand for the filthy fossil fuel is expected to rise because of consumption by power stations across Asean, China and India, the International Energy Agency estimated.

Coal-fired generation has dropped during 2019 by 14 per cent in the US and 19 per cent across the European Union.

But Vietnam has seen the biggest increase in coal use with imports doubling and domestic coal production rising by 10 per cent in the year until October.

The Indonesian coal price fell by 28 per cent during 2019, marking a third consecutive year of declines. 

The falling price reduced government revenue in Indonesia, where coal remains the largest export.

Coal production in 2019 exceeded government targets with approximately 1,000 firms starting new operations with newly issued permits, said Bambang Gatot Ariyono, Indonesia’s director general of minerals and coal. The government would track coal output through electronic reporting and regular monitoring and royalty payments, he added.


Tanjung Bara Coal Terminal, East Kalimantan. Picture credit: Wikimedia