Economic and Social Implication of Low-Carbon Development

Shifting from a high-carbon to a low-carbon development implies growing the economy in an environmentally sustainable way and a radical change to the old fashions of our lifestyle. While low-carbon development brings about positive changes, it also brings some unexpected economic and social challenges right to our doorstep. How is this possible?

Because the implementation of Low-Carbon Development remains expensive.

Transitioning towards a Low-Carbon Development holds immense potential for reshaping Indonesia's economic landscape. As a leading exporter of palm oil and coal, both closely associated with deforestation, Indonesia faces a critical challenge. The nation has committed to halting deforestation and attaining carbon neutrality in the land-based sector by 2030. However, this transition would come with complexities, as palm oil production currently contributes 4.5% to Indonesia's GDP and provides employment for 3 million individuals. Similarly, coal extraction plays a significant role, accounting for 3.6% of Indonesia's GDP.

Furthermore, low-carbon development cannot be discussed without addressing renewable energy. Currently, approximately 93% of Indonesia's energy supply is derived from fossil fuels, primarily coal (43%), oil (31%), and gas (19%). To meet the Renewable Energy Target (RET) of 23% by 2025, a significant investment of around IDR 1.6 trillion, equivalent to approximately $120 billion (which represents 76% of the Indonesian government spending in 2016), will be required.

Many developing countries, including Indonesia, face significant financial challenges when it comes to implementation of low-carbon development. To bridge the climate financing gap, one proposed solution is to increase the tax base to raise funds from public sources. However, this strategy may also trigger shifts in land and housing prices, alter returns on labor, capital, and resources, and cause fluctuations in supermarket prices for everyday goods.

With this background in mind, do you have any deeper insights or potential solutions to offer for addressing this issue?

Share your thoughts with us at ICONIC 2024!