Indonesia's fiscal policy for the 2020-2025 period is still not preferable toward the development of renewable energy as it has yet to show the linkup between fossil energy sector's income with the funding of renewable energy, concluded a study by Initiative Association.

Secretary General of the Initiative Association, Dadan Ramdan said that until now the government has not demonstrated any strong commitment to create incentive mechanisms and energy transition disincentives.

"For example, how revenues from the fossil fuel sector will be used to incentivize renewable energy development is completely unknown," Dadan told a press conference on Thursday, November 13, 2025.

He said that there is an indication of fiscal support toward clean energy based on Minister of Finance Regulation (PMK) No. 103/2021 on procedures for managing PNBP and Law Number 7/2021 about harmonization of tax regulation. However, both regulations have not yet shown explicitly their support for the development of renewable energy.

"The law states that taxes from natural resources can be used to address climate change, but it does not explicitly mention renewable energy development," he said.

The Initiative Association also found the fiscal incentive policy on new renewable energy is valid on a limited basis, especially on geothermal subsectors.

"Incentives such as VAT exemptions for imports of geothermal technology do exist, but for other renewable energy technologies like solar or wind, we have not found similar regulations," Dadan said.

Dadan cited that disincentives toward fossil energy's current policy are not yet firm, the disincentive appears in the form of carbon tax on coal subsectors, yet its implementation has not yet been implemented because its regulation has not yet come out.

"There are around five government regulations that should be derived from Law No. 7/2021 on carbon tax, but they haven't been issued yet. Yet, these regulations are crucial for operationally determining the subjects, objects, and rates of the carbon tax," he said.

Because of the weak fiscal policy, investment in the renewable energy sector is still far behind compared to the conventional energy sector (oil and gas sector).

According to the Energy Ministry performance report, investment on the new renewable energy subsector (EBTKE) only reached US$1,5 billion (Rp25 trillion) per year (2020-2024).

"Investment in the renewable energy sector is the lowest compared to the oil and gas subsector, which reaches US$15 billion, and the mineral and coal subsector, which reaches US$5.93 billion per year," Dadan said.

He said further that a study by the Initiative found three basic things on fiscal policy posture on renewable energy. First, the state revenue from coal production is still low compared to its potential. He cited that based on research from the Sustain Foundation that is used in the study demonstrates that the average state revenue from the production of coal only reached Rp86,26 trillion per year, albeit its state revenue potential in that sector could reach Rp357,7 trillion per year.

"This means the country has only received about a quarter of its actual coal revenue potential," he said.

Secondly, the low spending on renewable energy in the ministry is only 4,5 percent from its total spending. Far lower compared to its spending on oil and gas (migas) and coal sector that reach 32,61 percent.

"When viewed from total state spending, the contribution of renewable energy spending is certainly very small, because the average spending of the Ministry of Energy and Mineral Resources is around Rp5–6 trillion per year," he said.

Furthermore, the third findings have shown the high subsidy spending on fossil energy. From 2019-2024, the average state revenue from the energy sector reached Rp281,83 trillion per year. However, the subsidy on fossil energy had cost about Rp161 trillion per year.

"So, fossil fuel revenues actually go towards fossil fuel subsidies. The figure represents more than 50 percent of energy revenues, or around 6.4 percent of total state spending. Meanwhile, the government claims subsidies for renewable energy are only around 0.1 percent of total state spending," Dadan said.