Impact of international emission reduction on energy and forestry sector of Indonesia

Abstract

We extended the MERGE model to develop a set of energy projections for a reference and various mitigation scenarios to the year 2100. We included coal as a tradable good. In Indonesia, oil imports will increase while coal exports will decrease. If the OECD countries reduce their emissions, oil price would fall, Indonesia would import more oil but less gas and its per capita income would fall slightly. With international trade in emission permits, Indonesian energy development is similar to the earlier scenario, but Indonesia would gain some income. If all countries reduce their emissions, Indonesia would export more coal and would substitute coal by gas and carbon free technologies in energy consumption. If Indonesian commits to emissions reduction, per capita income would slightly fall. Population and economic growth are the driving forces of deforestation. In the reference scenario, deforestation increase by 60% in 2020 relative to today, indicating that Indonesia has large potential to mitigate emissions in the forestry sector. International climate policy would slightly increase the deforestation rate, mainly because of more rapid economic growth. Indonesia would gain from the sale of emission permits from reduced deforestation.

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