KOMPAS.com – The Publish What You Pay (PWYP) Indonesia Coalition has warned that fiscal risks from coal price volatility continue to haunt Indonesia due to its heavy dependence on fossil fuels.
This was conveyed by PWYP Indonesia National Coordinator Aryanto Nugroho in response to the government’s discourse on cutting coal production. According to him, the government cannot continue to hinge the fate of the national economy on volatile global market prices.
“The government must immediately prepare an economic diversification strategy, especially in mining-producing regions. In parallel, an economic transition must be put in place so that regional dependence on coal revenue-sharing can gradually be shifted toward more sustainable and low-emission sectors,” Aryanto said in a statement on Wednesday (January 7, 2026).
Indonesia is haunted by fiscal risks linked to coal prices
PWYP urged the government not to focus solely on production reduction figures, but also to ensure that such policies are accompanied by a permanent halt to the issuance of new coal mining permits.
Second, the government must develop protection schemes for workers and economic transformation plans for mining regions.
Third, production and revenue data must be disclosed transparently to prevent rent-seeking—opaque methods of extracting profit—in the allocation of remaining production quotas.
“Production cuts in 2026 will be a test of whether the government is truly transitioning, or merely managing stock while waiting for prices to rise again so environmental damage can resume,” Aryanto said.
At the same time, PWYP views the coal production cut plan as a momentum-building step to accelerate the energy transition.
Aryanto stressed that the government should not take this decision solely because coal prices are falling. In fact, production reductions should have been implemented long ago, in line with the National Energy Plan (RUEN).
“We need a transformative vision to cut production in order to protect the environment and accelerate the energy transition, not merely to save corporate profit margins,” Aryanto said.
According to him, coal production surging to as high as 800 million tons in 2024 is clear evidence of the stalled domestic energy transition. Such massive production, he added, weakens incentives to shift toward renewable energy.
“Cutting production is a necessity to achieve the Net Zero Emissions target. We cannot talk about an energy transition if upstream coal supply continues to be ramped up uncontrollably,” he said.
As mandated by the RUEN, reducing coal production to 400 million tons must be made a binding commitment in Indonesia’s decarbonization roadmap.
Governance audit
PWYP Indonesia also noted that rising coal production has long been accompanied by unresolved governance problems. These include corruption loopholes in quota setting, land conflicts with Indigenous communities, and numerous abandoned mining pits left unreclaimed. The government is therefore urged to conduct a comprehensive governance audit of the mining sector.
“This momentum must be used to clean up illegal mining practices and ensure that companies allowed to continue operating truly meet strict compliance standards, without compromise,” Aryanto said.
Previously reported, the government plans to lower nickel and coal production targets in the 2026 Work Plan and Budget (RKAB). This step is intended to push up commodity prices that have been under pressure due to oversupply.
Minister of Energy and Mineral Resources Bahlil Lahadalia said the production target cuts would be applied across the board.
“We are cutting everything. Not only nickel, but coal will also be cut,” Bahlil said after a press conference on the readiness of the energy and mineral resources sector to face the 2025 Christmas and 2026 New Year holiday period in Jakarta on Friday (December 19, 2025).
According to Bahlil, the reduction in production targets aims to restore balance between supply and demand. Excessive supply, he said, has continued to weaken commodity prices.
Source: Kompas Lestari