Jakarta, May 9, 2025 — The Government of Indonesia has officially increased royalty rates for minerals and coal through Government Regulation (PP) No. 18/2025 and No. 19/2025. This move has been positively received by civil society organizations, who emphasized that the potential increase in state revenue must be directed toward accelerating a just and sustainable energy transition in Indonesia.

Under the new policy, the government introduces a progressive royalty rate for minerals such as nickel—shifting from a flat 10% rate to a range between 14% and 19%, depending on the Reference Mineral Price (HMA). For coal, royalty adjustments are based on the type of mining license. Royalties for Mining Business Permits (IUP) have increased, while those for Coal Mining Concession Work Agreements (PKP2B) or Special Mining Business Permits (IUPK) have been reduced.

Al Ayubi, Policy Strategist at CERAH, emphasized that the royalty hike must be strategically utilized to support the energy transition. “The increase in royalties should not be seen merely as additional state income, but as a critical momentum to improve the governance of the extractive industry in accelerating the energy transition. The funds obtained must be explicitly allocated to support the development of the green energy sector, whether through renewable energy subsidies or incentives for green investments,” said Ayubi.

According to the National Medium-Term Development Plan (RPJMN) 2020–2024, the government has so far allocated only around IDR 34.2 trillion per year for renewable energy, far below the actual need of IDR 148.3 trillion annually. This funding gap makes it difficult to achieve national energy mix targets and emission reduction goals outlined in the Nationally Determined Contributions (NDC).

Furthermore, the Institute for Essential Services Reform (IESR) reports that from 2019 to 2021, private investment in fossil energy still dominated at 73.4%, while renewables only accounted for 26.6%. “This funding disparity is one of the main barriers to Indonesia’s energy transition. Therefore, the additional funds from increased mineral and coal royalties must be promptly allocated to close the renewable energy financing gap,” Ayubi stressed.

Tata Mustasya, Executive Director of Sustain, added that increasing coal production levies is a strategic solution for the Prabowo administration to accelerate the energy transition and address the climate crisis. According to him, there are three key goals of this policy: First, to significantly boost state revenue to expedite the energy transition. Second, to disincentivize coal production and shift investments toward clean and renewable energy. Lastly, to uphold justice by collecting proportional levies from the coal mining sector, which has long enjoyed substantial profits.

Tata added that coal royalties and other production-related charges still need to be gradually increased to fully achieve those goals.

“With actual coal prices during 2022–2024, the government could potentially gain additional state revenue ranging from US$5.63 billion (IDR 84.55 trillion) to US$23.58 billion (IDR 353.7 trillion) per year. These funds would be more than sufficient to finance the Just Energy Transition Partnership (JETP), which requires US$96.1 billion by 2030 and is currently facing funding bottlenecks,” Tata explained.

Aryanto Nugroho, National Coordinator of Publish What You Pay (PWYP) Indonesia, cautioned the government against a short-term mindset focused solely on increasing revenue. He stressed that royalty policy must serve as a strategic instrument to gradually reduce coal dependency—by curbing coal production and phasing out coal-fired power plants (PLTU) in both PLN’s electricity grid and captive power plants for specific industrial zones, such as mineral downstreaming areas.

This concern is particularly relevant as the 2025–2029 RPJMN still targets coal production of 700 million tons per year, which far exceeds the safe limit of 400 million tons as outlined in the National Energy Plan (RUEN). Additionally, the mining sector has long benefited from substantial incentives since the enactment of the Mineral and Coal Law No. 3 of 2020.

“Therefore, the royalty increase must be used as a tool to improve governance comprehensively and ensure that the benefits are truly felt by affected communities. Above all, the government should avoid allocating additional revenue to downstream coal projects such as Dimethyl Ether (DME), which has proven to be uneconomical and environmentally unsound,” Aryanto asserted.

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Media Contact

Al Ayubi, Policy Strategist, CERAH
+62 857-1142-3600