By: Massita Ayu Cindy
Researcher at Purnomo Yusgiantoro Center (PYC).
In 2012, there was a meeting between countries at the Rio de Janeiro, Brazil namely The United Nations Conference on Sustainable Development. This conference then established Sustainable Development Goals (SDGs) as the main guidelines for the policymakers around the world to formulate their development plans. The SDGs also replaced the previous guidelines, Millennium Development Goals (MDGs) published in 2000, which focuses on poverty, hunger, gender equality, and child mortality issues. The SDGs focus is broader than MDG, covering 17 specific goals to pursue a sustainable world where environmental sustainability, social inclusion, and economic development are equally valued, as shown in Figure 1.
Figure 1. The three pillars of sustainable development.
Indonesia has adopted the SDGs and enacted it through Presidential Decree No. 59 of 2017 on Sustainable Development Goals (SDGs) Plan Implementations. The legal basis for SDGs implementation then should be followed by the establishment of National SDGs Roadmap and its action plan which planned to be finished in 2019. In the energy sector, sustainable development usually related to renewable energy development. The raised awareness of climate changes, environmental disasters, and emission has put conventional energy such as oil, gas, and coal industry as one of the culprits. These kinds of energy source have been dominating the energy market since the industrial revolution in the 19th and 20th centuries. The oligopolistic market structure, which usually occurred in the conventional energy market, also lead to a significant gap of economic benefit as well as geopolitics tension.
Furthermore, as the non-renewable energy, the existence of oil, gas, and coal only dependent on the continuous discovery of new resources and reserves. There has been a lot of studies that stated the possible energy scarcity in the future if we keep dependent on non-renewable energy sources. Thus, the presence of renewable energy as the alternative energy source has driven people to become more skeptical with the existence of conventional energy.
While it is good news for the sustainable energy community, as a developing country and one of the largest conventional energy exporter country, Indonesia still has to deal with conventional energy industry for a long period of times. Although Indonesia has already become a net oil importer country, it is predicted that there are still abundance resources of coal and gas beneath our nation. Data from the Ministry of Energy and Mineral Resources in 2017 shows that there are 140.48 billion ton of coal resources and 151 trillion cubic feet of gas resources in Indonesia. For comparison, the yearly production of coal and gas in 2018 were 0.49 billion ton and 2.83 trillion cubic feet, respectively. So, if we assume that all of those resources can be extracted and the production rate is kept on the constant volume, the coal industry will last for about 285.7 years, while gas will last for 53.3 years.
On top of that, gas and coal have not only used as domestic energy sources but also one of the national top export commodities. In 2018, the non-tax revenue from natural resources sector was about 217.5 billion rupiahs, consist of oil and gas contribution for about 163.4 trillion rupiahs; coal contributions for 50 trillion rupiahs; and renewable energy around 2.3 trillion rupiahs. Although there are many positive and negative impacts within conventional energy industry activities, it should not be dissociated from SDGs spirit. In fact, there are some potential contributions that the conventional energy industry could do in order to support the government in achieving the SDGs target.
As state in the first paragraph, sustainable development refers to three main pillars to define the development plans. Hence, this opinion will review the potential contributions of conventional energy in supporting the SDGs from those three aspects.
Conventional energy industry contributions to Indonesia could easily be linked to economic development. The high demand for conventional energy commodities in international trade has benefited Indonesia as the exporter country in adding revenue to government both from tax and non-tax. In New Order Era between the 1960s and 1980s, oil has been lex specialist and the top export commodities which contribute to more than 80 percent of national export. The government had to push the oil production to 1.6 million barrel per day, way beyond its withdrawal rate. The oil Dutch Disease in 1982 then drove the government to add coal and gas to support national economic growth. The extensive production of conventional energy and combined with its high price in international trade helped Indonesia to regain from economic catastrophic and strengthen the national fiscal and monetary position.
Aside of national economic contributions, conventional energy industry also contributes in local economics including generating jobs both direct and indirect, increase the local GDP per capita and average salary as well as investing to the local communities. Figure 2 shows the GDP per capita and average salary per region in 2017. Aside from DKI Jakarta as the capital city, most of the high salary and GDP per capita lies in the region with “conventional energy producing regions” such as East Kalimantan, Riau, and Papua. In these regions, both the GDP per capita and average salary are higher than the national average.
Figure 2. Indonesia’s GDP per Capita and Average Salary per region in 2017 ( (International Labour Organization, 2017))
The issues around local economic development usually link to some problems such as (1) direct and indirect local employment; (2) shared-use infrastructure to increase local productivity capacity; as well as (3) urbanization, with the details as followed:
First, the lack of education and skills often hinder the local workers from getting the job. At the same time, the conventional energy industry is also facing difficulties in finding labors, which meets their requirements. It is necessary for the industry to invest in education and skills-based training for the local worker so both industry and community can get the benefit. This can be done by collaborating with local universities or other educational institutions to support technical training programs. In addition to the indirect job generation, the industry could collaborate with local suppliers and distributors in order to increase the productivity of the local community. The industry can coordinate with local suppliers and distributors to organize the development programs to meet the tender requirements and procedures.
Second, the conventional energy industry requires a massive development to support the industry activities, including road, telecommunication, power plant, health, water, and sanitation infrastructure. The conjunction with the local government could benefit both the industry and the local community, especially in cost saving and leverage the local economy. However, infrastructure development should be well-planned and consider both social and industry needs. For examples is the water infrastructure, the industry can seek the potential synergies between agricultural zone, water reclamation projects, and municipal water system.
Third, the common issues on almost all the project sites are that there will be an uncontrollable inward migration, especially job seekers and entrepreneurs. The sudden population growth can increase the crime rate, overrun existing communities, and overwhelm the local government. The industry has to work with stakeholders to hinder this issue by helping communities to diversify their economies while giving necessary education and skills.
Seven out of seventeen SDGs are targeting directly to social issues, including poverty, hunger, health, education, gender equality, and social inequality. The conventional energy industry has to take a major role in social inclusion aspect, especially within local communities. Most of the social issues cannot be resolved in the short-term projects; there has to be a continuous and consistent action to see the positive changing of the local community. However, there are some basic services that the industry can support the community in order to develop the local community.
– Increasing access to reliable, affordable, sustainable, and modern energy. There are many cases where the local communities experienced a lack of energy sources, even though it is located near the oil, gas, and coal production plans. The strong correlation between increased energy use and economic growth shows the importance of energy to reduce poverty.
– Integrating the planning and management of land resources between industry and community needs. In rural areas, there should be transparent management on land utilization since both agricultural and mining activities takes a significant amount of lands. By identifying areas, the industry, government, communities, and other stakeholders can get equal benefits.
– Conducting health assessments to both local communities and workers. The chemical, biological, and physical exposes can threaten health and productivity. There is also thread from infectious disease due to the inward-migration and lack of sanitation infrastructure. The conventional energy industry can contribute to the health issues by designing health benefits plans and improve health infrastructure within the community.
– Investing in education and training for the local community. Nowadays, education has been one of the most basic needs of the community. This can be done by conjunction program with the local academic institution, government as well as the community. Improving community knowledge will also benefit the industry by providing the necessary skilled workers that meet their requirements.
– Engaging the communities to set the expectations. There are various expectation sets by the local communities in responding to the arrival of the conventional energy industry in their backyard. The social frustration that occured from high expectation can be expressed through violence and social instability. There should be an early and ongoing dialogue between industry, communities, and government to set more reasonable expectations, while avoiding the disappointment that might appear in the future.
– Protecting the world’s cultural and natural heritage. The conventional energy industry can threaten cultural and natural heritage such as archaeological areas, historical buildings, endangered animals as well as indigenous communities. The industry has to implement cultural and natural heritage management and preservation to avoid social conflict with the communities.
Environment issues are often associated with the conventional energy industry. The natural resources extraction process will damage the environment and even change the original landscape. If there is no proper management, there will be a serious impact on the local ecosystem, including land degradation, rising drought, desertification, and deforestation. In addition, the offshore drilling also creates damage to the marine habitats such as whale migration route disruption and ocean acidification.
Although the conventional energy industry activities will likely to cause environmental damage, there is a mitigation hierarchy which emphasizes the prevention before considering the remediation efforts as seen in Figure 3. Based on the UNDP (……….), four steps of mitigation hierarchy must be followed by the “environmental destroyer industries” such as infrastructure, energy, and mining industry in order to minimize the loss of biodiversity.
Figure 3. Mitigation Hierarchy (Ervin, 2018)
The four steps in the mitigation hierarchy are:
The very first step of the mitigation hierarchy is to avoid any impacts and disturbance. This step is the easiest and cheapest way to reduce negative impacts. For example, placing the road outside the protected forest and rare habitats; creating the “buffer zone” to provide a separation between urban areas and project site; establishing standards and operations to prevent the incidents.
Minimalization step focuses on reducing the intensity, duration, timing, and/or extent of the impact that cannot be completely avoided. For example, cutting the amount of flaring gas, minimizing methane emission, reducing noise from heavy machinery, developing Carbon Capture Storage (CCS), and minimizing the ocean acidification.
- Restoration / Rehabilitation
This step is implemented to improve the already degraded or removed ecosystem following the impacts of conventional energy industries activities that cannot be avoided or minimized. Restoration is defined as the activities to return an area to the original ecosystem, whereas rehabilitation only aims to restore the basic ecological functions and ecosystem services. This step usually considered as the final stage in a mitigation hierarchy.
Offset step should be done as the compensation of any residual impact after full implementation of the previous three steps of the mitigation hierarchy. It consists of two main types, the “restoration offset” which aims to rehabilitate the degraded habitat, and the “averted loss offset” which aims to stop the biodiversity loss. However, biodiversity offsets often only considered as the preferable step since it takes complex and expensive procedure.
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Disclaimer: This opinion piece is the author(s) own and does not necessarily represent opinions of the Purnomo Yusgiantoro Center (PYC).