Powering prosperity: Unveiling the impacts of renewable energy policies on economy, employment, and income distribution in Indonesia

Abstract

This study analyzes the economic and distributional impacts of a Production Tax Credit (PTC) on Indonesia's renewable electricity sector using a Computable General Equilibrium (CGE) model. The simulation spans 2018 to 2030, utilizing the 2018 Social Accounting Matrix (SAM). Results indicate significant reductions in electricity prices by 2025 under two scenarios of total factor productivity (TFP) growth (20 % and 30 %), with continued price decreases through 2030. The study reveals that while urban households and highly educated labour benefit from reduced energy costs and income gains, rural and lower-skilled workers experience fewer advantages, highlighting potential inequalities. The findings underscore the importance of inclusive renewable energy policies to ensure equitable economic outcomes during the energy transition. This research contributes to existing literature by offering new insights into the role of PTC in promoting sustainable energy development in emerging economies like Indonesia, with critical implications for policy design.