Role of the energy-carbon-economy nexus and CO2 abatement cost in supporting energy policy analysis: A multi-scenario analysis of the Java-Bali system

Abstract

Java-Bali is Indonesia's largest power system, with enormous CO2 emissions. Therefore, the Government of Indonesia has committed to reducing CO2 emissions by introducing two policies: (1) a new and renewable energy target and (2) coal phase-out planning. However, no study on the energy-carbon-economic nexus in Indonesia has analyzed the impact of reducing CO2 emissions using these policies. Therefore, this research analyzes the economic impacts on the energy and carbon nexus in the Java-Bali system to obtain and review feasible strategies to support these policies. OSeMOSYS was used in this study to implement multiple scenarios of emission reduction. The results indicate that policies that clearly regulate carbon limits and taxes for power generation companies are required. A carbon limitation of 10,087 million tons with a carbon tax of 67 USD/ton and a carbon limitation of 8482 million tons with a carbon tax of 77 USD/ton are required to supporting the new and renewable energy target and coal phase-out plan. Nuclear energy and liquefied natural gas are crucial for supporting the new and renewable energy targets and coal phase-out policies. Therefore, the government must immediately decide to utilize nuclear energy and guarantee an adequate liquefied natural gas supply at an affordable price. Furthermore, it is crucial to seek alternatives to meet the demand projection through interconnection with other islands that have immense renewable energy sources to meet the new and renewable energy target and successfully implement the coal phase-out plan.