Indonesia Faces Unequal Burden as Coal Transition Threatens Jobs and Livelihoods

Indonesia, long considered a coal giant in Asia, is now facing one of the most difficult balancing acts in its modern economic history. The country, which holds the world’s sixth-largest coal reserves, has used its abundant deposits to achieve near-universal electrification and establish itself as one of the largest coal exporters globally. But as the costs of renewable energy fall and international pressure mounts to cut carbon emissions, the nation must confront the economic and social challenges of phasing down coal. A new World Bank study, prepared with the support of the Climate Support Facility, the Climate Investment Funds, the Extractives Global Programmatic Support, and in collaboration with Indonesian partners such as the Dala Institute and the SMERU Research Institute, provides the first spatial analysis of how vulnerable Indonesia’s provinces and communities are to the transition. The research underscores that while the shift is inevitable, its impacts will be distributed unevenly, and unless carefully managed, entire regions and marginalized social groups could be left behind.

Coal’s Economic Grip

Coal is deeply woven into Indonesia’s development story. In 2023, the country produced 775 million tons, about 8.6 percent of global output, with roughly two-thirds exported mainly to China and India. Domestically, coal accounts for nearly two-thirds of the power supply, and the industry contributes significantly to exports, government revenue, and local employment. Although only around 250,000 people are formally employed in coal mining, just 0.2 percent of the national workforce, the industry sustains many more jobs indirectly across transport, services, and small businesses that depend on miners’ incomes. The central role of coal is evident in places like East Kalimantan, South Kalimantan, and South Sumatra, where mining royalties and company-funded infrastructure help sustain schools, clinics, roads, and water facilities. Yet, the government has set targets under the National Energy Plan and the Just Energy Transition Partnership (JETP) to scale up renewables and begin the gradual retirement of coal-fired power plants. This tension between climate ambition and economic dependence forms the crux of Indonesia’s dilemma.

Mapping Vulnerability with the CTVI

To assess where the impacts will be most acute, researchers developed a Coal Transition Vulnerability Index (CTVI), combining three dimensions: exposure to coal infrastructure, sensitivity of the local economy and workforce, and adaptive capacity to diversify and absorb shocks. The index reveals that the highest vulnerabilities are concentrated in East Kalimantan, South Kalimantan, and South Sumatra. These regions host the majority of the country’s coal mines and plants, making them extremely exposed to closures. They are also highly sensitive because of the large share of local employment and income tied to coal. While East Kalimantan shows some resilience due to relatively higher economic diversification and education levels, South Sumatra and South Kalimantan, with their smaller-scale operations and reliance on royalties, face steeper challenges. Maps included in the report highlight how dependence on coal extends beyond traditional hubs, with provinces like Papua also flagged as vulnerable due to their limited adaptive capacity and underdeveloped economies.

Communities on the Edge

Case studies of specific districts show the human face of these vulnerabilities. In West Kutai and Berau in East Kalimantan, and Tanah Bumbu in South Kalimantan, thousands of workers are directly employed in large mines, with entire communities revolving around the industry. Transport infrastructure, small businesses, and local services are heavily dependent on mining activity. The anticipated closures of major operations in the coming decade raise concerns about declining household incomes, falling property values, and loss of essential services. In these regions, schools, healthcare centers, and even clean water are often financed or operated by mining companies, and their withdrawal could leave local governments struggling to fill the gaps. The experience of Sawahlunto in West Sumatra, where mines closed in the early 2000s, offers a stark warning. Once a thriving coal town with high wages and abundant services, the city suffered economic collapse, mass outmigration, and a surge in informal employment after mining ceased. Attempts to revive the economy through small-scale agriculture, tourism, and a cultural heritage designation brought some relief but did not fully compensate for the decline.

Who Bears the Heaviest Burden?

Beyond the economic fallout, the social dimensions of transition are profound. The report stresses that women, youth, indigenous communities, and informal workers will bear disproportionate burdens. Women, who account for only about 4 percent of formal coal employees, often benefit indirectly from mining-funded social programs like health and education, which are at risk when companies exit. Young people in coal areas frequently enter low-skilled informal roles around the industry, and with few alternative career paths, they risk long-term unemployment or migration. Informal and artisanal miners, especially common in South Sumatra, operate without contracts or social protection and will be excluded from retraining schemes. Indigenous groups, meanwhile, face the twin challenges of land dispossession and cultural disruption, compounded by the arrival of new land uses such as large renewable projects or plantations. Without inclusive planning and respect for customary rights, these communities risk being further marginalized.

Building a Just Transition

The study argues that Indonesia’s transition cannot be understood purely as an energy shift but must be seen as a broad socio-economic transformation. Policy responses must include retraining and labor market programs, targeted safety nets for informal workers, gender-responsive livelihood initiatives, and mechanisms to protect indigenous land rights. Economic diversification is key: while renewable energy may provide some new jobs, it cannot absorb the scale of displacement from coal. Agriculture, services, and small-scale enterprises will play critical roles, alongside creative reuse of mining land for aquaculture, agro-tourism, or floating solar projects. The report highlights the importance of early planning and stakeholder engagement at both national and local levels, through mechanisms such as regional energy plans and community development programs.

Ultimately, Indonesia’s coal transition will not happen overnight. Coal reserves could last another 65 years at current production levels, and short-term demand from industrial growth and exports may even drive increases before the decline sets in. Yet the study makes clear that vulnerabilities are already visible, and the consequences of inaction will be severe. The findings show that the coal transition is as much a question of social justice as it is of economics or climate policy. Whether Indonesia succeeds will depend on its ability to ensure that no community is left behind as the country charts a path toward a more sustainable future.