Indonesia’s accession to the OECD: Recommendations for improving the Indonesian regulatory and institutional framework in the energy and environmental sectors

Indonesia’s efforts to join the OECD offer a strategic opportunity to align environmental and energy governance with international standards. This collaborative report by CELIOS and ICEL highlights several regulatory gaps that hinder a just and sustainable transition, particularly in environmental assessments, energy pricing, transparency, governance, and climate finance.

The report’s findings show that the Environmental Impact Assessment (EIA) process remains exclusionary, with no legal guarantee of Free, Prior, and Informed Consent (FPIC) and limited recognition of cumulative impacts in coal-mining regions. Energy pricing does not reflect environmental and health costs, making coal appear cheaper than renewable energy. Transparency is also weak, as there is no requirement to disclose power purchase agreement (PPA) data, emissions, or real-time air quality around coal-fired power plants. Meanwhile, overlapping ministerial responsibilities, the absence of a cross-sectoral body to oversee the energy transition, and weak coordination between central and regional governments are further slowing progress.

The report also highlights governance risks in climate finance and green investment instruments such as Danantara, where ministers’ dual roles and legal immunities weaken accountability. Meanwhile, PLN’s monopoly over electricity transmission distorts the market and conflicts with OECD principles on competitive neutrality. To meet OECD standards, Indonesia needs to pursue systemic reform—strengthening institutions, ensuring transparency, and establishing a participatory and inclusive transition framework aligned with the Paris Agreement and OECD values.

Indonesia’s bid to join the OECD offers a strategic opportunity to align its environmental and energy governance with international standards. A collaborative report by CELIOS and ICEL highlights key regulatory gaps that undermine a just and sustainable transition, particularly in the areas of environmental assessments, energy pricing, transparency, governance, and climate finance.

The findings show that the Environmental Impact Assessment (EIA) process remains exclusionary, with no legal guarantee of Free, Prior, and Informed Consent (FPIC) and limited recognition of cumulative impacts in coal regions. Energy pricing does not reflect environmental and health costs, making coal appear cheaper than renewables. Transparency is weak, with no obligation to disclose PPAs, emissions data, or real-time air quality around coal-fired power plants. At the same time, fragmented institutional responsibilities, the lack of a cross-sectoral transition body, and weak coordination between central and regional governments are slowing progress.

The report also flags governance risks in climate finance and green investment instruments such as Danantara, where dual ministerial roles and legal immunities undermine accountability. Meanwhile, PLN’s monopoly distorts competition and conflicts with OECD principles. To meet OECD standards, Indonesia must pursue systemic reform—strengthening institutions, ensuring transparency, and adopting participatory, inclusive frameworks aligned with the Paris Agreement and OECD values.