Thus, massive land conversion is inevitable. Additionally, as a country with a dense population, Indonesia must ensure food sustainability by maintaining its agricultural production. For example, in the agriculture, forestry, and land use (AFOLU) sector, Indonesia experiences high and rapid deforestation and forest degradation along with seasonal forest fires caused by El-Niño or human activities (Chrysolite et al. The stated emission reduction target is challenging because Indonesia also faces certain environmental issues. Thus, the government must consider the cost and impact of implementing mitigation policies on its economy as well as the environment. However, achieving this target is challenging due to its tendency to slow down the economy that Indonesia aims to boost by optimizing the use of all national resources. Under the Nationally Determined Commitment (NDC), Indonesia must reduce its total emissions by 29% (voluntary) or 41% (with foreign aid) by 2030 to be in line with the Business as Usual (BAU) levels. At the same time, the Indonesian government is significantly ambitious and committed to reducing its emissions. To this end, the Indonesian government has established several masterplans to boost the country’s economic growth. However, Indonesia still struggles to transform its economic structure and to become a developed country (Legowo 2017). It has become the largest economy in the Southeast Asia region. Indonesia’s economy has advanced gradually but steadily as one of the best economies in the Group of Twenty (G20). Otherwise, the government may need to prepare more expenditure to introduce more technologies and policies in the future. Another crucial thing is that considering the possible economic impact, especially in the mid-term period, the government needs to implement necessary mitigation policies immediately. In terms of employment, the government needs to prepare other sectors to absorb labor, especially from the agricultural sector. There are several policy recommendations based on our simulation results, including that the government also needs to increase efficiency in using fossil fuels, especially coal and gas, during the process of building infrastructure for renewable energy utilization. It also showed that the utilization of renewable energies for power generation would increase significantly, especially after 2025, but still cannot fully replace the dominance of fossil fuel sources. But the energy sector might become a sector experiencing higher GDP under the mitigation action (3.5% compared to BAU level by 2030). If we look at the sectoral GDP, the agriculture sector is projected to experiencing the most significant shock by the emission mitigation policies (− 13.4% compared to BAU level by 2030). The simulation result showed that the implementation of comprehensive mitigation technology would cause a GDP loss of around 1.7% by 2030 compared to the BAU level. This study is trying to examine the potential impact of the emission mitigation policies on the Indonesian economy by utilizing a dynamic computable general equilibrium (CGE).
While the national economics itself is still growing and advancing, the mitigation policies are expected to slow down the economy at some level.
Under the Nationally Determined Commitment (NDC), Indonesia voluntarily reduces GHG emission by 29% compared to the BAU level in 2030.