Unpacking the determinants of emission intensity changes in Indonesia: A multiplicative structural decomposition approach

Abstract

Addressing the global warming crisis requires a deeper understanding of the factors influencing carbon emission intensity and the trends of major emitters. Indonesia, with its rapid economic growth and ambitious reduction targets, provides a case study for examining how national policies and structural shifts shape its carbon intensity. This paper analyzes the driving forces behind changes in Indonesia's emission intensity from 2010 to 2019, using multiplicative Structural Decomposition Analysis (SDA). Specifically, it assesses the impact of emission intensity, Leontief structural change (shifts in inter-industry relationships), and final demand (changes in final consumption). Our findings reveal that while Indonesia’s Aggregate Emission Intensity (AEI) improved from 2010 to 2015, it worsened from 2015 to 2019. The electricity sector, a major contributor to AEI changes, showed significant efficiency gains in the latter period, likely due to cleaner energy initiatives introduced between 2014 and 2017. However, these gains were offset by rising electricity demand for both intermediate and final uses. Other high-impact sectors, such as non-metallic mineral products, also experienced increases in emission intensity. Further analysis highlights the role of household consumption in driving demand-side effects, particularly in sectors like electricity, electrical machinery, and air transportation. These results underscore the need for strengthened policies targeting efficiency improvements, renewable energy expansion, and demand management to achieve Indonesia's carbon reduction goals and support a sustainable energy transition.