The Role of Fiscal Policy to Increase Energy Security: Indonesian Case Study

Abstract

In a simple language, energy security is maintaining the availability of national energy supply at affordable prices. Some energy resources are used in Indonesia, such as petroleum, natural gas, coal, and renewable energy. In line with increasing the population and growing the economy of Indonesia, the demand for petroleum is increasing. Meanwhile, petroleum production and reserves are declining. 2004 was a turning point for Indonesia, from the petroleum exporter country to the petroleum importer country, and since then the volume of petroleum imports increases every year. Depending petroleum supplies from imports is very risky for Indonesia's energy security. Limited stock or rising petroleum prices on global markets can have a negative impact on the sustainability of national petroleum supplies, economic growth and government budgets. This research is intended to look for policies that can increase energy security in relation to the decline in petroleum production. Descriptive exploratory method is used, to explain the phenomena related to energy security issue in Indonesia. Bioethanol, one of renewable energy, is expected to substitute the imported petroleum. Bioethanol can be produced by the community. However, the economic price of bioethanol is more expensive than that of petroleum, that make people prefer to use the petroleum rather than bioethanol. Fiscal instruments can be used to promote bioethanol as a substitute for petroleum. The use of petroleum causes air pollution, so it deserves as excise object. A portion of the excise proceeds can be earmarked to provide subsidies for bioethanol production, that will make bioethanol prices more competitive. This policy will add a little burden to community, but provide several benefits, such as having better energy security, reducing dependence on petroleum imports, improving the economy and creating jobs with the bioethanol industry, and creating cleaner environment.