Leveraging fiscal stimulus to improve energy transition: Case of South Korea and Indonesia

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Strict lockdowns across the globe in response to the COVID-19 crisis have led to severe economic consequences. Compared to 2019, the global GDP in 2020 fell by 4.3 %, the most severe decline since 1960 – exceeding the 0.1% drop which followed the global financial crisis in 2009 (World Bank, 2021).

While early responses to the pandemic were focused on rescue efforts, governments are now transitioning into economic recovery efforts. The two countries analyzed in this report – South Korea and Indonesia – announced stimulus packages of USD 333.7 billion and USD 74.7 billion, respectively (Climate Policy Initiative, 2021).

This study, produced in collaboration with the Seoul National University, aims to analyze the COVID-19 recovery policies in South Korea and Indonesia, particularly the role of fiscal stimulus in their energy transition goals. Both countries are actively trying to increase the share of renewable energy in their energy mix. Given the similarities in the energy supply mix and the energy market structure, this study will also explore the relationship between newly developed energy and fiscal stimulus policies and clean energy transition. It will further delve into the impact of crisis-induced fiscal spending on the trajectory of energy transition development in both countries.

Authors: Muhammad Ery Wijaya, Jong Ho Hong, Muhammad Zeki, Brurce Muhammad Mecca, Alke Rabinsa Haesra, Keewon Kim, Soo-suk Lee, Rahmahwati Rosidah and Sangwon Uhm

Publisher: Climate Policy Initiative