Indonesia and Germany play a central role in numerous global initiatives, including climate neutrality and sustainable energy. The two countries are among those with a net-zero emissions pledge. The global net-zero ambition combined with the strengthening national policy on coal transition will facilitate a declining demand for coal. More than 95% of global coal is consumed in countries with net zero emission targets. Apart from participation in the global coal transition initiatives, the Indonesian government has made the acceleration of coal power plant retirement an official national policy by enacting Presidential Regulation 112/2022. Assuming all net zero pledges announced by governments are met on time and in full, global coal demand is projected to drop by around 20% by 2030 and by more than 70% by 2050 (IEA 2022).

While phasing down/out coal is essential in decarbonising the energy system to achieve the 1.5 °C target, it will impact the coal-producing regions and facilitate structural changes in the local economy. In East Kalimantan and South Sumatra, two of the three main Indonesian coal regions, coal production activities contributed about 44% and 16% of the local GDP in 2022. A diminishing role of the coal mining sector will also affect the financial capability of the local government to deliver public services, as coal royalty shares about 15% and 3% of the provincial government revenue of East Kalimantan and South Sumatra, respectively, in 2022. The coal regions need to transform their local economy from one that is (heavily) dependent on coal with a degraded and unsafe environment to a more sustainable and just local economy and communities with decent long-term jobs and a safe and healthy environment. Workers (formal and informal) and local communities with livelihoods linked to coal production activities need to be prepared and ready to transition towards more sustainable and just local economies.