Indonesia faces serious challenges as coal exports hit three-year low

In 2025, Indonesia's coal industry is under significant pressure, primarily because of declining demand from its largest customers, China and India. Facing a shift towards cleaner energy sources, both countries have begun to reduce their reliance on coal, a heavily polluting fossil fuel that has been a significant part of Indonesia's economy. Reports indicate that Indonesia’s coal exports reached a three-year low in the early months of 2025, with coal exports accounting for nearly two-thirds of the country’s total in 2023. Moreover, data reveals India’s coal imports decreased by over 8% in the latter half of 2024 compared to the previous year. Even though Indonesia's coal production continues to rise, predicting a record output of 836 million tons in 2025 – nearly 8% more than the previous year – this could potentially signal trouble for the industry in the longer term. The current dependence on a few key buyers creates vulnerabilities, particularly as shifts in global energy consumption patterns favor more sustainable and cleaner energy forms. China, while still heavily reliant on coal for over half of its electricity generation, has met more than 75% of its growth in energy demand through renewable sources, suggesting a critical turning point for fossil fuel markets. Unfortunately, the situation is further complicated by structural issues within Indonesia’s coal sector, including the heavy control exerted by insiders and restrictive government regulations, which stifle potential profits. Domestic supply rules and high royalty rates limit the industry's financial flexibility, making it challenging for coal companies to adapt to these market changes effectively. Global financing remains elusive, as private investors appear hesitant to engage with long-term transition plans, preferring instead immediate profit-driven strategies. Despite government pledges to cut emissions and invest in clean energy, coal production expansion continues alongside the approval of new coal plant developments, reflecting a disparity between policy intentions and actionable outcomes. Unpredictable domestic subsidies can keep coal prices low, while sudden export bans have been known to disrupt global energy markets. As both China and India reassess their import strategies to enhance energy security, Indonesia’s coal sector faces urgent calls for planning and diversification to navigate the transition to a more sustainable energy future.