The economy-wide impact of controlling energy consumption in Indonesia: An analysis using a Social Accounting Matrix framework

Abstract

Escalating oil prices and the need to control carbon emissions sound the alarm for Indonesia to reduce or be more efficient in its energy use. Instead of eliminating the fuel oil subsidy to promote better and more efficient use of energy, the Indonesian government seems to be more in favour of restricting energy use by, for example, requiring all hotels, restaurants, night clubs and other business activities to close down by 1 am. Societies need to understand the full consequences of adopting restricting energy use and more efficient energy use strategies toward their incomes. This paper aims to analyse the impact on the economy of energy policies aiming to reduce and to improve the efficiency of energy use, particularly on the income of various household groups. This paper will, first, construct a Social Accounting Matrix for Indonesia with detailed energy sectors and, second, utilise various multiplier analyses to observe and understand the impact of these energy policies.