Indonesia’s EV Transition Not Just to Cut Emissions, More So to Cut Oil Dependence, Study Says

Indonesia’s transition to electric vehicles (EVs) is driven primarily by the urgent need to reduce its heavy reliance on imported oil rather than solely by environmental concerns. The country’s transport sector, which accounts for 22% of energy-related emissions, remains deeply entrenched in fossil fuel use, supported by extensive government subsidies that have historically kept fuel prices artificially low. However, escalating global oil prices and geopolitical instability are placing increasing strain on Indonesia’s public finances, as subsidies now consume around 10% of state spending, creating an unsustainable fiscal burden. A recent working paper from the International Council on Clean Transportation (ICCT) highlights the structural challenges facing Indonesia’s transport system. With over 170 million registered vehicles and millions of new motorcycles and cars sold annually, the majority still run on low-quality fossil fuels. The country is particularly vulnerable to external shocks due to its declining domestic fuel production and dependence on imported oil, which exacerbates both fiscal and energy security risks. This vulnerability is intensified during periods of global oil supply disruption, forcing the government to maintain politically sensitive fuel prices through costly subsidies. Electrification is presented as a strategic solution to these intertwined economic and environmental challenges. The ICCT report argues that transitioning to zero-emission vehicles could significantly reduce Indonesia’s oil consumption—potentially saving billions of barrels of oil equivalent by 2060—and generate substantial energy cost savings. Beyond emissions reductions, the shift to EVs offers a pathway to greater fiscal stability and improved public health outcomes by lowering pollution-related premature deaths. Yet, despite some progress, the adoption of zero-emission vehicles remains uneven, with passenger cars reaching just over 5% market share in 2024, while other vehicle categories, especially motorcycles, lag far behind. The report warns that without comprehensive and effective policies, Indonesia risks missing its transition targets, which would deepen its dependence on fossil fuel imports and forgo significant economic and environmental benefits. The contradiction between maintaining cheap fuel prices and coping with expensive global oil markets is no longer sustainable, making the EV transition a critical mechanism for achieving structural resilience. Indonesia now stands at a pivotal moment where accelerating electrification could resolve long-standing vulnerabilities and align the country’s transport system with both economic imperatives and climate goals.