Climate-economic country risk profile: Indonesia

This report examines Indonesia’s exposure to simultaneous physical climate and transition to low-carbon risks, focusing on the “double cost crunch” in which climate impacts reduce growth, productivity and fiscal space while the low-carbon transition requires substantial upfront investment. The GeoClimRisk project uses modelling to examine how climate damages, the transition to a low-carbon economy and their interaction may affect Indonesia’s geopolitics. The analysis also considers terrestrial water storage, capital and labour productivity, and climate-related consumption and migration.

The report finds that high capital costs can reduce renewable energy deployment and increase reliance on fossil fuels, while climate impacts can damage capital, reduce productivity and increase adaptation costs. It concludes that delaying mitigation intensifies the double cost crunch. The report recommends early climate action, investment in renewable energy, adaptation and resilient infrastructure, improved capital market conditions, international climate finance, smart governance and sustainability criteria in resource partnerships.