This U4 Issue analyses Indonesia's ambitious energy transition and highlights how political finance, weak regulations and a "revolving door" of personnel between public office and the private sector create vulnerabilities. The publication was produced by U4 and the Basel Institute on Governance through its Green Corruption programme.

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About the paper

Conflicts of interest and corruption in Indonesia's political economy pose significant risks to its energy transition, including the Just Energy Transition Partnership. Existing legal and institutional frameworks are fragmented, inconsistently applied, and often fail to address the risk of state capture by powerful political and economic actors, especially in the extractive and energy sectors.

The reliance on fossil fuel industries for political financing and the monopolistic nature of state-owned entities further complicate the shift to a low- or no-carbon system, despite the country's ambitious renewable energy targets.

Potential pathways to greater anti-corruption resilience lie in improvements to beneficial ownership transparency and strengthening regulation, monitoring and sanctioning of conflict of interest violations.

Main points:

• Corruption and conflicts of interest are embedded in the energy transition process due to the strong links between political power, private wealth (especially from extractive industries) and public office holders.
• Existing anti-corruption regulations are often vague, fragmented across different legal instruments, and suffer from inconsistent enforcement, which creates loopholes susceptible to manipulation.
• Progress in renewable energy uptake is slowed by the enduring influence and interests of fossil fuel incumbents who benefit from subsidies that keep coal an artificially cheap and viable energy source.
• The Just Energy Transition Partnership is vulnerable to misallocations due to concentrated decision-making power, limited transparency in project selection and insufficient involvement of national anti-corruption bodies and civil society in its planning.
• Improving transparency of beneficial ownership and strengthening the monitoring and sanctioning of conflict of interest violations are possible pathways to build greater anti-corruption resilience, though these institutional efforts alone are insufficient to fully address state capture dynamics.