Callum foresees rising levels of poverty and social unrest as the consequences for Indonesia of global warming.

How Climate Change, Rising Energy & Food Prices Will Affect Indonesia

In our first article we looked at the global causes of rising energy & food prices and climate change. In this article we will look at how these trends will affect Indonesia.

The Effects of Climate Change:

While global warming will have its most notable affects in terms of average temperature in the extreme northern and southern hemispheres, countries in tropical regions such as Indonesia may be the ones most adversely affected. You won’t see much of a rise in temperature but you will see a significant rise in sea levels and the incidence and ferocity of extreme weather events.

As the temperature warms, the ice in both polar regions will retreat. We are already seeing this in the form of the disappearing sea ice in the Arctic and Antarctic Oceans. The current rate of sea rise is 3-4mm per year which is accelerating at 0.013mm per year, if it continues at this rate it will mean rise of about 30 cm by the year 2100. Now this does not sound to foreboding but you need to understand that the current rise is being caused by sea ice melting. This ice is already in the ocean so that like ice in a drink its melting won’t significantly affect the level of liquid in your glass. The danger is that as the sea ice melts the next thing to melt will be land based ice in Greenland and the Antarctic.

If the Greenland Ice Shelf was to completely melt the world’s oceans would rise 6.55 meters. If the West Antarctic Ice Sheet was to also melt, the oceans would rise a further 8.05 meters. And if the East Antarctic Ice sheet also melted the ocean would rise a further 64.08 meters for a total of almost 80 meters. To give you some perspective, if the ocean rose 80 meters the Tuga Monas would be half submerged. All of Jakarta and 35,000 square kilometers of Indonesia would be consumed by the sea. If this wasn’t bad enough the surviving areas would be periodically hit by super typhoons packing winds of 150 kilometers per hour.

The Effects of Rising Food Prices:

In a country like Indonesia where a large portion of the population survives on less than 2 dollars a day, even modest rises in food prices can create a lot of suffering. Current estimates by the World Food Program are that 4 million children in Indonesia are suffering from various degrees of malnutrition. If food prices continue to rise at their current rates without offsetting increases in people’s wages this number could easily grow to 40 million within the next 5 years.

Since the poor spend a disproportionate amount of their earning on food. In some cases as high as 70%. They are much more adversely affected by even small rises in basic food items. When people are hungry and unable to feed their children, they often will resort to violence to express their discontent. The spark could be anything. A policeman being a bit too rough when affecting an arrest or a rich man hitting a poor person with his car, could be the spark that sets of a wave of rioting among the disenfranchised poor.

The Effect of Energy Price Rises:

Indonesia still clings to a model that insulates people from the true cost of energy. Once an oil exporter, the ingrained habit of subsidizing fuel continues even when it makes no economic sense. The government will spend an amount equal to all of its oil related income on proving subsidized benzene to fill up people’s car and motorcycles. That means that other than cheap fuel and the corresponding air pollution, the people of Indonesia get zero benefit from the counties petroleum resources.

As energy prices continue to rise in the future and oil production continues its decline we will see an increasingly larger share of valuable government revenue disappearing in to people’s gas tanks.

Motive fuels are not the only subsidy; the government also restricts what PLN can charge for electricity. This has left the utility in the impossible position of trying to provide electricity at costs below what it currently costs to generate as well as build new power plants to growth in demand. It is currently estimated that PLN needs an additional 10,000 Megawatts of generating capacity just to keep the lights from going out in Java and Bali.

Any thought of achieving its mandate to provide electrification to the whole country has had to be shelved through a lack of resources. PLN is in such bad financial shape that it has not paid its bill to Pertamina since 2006 and now owes them 35 trillion rupiah. Try not paying your PLN bill for one month and see how understanding they are. As energy prices continue to rise one day the lights may go out, as they often do in Indonesia, but they may not come back on.

In our next installment we will look at some things that can be done to try and avoid these nightmare scenarios.