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luggish commodity prices have sent Indonesia’s energy sector into disarray at a time when oil demand and electricity consumption keeps increasing exponentially. However, the International Energy Agency (IEA) sees this time as an opportunity for Indonesia to implement energy efficiency standards and stockpile oil for a rainy day. IEA executive director Fatih Birol, who was touted by Forbes magazine as the fourth most influential person in the world’s energy sector, talks to The Jakarta Post’s Fedina S. Sundaryani about low oil prices and the agency’s Clean Air Scenario and how it impacts the future of Indonesia’s energy sector. The following are excerpts from the interview.

Question: Could you please explain the Clean Air Scenario, especially in the context of Indonesia?

Answer: Now, energy is the source of economy, energy is the source of prosperity and energy makes our lives more comfortable, but at the same time energy has some challenges in terms of the environmental implications. One of them is climate change, since energy is responsible for two-thirds of the emissions causing climate change and this issue has been discussed in Paris recently. But the other one, which is not very much discussed, is the impact of energy on air pollution in the cities.

Today, 6.5 million people die prematurely because of air pollution caused by energy. It is the fourth largest source of premature death after heart disease, smoking and dietary risks. Therefore, we thought what we can do is first analyze the problem and make some suggestions. It is a problem for many Asian countries — China, India, Indonesia — but it is also more and more for African countries. It is caused by the inefficient coal-fired power plants and the transportation in cars.

So, we’ve made some suggestions and in the context of Indonesia, I can give two recommendations. In terms of power plants, reduce the share of inefficient coal-fired power plants and for cars get some fuel-efficient standards to reduce the emissions. If these two things can be done, if those measures can be put into legislation and enforced and monitored by the government, I think we will see a major cleaning up of the air in Indonesia as well.

How can Indonesia reduce its dependence on fossil fuels while also benefiting business?

I think that Indonesia has to do at least three important policies. Number one, to make the most out of the renewable energies. Indonesia’s hydro, geothermal and especially solar power are huge sources. For example, in Indonesia you have a lot of coal and gas underground, but you also have a lot of energy in the sky and the cost of solar power has been going down in the last six years, down by 80 percent.

Second, if we prefer to use coal and some have to use coal because it’s cheap, we have to make a very efficient coal-fired power plant.

Third, we have to make use of the natural gas in the optimization package.

But overall, if you ask me, if I had a magic touch what would I change? I would change energy efficiency. In Indonesia, we can achieve a lot by having fuel efficiency standards for cars, like the entire world has, and for electrical appliances such as refrigerators, television sets and washing machines and also for industry.

Do you think it’s possible for Indonesia to implement an energy-efficiency program in the next few years, especially seeing Indonesia’s long-drawn legislation process?

In the entire world, efficiency policies have two legs. One is having the right energy prices and the second one is the legislation. In terms of energy prices, phasing out the subsidies for oil products and electricity is an excellent example and a very good step toward the right direction.

Second, in terms of legislation, in these three areas — cars, electrical appliances and industry — this needs to be coordinated by many ministries. So, the difficulty with energy efficiency is, for example, if its oil and gas there’s only one ministry that makes the decision, but with efficiency, the minister of energy, the minister of transportation, the minister of finance, the minister of industry, all of them get together and there’s a need for the right coordination.

Going back to renewable energy sources, the government has recently decreased its expectations of how much electricity will be procured by renewable energy to 19.6 percent from approximately 25 percent by 2025. How does the IEA see this development?

In the entire world, governments have targets for renewable energy and this is driven by domestic policies and also their signatures on the Paris agreement and governments revise their targets often. So, therefore my suggestion is that the Indonesian government has to make the renewable energy expansion a priority and should make it known around the world that they are open to foreign investments because there are not many places like Indonesia that have a huge potential for renewable energy that is still not discovered.

Oil prices are still low despite a slow increase since the beginning of the year. Does the IEA think that the prices will reach US$60 per barrel soon? Also, how can Indonesia take advantage of these low prices?

We expect that this year non-OPEC production will decline by about 1 million barrels of oil per day (bopd). We have never seen such a big decline since 1992, so this means more than 25 years. As a result, we expect that in the second half of this year or early next year, markets will rebalance and we may see an upward pressure on the current prices.

But for Indonesia the current low prices can provide two opportunities. One, it is a good window of opportunity to reform the prices and phase out the subsidies and, second, build the stocks when it is cheap for the rainy days we may have in the future.

Oil is perhaps the most strategic commodity in any country in daily economic life. Therefore, it is very important for the countries to have stocks for a rainy day. Indonesia currently has a stock of close to 30 days, while typically our member countries have close to 90 days of stocks. Since the oil prices are low now, we are ready to assist Indonesia to build up their stocks and give them some suggestions.

Indonesia became an associate member of the IEA recently and we are working with Indonesia on many fronts; clean energy technologies, energy efficiency, oil and gas and also I am happy to work with Indonesia for clean coal technologies as well.