Downstream Policy in Indonesia: Does it Support Energy Security?

Abstract

The downstream policy in the mining sector aims to enhance the added value and competitiveness of national industries in a dynamic global market. This policy also impacts domestic energy security. Our study explores the effects of down streaming on energy security in Indonesia using panel data from 34 provinces from 2017 to 2022. Down streaming is measured by the added value in the mining sector, while energy security is assessed through an index developed using Principal Component Analysis (PCA), covering Availability, Accessibility, Affordability, and Acceptability. By employing the Panel Least Squares method, our findings indicate that the downstream policy positively affects energy security in Indonesia. The policy significantly improves the availability, accessibility, affordability, and acceptability of energy, thereby boosting overall energy production. However, our results also reveal that the implementation of downstream leads to higher energy prices. This indicates that while the downstream policy enhances energy security by increasing energy supply and improving its distribution, it simultaneously raises the cost of energy in the domestic market. Thus, careful consideration is needed to balance these outcomes for sustainable energy policy development in Indonesia.