Economics & Development

Indonesia is becoming increasingly urban. As of 2020, over 150 million Indonesians (56.7%) lived in cities. By 2045, 220 million Indonesians (70%) are projected to live in urban areas. Urbanization in Indonesia is associated with economic growth and poverty reduction, but economic returns have yet to be maximized due to the quality of urban development. Urban sectors are also responsible for a significant proportion of Indonesia’s total GHG emissions. In 2020, urban sectors are estimated to have contributed to 64.3% (848 MMTCO2e) of national GHG emissions—the equivalent of more than 180 million passenger vehicles driven for a year. Much of the GHG abatement potential lies in urban areas, particularly in reducing energy demand in buildings and waste while accelerating the land transition. Urban sectors will therefore play a critical role in meeting Indonesia’s national commitments and long-term goals on climate mitigation and adaptation, but the role of cities is missing in the national vision on climate. The Government of Indonesia is prioritizing urban development, providing a unique opportunity to set cities on a low carbon and climate resilient growth trajectory. To this end, there is an urgent need to synergize climate action planning and associated investments at the urban level with national and provincial priorities on climate and build requisite institutional, financial, and technical capacities within local governments to plan and implement climate-smart urban development. This policy note examines key transitions in land use, buildings, and waste sectors, with evidence from modeling of land and building transitions. It also emphasizes core governance and capacity gaps that must be addressed to enable local governments in advancing climate-smart development in Indonesian cities. Lastly, it provides key recommendations in three urban policy areas based on risks and opportunities described in the first two sections to advance climate-smart urbanization in Indonesia.