The race to replace coal in Indonesia, the world’s largest coal exporter, has become a contest between the United States and China. At stake is not only Indonesia’s climate future, but also which superpower sets the terms for the next generation of energy in the developing world.

Like much of the developing world, Indonesia faces a choice between two stark energy futures.

Chinese companies signed more than $54 billion in agreements in 2023 with Indonesian state utility PLN, while President Prabowo Subianto’s 2024 Beijing visit added $10 billion in commitments. Chinese firms are now rapidly embedding themselves in Indonesia’s clean-energy supply chain, from solar and critical mineral mining to electric vehicles (EVs).

These investments dwarf the $20 billion Just Energy Transition Partnership, or JETP, signed in 2022 between Indonesia and a group of wealthy nations to help the country shift away from coal, which contributes 3.6 percent of the country’s GDP.

The program was faltering even before US President Donald Trump's administration formally withdrew in March. Only $1.2 billion, or about 6 percent, of JETP finances have been disbursed while Indonesia believes it needs over $97 billion for the transition.

The US is the world’s top oil producer and has pushed liquefied natural gas, or LNG, as part of talks meant to head off tariffs for Indonesia. It touts “energy dominance” as a way to cut dependence on rivals like China. Beijing is betting on big renewables to cement its role as the biggest supplier of clean energy technology.

The US path risks deeper fossil fuel dependence, while China’s promises jobs and cleaner power with fewer safeguards.

“These two countries ... they’re shaping two different visions of the future,” Putra Adhiguna of the Energy Shift Institute said.

US Exit Impacts Politics but Not Investment
The US withdrawal in March didn’t derail the JETP, but impacted political leadership, analysts said.

When the deal was signed, US climate envoy John Kerry said America had laid the groundwork. But after Trump dismantled Biden-era climate policies and pushed fossil fuel development, Indonesian officials questioned why they should transition if America isn’t, Adhiguna said.

Early JETP conversations “set expectations unrealistically high,” raising goals that were hard to achieve regardless of US policy changes, he added.

The US pledged $2 billion, with roughly half still accessible via loan guarantees, said Jordan Lee of the Tony Blair Institute for Global Change in Jakarta. The JETP was always meant to cover only a portion of the roughly $97 billion needed. Foreign investment was critical given Indonesia’s tiny solar and wind sector, accounting for 0.24 percent of total energy compared with 3.8 percent in the Philippines and 13 percent in Vietnam.

Lee said the JETP also provided a unifying platform for stakeholders and helped Indonesia partner with new countries like the United Arab Emirates and Saudi Arabia.

China Offers a New Model
China offers a "different version of energy security," replacing imported fossil fuels with solar panels that generate electricity for decades, Adhiguna said.

Major Chinese projects in Indonesia include a $6 billion supply-chain venture by battery giant CATL with local partners in 2022 and BYD’s $1 billion EV plant announced in 2024 will produce 150,000 cars annually and employ 18,000 workers.

China's BTR New Material Group launched a $478 million factory in 2024 that will make anode materials for EV batteries and create around 8,000 jobs, while a solar panel factory unveiled in 2025 by LONGi has an annual capacity of 1.6 gigawatts.

“It’s a whole-systems change,” said Dinita Setyawati, an energy analyst focused on Southeast Asia at the think tank Ember. She noted this meant a country could buy solar panels from China and charge their Chinese-built electric cars with clean electricity.

These projects are deployed quickly, which is crucial for Indonesia’s five-year political cycles, even if Western investors offer more safeguards. POWERCHINA built a 100-megawatt solar park in just seven months in 2024.

“If a US company takes four years to do a feasibility study, Chinese companies will already have invested by then,” Adhiguna said.

But Chinese investments often have come with high environmental costs.

Most of Indonesia’s nickel mines, for instance, are Chinese-owned. The country has the biggest reserves of the mineral needed to build EV batteries and the mines rely on captive coal-fired power plants, built on-site to supply electricity.

A 2024 study by the Centre for Research on Energy and Clean Air on the impact of nickel mining in three Indonesian provinces found pollution from smelters and the coal-fired power plants would cost the economy $2.6 billion in 2025, rising to $3.4 billion by 2030, while resulting in more than 3,800 deaths in 2025 and nearly 5,000 by 2030.

US Gas Could Lock Indonesia into Fossil Fuels
Energy and Mineral Resources Minister Bahlil Lahadalia said in April that it would boost LNG imports from the US by around $10 billion as part of tariff negotiations. LNG is natural gas cooled to a liquid for storage and transport, burning cleaner than coal but still emitting greenhouse gases.

The risk is that the gas deals could further entrench Indonesia’s reliance on fossil fuels. Committing to long-term deals risks leaving countries stuck with outdated infrastructure, even as the world moves quickly toward cheaper, faster-to-deploy solar and wind power, analysts said.

Indonesia could risk falling behind in the clean energy transition and miss out on investment opportunities, such as data centers seeking renewable energy in Southeast Asia, Setyawati said.

“And once they realize it, it might be too late,” she said.

Meanwhile, Indonesia remains deeply tied to coal. It was the only country to propose building new coal plants and had the third-highest amount of coal capacity globally in 2024. About 80 percent of the 1.9 gigawatts of coal capacity Indonesia built was for the captive coal plants for smelters processing minerals like nickel and cobalt for electric vehicles, according to a report by US-based nonprofit Global Energy Monitor.

“The Indonesian government needs to realize that this is where the world is heading, like it or not,” Setyawati said.