Daftarsbmptn.com – Climate change is no longer an abstract threat, but a harsh reality with direct impacts on various sectors of life, including the economy. Indonesia, as the world’s largest archipelagic nation, is at the forefront of this threat. With more than 17,000 islands, a 108,000-kilometer coastline, and high ecological diversity, Indonesia is highly vulnerable to extreme weather changes, sea-level rise, floods, droughts, forest fires, and other related disasters. These impacts not only devastate the environment but also cause enormous economic losses.
In the 2020–2024 period alone, the government recorded losses from climate-related disasters reaching more than IDR 544 trillion. This figure represents the culmination of a series of annual losses resulting from disruptions to agricultural production, infrastructure damage, supply chain disruptions, reduced public health, and lost work productivity. In the agricultural sector, changing rainfall patterns cause crop failures; in coastal areas, abrasion and tidal flooding threaten local economies and vital infrastructure; meanwhile, in urban areas, massive flooding, such as in Jakarta, causes billions of rupiah in losses in a matter of days.
The climate crisis is not only impacting the domestic economy but also making Indonesia vulnerable to global competition. If not addressed immediately with massive adaptation investments and strategic climate policies, climate change has the potential to reduce Indonesia’s Gross Domestic Product (GDP) by up to 3.45% by 2050. This is where the urgency of calculating economic losses becomes clear—not simply to record the damage, but to encourage concrete action in responding to this century’s greatest challenge in a targeted, equitable, and sustainable manner.
1. Why Indonesia is highly vulnerable to the climate crisis
- Indonesia has characteristics that increase its vulnerability to climate change:
- Its geographical location as an archipelagic nation with a long coastline makes it vulnerable to rising sea levels and saltwater intrusion.
- Many regions have low-lying topography and densely populated coastal areas with significant economic activity.
- High exposure to extreme weather phenomena such as floods, landslides, forest and land fires, droughts, and increasingly erratic rainfall cycles.
- Therefore, the impacts of climate change are not only environmental but also economic and social.
2. The magnitude of economic losses that have already occurred
- Several studies and reports indicate very large figures regarding the economic losses due to climate change in Indonesia:
- According to a report by UNICEF and the Indonesian government, climate change could reduce Indonesia’s GDP by around 3.45% by 2050 if not addressed.
- A report, “The Cost of Climate Change in Indonesia,” estimates significant losses in the agriculture, health, infrastructure, and workforce sectors.
- The Ministry of Finance reports that Indonesia faces losses of up to IDR 544 trillion (approximately USD 30–40 billion depending on the exchange rate) from the impacts of climate change between 2020 and 2024.
- Additional studies indicate that the agriculture and health sectors will be two of the most impacted by climate change in Indonesia.
- These figures demonstrate that the climate crisis is not just an environmental issue, but a real and long-term economic one.
3. Most Impacted Economic Sectors
Several sectors are experiencing direct and significant impacts from climate change:
a. Agriculture, Fisheries, and Forestry
Unpredictable rainfall, droughts, floods, and landslides disrupt agricultural and fisheries production. Land is damaged, crop yields decline, and thus the incomes of farmers and fishermen decrease.
Forestry also faces losses through forest and peatland fires; in addition to environmental damage, this impacts the loss of the economic value of timber, ecosystem services, and restoration costs.
b. Infrastructure and Settlements
Flooding, sea level rise, coastal erosion, and landslides cause physical damage to roads, bridges, transportation facilities, buildings, electricity, and water installations.
For example, coastal infrastructure threatened by increased sea intrusion or land subsidence increases mitigation and adaptation costs.
c. Health and Labor Productivity
Climate change impacts public health: tropical diseases may increase, air and water quality may decline, and heat stress may increase, all of which reduce labor productivity.
Studies show that extreme heat waves can significantly reduce human activity and productivity.
d. Macroeconomics and Growth
With widespread damage to key sectors and increasing adaptation/mitigation costs, national economic growth could be hampered. An IMF report states that Indonesia faces “risks of economic damage related to extreme weather, rising seas, and social vulnerabilities” that could hinder growth.
Exports and investment sectors could also be impacted if infrastructure and supply chains are disrupted by climate disasters.
4. Real-life examples of climate losses in Indonesia
- Reports indicate that between 2020 and 2024, losses due to climate change will reach approximately IDR 544 trillion.
- In Jakarta, annual flooding contributes significantly to economic losses each year. For example, a Wikipedia report states that the cost of a single major flood in Jakarta could reach US$400 million (approximately IDR 5-6 trillion) in 2007.
- Forest and land fires, triggered by a combination of land clearing, drought, and climate change, cause enormous environmental and economic losses in the short and long term.
5. Implications and Challenges of Adaptation
Implications
- Government spending on emergency response, recovery, and infrastructure reconstruction will increase.
- Financial risks will increase for both the private and public sectors (insurance, investment) as disaster frequency increases.
- Social inequalities could widen: poorer groups and remote areas are most vulnerable to climate impacts—so the economic burden of climate change is also a social burden.
Adaptation Challenges
Large funds are needed to build climate-resilient infrastructure: flood control, coastal embankments, drainage, early warning systems, and the relocation of residents from high-risk zones.
Inter-sectoral and inter-regional integration is necessary: climate adaptation is not only an environmental task but also an economic, social, and spatial one.
Inclusive policies: adaptation must include vulnerable groups so that economic losses do not exacerbate poverty.
Sound measurement of the costs and benefits of adaptation: without solid data, it is difficult to prioritize adaptation investments.
6. Policy Recommendations
- Based on the losses already incurred and the potential for future losses, several key policy recommendations can be put forward:
- Accelerate the development of climate adaptation infrastructure, prioritizing coastal areas, large cities, and disaster-prone areas.
- Improve early warning systems and community preparedness so that losses can be prevented or reduced.
- Allocate adaptation and mitigation budgets transparently and focused on tangible economic impacts.
- Encourage the private sector to invest in climate adaptation and diversify climate-economic risks.
- Involve local communities and vulnerable groups in adaptation planning so that implemented solutions are tailored to local conditions and equitable.
In conclusion, the economic losses from the climate crisis in Indonesia are already real and substantial. If not addressed with appropriate and rapid adaptation strategies, these losses will not only grow but also hinder economic growth, widen social disparities, and impose a burden on future generations. Education, investment, policy, and cross-sectoral collaboration are key to transforming climate challenges into opportunities for more resilient and sustainable development.
If you wish, I can prepare a summary of climate economic losses data in Indonesia in the form of an infographic or trend chart for the period 2010-2050.