Optimization of Fuel Subsidy Reallocation to Support the Electric Vehicle Program and Reduce Carbon Emissions in Indonesia

Abstract

Indonesia faces significant challenges in subsidized fuel consumption, particularly in the transportation sector, which not only burdens the state budget but also worsens air quality. Therefore, the transition from fossil fuel-powered vehicles to electric vehicles is essential to reduce fossil fuel consumption and the air pollution caused by its use. This study employs a literature review method to analyze the potential reallocation of fuel subsidies to the electric vehicle program. The results indicate that by allocating 5% of the fuel subsidy budget, the government could fund up to 811,428 electric motorcycles and potentially reduce carbon emissions by 1,947,427 kg CO₂ per day. These reductions could then be converted into carbon credit certificates, generating up to $19,470 per day in revenue for the government, while also providing incentives for infrastructure developers to attract investment. Additionally, utilizing digital applications in the distribution of subsidized fuel can enhance targeting accuracy and minimize misuse.