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Indonesia's fuel subsidies were put in place to make energy more affordable, particularly for poor people.

However, overwhelming evidence suggests that most of the subsidies—likely to be worth over Rp134 trillion (US$15 billion) in 2011—go to the well-off. In addition, the subsidies interfere with energy supplies and economic development by reducing investment in energy infrastructure (both current and emerging technologies), wasting government resources and undermining Indonesia's international competitiveness.

This paper gathers the best available information on the costs and benefits of energy subsidies. The first part provides an overview of how various types of energy are subsidized in Indonesia. The second part looks at the implications of these subsidies on various aspects of sustainable development. The third part discusses the process of reforming energy subsidies, drawing on Indonesia's earlier efforts, and lessons learned from other countries.