Myopic versus perfect foresight target setting for Indonesia's net zero electricity transition

Area of Science:

• Energy Systems Analysis
• Climate Change Mitigation Policy
• Economic Modeling

Background:

• International climate agreements, like the Paris Agreement, necessitate setting emissions targets.
• Current decision-making often focuses on short-term milestones, potentially overlooking long-term implications.
• The choice between myopic (short-sighted) and perfect foresight (long-term) approaches to target setting has economic and environmental consequences.

Purpose of the Study:

• To investigate the cost implications of setting emissions targets based on myopic versus perfect foresight.
• To analyze the trade-offs between cost minimization and emissions reduction strategies in long-term energy planning.
• To evaluate the role of renewable energy policies in mitigating risks associated with myopic emissions targets.

Main Methods:

• Utilized a long-term energy system optimization model.
• Employed mixed-integer linear programming (MILP) to simulate perfect foresight scenarios.
• Compared emissions outcomes and costs derived from perfect foresight with myopic, exogenous target values.

Main Results:

• Significant cost discrepancies exist between myopic and perfect foresight emissions targets.
• Myopic approaches, avoiding drastic emissions reductions, show lower immediate cost discrepancies compared to perfect foresight.
• Lenient emissions targets under a myopic approach risk increased reliance on fossil power generation.

Conclusions:

• Myopic emissions target setting can lead to suboptimal long-term energy system configurations.
• While seemingly cost-effective in the short term, myopic strategies may increase fossil fuel dependency.
• Integrating ambitious renewable energy promotion policies with less drastic emissions reduction targets is crucial to balance costs and sustainability.