The Impacts of Coal Mining on the Economy and Environment of South Kalimantan Province, Indonesia

The purpose of this research is to analyse the impact of the coal mining industry on the economy as well as the environment of South Kalimantan Province, Indonesia. The South Kalimantan Province is an area with abundant deposits of coal and contributes 16.36 per cent to the national coal stock. Coal mining is a profitable business. It creates employment, generates value, and improves the foreign investment of a country or region. However, coal mining has its disadvantages including negative externalities. It seems that in this business the public gets the dust and dirt, while the workers and managers get the benefits and advantages. This research uses a Social Accounting Matrix (SAM) to analyse the impact of the coal mining industry on the economy and to do simulations to find alternative policies on the coal industry that are suitable for economic improvement and environmental sustainability. The results show that the coal mining industry in South Kalimantan Province is growing. Large-scale coal mining is more profitable economically than small-scale operations, but in terms of environmental impact, the latter is a better choice as it exploits less resources. The policy-maker needs to consider measures to reduce the level of coal exploitation to save the environment and investment policies that support agricultural-based activities where the employment rate is the highest. The first easy step is to impose taxes on coal mining to slow down mining activities and then use this tax revenue as transfer payments such as subsidies and direct transfers "in kind" (for example, rice and farming equipment) to support the needs of lower income households in the province.