The Political Economy of Subsidies: Measuring the Socio-Economic Impact of Removing Fuel Subsidies and Accelerating Electric Vehicles on National Stability

Abstract

The contemporary structural shift from a fossil-based energy regime, which suffers from path-dependency, to a green socio-technical order creates a crucial political-economic dilemma for developing countries. This study aims to dissect the socio-economic impacts of fuel subsidy rationalization policies running simultaneously with the acceleration of electric vehicle adoption in Indonesia, as well as to analyze how the intersection of these two policies affects national stability and social justice. Using a critical political economy approach, this study employs a Systematic Literature Review method combined with Contemporary Content Analysis of reputable scientific literature and public policy documents from 2000–2026. The findings identify a sharp distributive injustice in the architecture of the energy transition.  The lower-class society (grassroots) is forced to bear the direct burden of supply-side inflation and the surge in logistics costs due to the removal of fuel subsidies, while the benefits of green techno-ecology fiscal incentives are unevenly enjoyed by the urban bourgeoisie because of the high upfront cost of electric vehicle (EV) units and the exclusivity of charging infrastructure. This socio-economic friction creates structural tension and sociological deprivation that could trigger horizontal polarization and social resistance, reducing national security stability. Therefore, the government needs to redirect green incentives towards mass public transport electrification and build adaptive social safety valves through inclusive procedural justice