Indonesia’s green energy ambitions are hampered by a lack of climate finance

Indonesia is the world’s largest producer of coal and the fifth-largest consumer of the dirtiest fossil fuel. Since 2001, according to figures from the International Energy Agency (IEA), Indonesia’s coal production increased by 558%, domestic coal consumption increased by 494%, and coal exports skyrocketed by 608%. Weaning Indonesia off coal is therefore not only integral to the Southeast Asian nation’s climate goals, but critical to combating catastrophic climate change worldwide.

The Indonesian government has committed to achieving net zero emissions by 2060, but achieving this goal will be extremely difficult and will require a concerted and coordinated effort from the national government, industry, financial institutions and communities. Despite these ambitious goals, however, “only a limited number of coal plants have been planned for early retirement,” East Asia Forum. rEPORTS. “This is due to the need for greater political will, strict criteria and financial support from financial institutions and donors.”

In addition to encouraging stronger domestic governance, it will require weaning Indonesia off coal a lot of hard money. Reuters reports Indonesia will need $94.6 billion by 2030 to adequately build clean energy production and transportation infrastructure so that it can gradually reduce its prodigious rates of coal-based energy production and consumption.

It is widely recognized that meeting the international targets set out in the 2016 Paris Agreement will require richer countries, which have spent decades building their economies with indiscriminate consumption of fossil fuels, to channel funds to poorer countries to help them move away from the cheapest and more. affordable fossil fuels and develop sufficient clean energy alternatives without derailing their own economic development trajectories. This approach is known as “climate finance” and has received wide support – in theory.

In practice, climate finance has been characterized by years of delays and broken promises. In 2009, at the COP15 United Nations climate summit in Copenhagen, rich nations pledged to send $100 billion a year to less rich countries by 2020 as part of the global imperative to cut emissions of greenhouse gases. They never fulfilled that promise.

Today, Indonesia is plagued by continued failures of the climate finance system. “The Southeast Asian nation of more than 275 million has been promised $20 billion in funding as part of the G7’s Just Energy Transition Partnership (JETP) unveiled in 2022,” Reuters reported early this week, ‘but very little money was paid. “

According to a senior minister overseeing mining in Indonesia, Luhut Pandjaitan, the current climate finance mechanism has major pitfalls that have led to its inefficiency and ineffectiveness. Namely, he says it doesn’t include any grants and hasn’t addressed pressing issues like the high cost of decommissioning existing coal plants.

“If you push us to retire coal plants early, how do we finance them? Interest in financing must be attractive,” Luhut was quoted as saying at the Coaltrans Asia conference in Bali this week. “If I give a commercial interest (rate), what’s the point?”

A broader Reuters analysis found that climate finance mechanisms around the world were plagued by similar flaws. The report found that “a program designed to help developing nations fight climate change is funneling billions of dollars back to rich countries,” including Japan, France, Germany, the United States and other rich nations. Instead of offering low-interest or no-interest loans, as originally promised at COP15, these nations are offering market-rate interest for their own financial gains, ultimately deepening the disparities between the developed and developing world and pushing back progress in climate change action below. timeline while the clock runs out.

In the words of Septian Hario Seto, an Indonesian deputy minister for investment affairs, “Too many promises, nothing delivered.”

By Haley Zaremba for Oilprice.com

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