Indonesia signs deals to accelerate clean energy transition – diplomacy

Indonesia signed agreements with international lenders and major countries on Tuesday that will bring in billions of dollars in financing to help the country increase its use of renewable energy and reduce its dependence on coal.

The $20 billion agreement was announced on the sidelines of the G20 summit in Bali, Indonesia. Called the Just Energy Transition Partnership, or JETP, it aims to help developing countries reduce their reliance on fossil fuels like coal and gas that emit carbon emissions that contribute to climate change.

It is an important step for Indonesia, which is a major coal exporter and has abundant potential for developing cleaner energy.

“In today’s world, climate change is a global emergency,” said Luhut Binsar Pandajitan, Indonesia’s Coordinating Minister for Maritime Affairs and Investment. “Indonesia has an important role to play in avoiding the worst effects of climate change on our country, our people and the environment.”

Participating governments – the United States, Japan, Canada, Denmark, the European Union, France, Germany, Italy, Norway and the United Kingdom – will provide a total of about $10 billion in soft loans, grants and equity. US officials said the world’s major private financial institutions, which earlier pledged support for climate investment, would arrange the rest.

Did you enjoy this article? Click here to sign up for full access. Only $5 a month.

As part of the agreement, Indonesia pledged to ensure that emissions from the country’s energy sector begin to decline by 2030. The country has furthered its goal of making the entire power generation sector emission-free by 2050.

“Indonesia’s energy transition plans will send a very strong signal not only in the Asia-Pacific region but also in the world that Indonesia is a world leader in a just and affordable transition from fossil fuels to clean energy,” said Indonesian Finance Minister Sri Mulyani Indrawati.

US climate envoy John Kerry said the United States and Indonesia have been laying the groundwork for an agreement since the early days of President Joe Biden’s administration.

“We wrestled with a myriad of issues to get to today’s groundbreaking announcement,” Kerry said. He said the agreement “can really transform Indonesia’s energy sector from coal to renewables and support significant economic growth.”

South Africa was the first country to sign the JETP agreement, during last year’s climate conference, COP26, in Glasgow. The major G7 countries are calling for $8.5 billion in soft loans and grants to help the coal-rich nation reduce its use of fossil fuels.

Citing lessons learned from the South African agreement, US officials said the package with Indonesia has strict and short timelines, will start soon and will keep stakeholders engaged.

The Indonesian deal is the largest to date, reflecting the nation’s heavy reliance on coal. Indonesia is the third largest producer of coal in the world and the average age of coal-fired power plants is only 12 or 13 years. These plants can remain in operation for up to 45 years.

The effort to form JETPs reflects recognition that developing countries are disproportionately suffering from the consequences of climate change, said Swati D’Souza, an energy analyst in New Delhi at the Institute of Energy, Economics and Financial Analysis.

“So, we need funding and money from the Global North to help the Global South transition to clean energy,” said D’Souza. “JETPs are a way to save needed money.”

Other coal-rich developing economies are watching how deals with South Africa and Indonesia progress. India, the world’s third largest emitter of greenhouse gases, and Vietnam, Senegal and the Philippines are all considering signing similar agreements.

Did you enjoy this article? Click here to sign up for full access. Only $5 a month.

Putra Adiguna, an IEEFA energy analyst in Indonesia’s capital, Jakarta, noted that the transition to alternative energy sources could be “low-hanging fruit” for many places in an archipelago of more than 17,000 islands. However, since Indonesia already has excess power generation capacity, there is less incentive to shift to cleaner sources. “This is another issue that energy transition deals need to address,” Putra said.

The biggest concern is that such arrangements may be too little, too late.

said Soni Kapoor, professor of climate, geoeconomics and finance at the European University Institute based in Florence. “It is commendable that these deals acknowledge the issues at hand but at the same time, funding is insufficient and is limited by design to a few countries.”

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *