Global Courant 2023-05-17 11:35:00
JAKARTA – A $20 billion (S$26.8) international effort to accelerate Indonesia’s coal shift depends on the availability of cheap financing – and Jakarta fears there simply isn’t enough.
Indonesian President Joko Widodo and his American counterpart Joe Biden made headlines last year with their agreement to jump-start efforts to clean up Southeast Asia’s largest economy, a deal known as the Just Energy Transition Partnership and which is considered a potential model for other cash-poor, coal-dependent countries.
An initial investment plan detailing how Indonesia will green its power supply and reduce greenhouse gas emissions is expected in mid-August. As of now, however, government officials say much more money needs to come in on terms the country can live with.
“We don’t want our economy to be affected by the JETP,” Luhut Binsar Panjaitan, Coordinating Minister for Maritime Affairs and Investment and the representative of the Jakarta government, said of the deal.
“There is no problem on our end. The point is, if we get the money on good terms, we will continue. If not, we will continue with our own plans.”
Mr Panjaitan argues that partners in the deal must provide sufficient financing at sufficiently low rates so that the green push does not add to a debt burden that currently stands just below 43 percent of gross domestic product, the fourth lowest in the world. G-20 nations.
“Show your money,” Mr. Panjaitan said in an interview at his office in Jakarta.
Under the deal agreed last November, funds to support the JETP would come from a mix of government and private sources, with concessional loans, grants and more crowding out private funding. In theory, the total costs should therefore be manageable.
But Indonesian officials have expressed concern about the amount that would be in grants and where cheaper funding would be allocated. So far, Mr Panjaitan said, he is impressed.
“To remind them that we still have two and a half months to go. This is your credibility. We lose nothing if the deal falls through.”
The JETP plan has broad ambitions ranging from improving the power grid to boosting investment in renewable energy and providing a fair transition from fossil fuels for workers and communities that depend on them. At the heart, however, is a concerted effort to accelerate the transition away from coal in a country with sufficient resources – by buying out power plants and restructuring debt so they can be closed early.
The $20 billion pledge is just one step. According to BloombergNEF, Indonesia’s transition would require $2 trillion in investment in its energy system by 2050. Reaching net zero by 2050 could cost $3.5 trillion. BLOOMBERG
