The US, Japan and partners are mobilizing $20 billion to help Indonesia get rid of coal

  • Deal brings peak emissions forward to 2030
  • Indonesia sets net-zero target in energy sector
  • Program based on the COP26 South Africa plan

NUSA DUA, Indonesia/SHARM EL-SHEIKH, Egypt, Nov 15 (Reuters) – A coalition of countries will mobilize $20 billion in public and private funding to help Indonesia shut down coal plants and advance the industry’s peak emissions date by seven years . 2030, the United States, Japan and partners said on Tuesday.

The Indonesia Just Energy Transition Partnership (JETP), which has been in the works for more than a year, “is probably the largest ever climate finance transaction or partnership,” a US Treasury Department official told reporters.

Indonesia’s JETP builds on last year’s $8.5 billion initiative to help South Africa accelerate the decarbonisation of its energy sector, which was launched at the COP26 Climate Summit in Glasgow by the United States, Britain and the United States. European Union.

To access the program’s $20 billion in grants and concessional loans over three to five years, Indonesia has committed to limit energy sector emissions to 290 million metric tons by 2030, peaking at that year. The public and private sectors have each committed about half of the funds.

Indonesia has also set a goal of reaching net-zero emissions in its energy sector by 2050, ten years ahead of its current target in its national climate plan, and to double the pace of renewable energy deployment, accounting for at least at least 34% of all electricity generation by 2030.

“We have built a platform for collaboration that can truly transform Indonesia’s energy sector from coal to renewables and support significant economic growth,” said John Kerry, US special envoy for climate change.

FORMER PEAK

The Treasury official said peak power emissions for Indonesia in 2030 would be 25% lower than their currently estimated peak in 2037 under the plan. Indonesia’s annual emissions reduction in those years would exceed annual emissions from the UK energy sector, said the official. .

The plan will eliminate 300 million tons of greenhouse gas emissions by 2030 and a reduction of more than 2 billion tons by 2060, the partners said in their statement.

“Indonesia is committed to using our energy transition to achieve a green economy and drive sustainable development,” President Joko Widodo said in a statement. “This partnership will provide valuable lessons for the global community.”

USA, JAPAN LEAD

The United States and Japan, along with Indonesia, are leading the effort on behalf of the other G7 democracies Britain, Canada, France, Germany, Italy, as well as partners Norway, Denmark and the European Union.

Multilateral development banks and the Climate Investment Funds will account for about a third of the $10 billion in public funding for Indonesia’s JETP, CIF head Mafalda Duarte told reporters. CIF has allocated approximately $500 million to support Indonesia’s energy transition.

“It is recognized that this is the first step, a first support package, and that more will be needed,” Duarte said when asked about the adequacy of the JETP funding.

On Monday, Japan announced it would help Indonesia transition from coal-fired power through public and private institutions, including the state-affiliated Japan Bank for International Cooperation (JBIC).

Indonesia, the Asian Development Bank (ADB) and a private energy producer on Monday announced plans to refinance and prematurely decommission a 660-megawatt coal-fired power plant in West Java province. .

U.S. Treasury and State Department officials said half of the $20 billion would come from the private sector, with seven global banks participating: Bank of America (BA.N) Citigroup Deutsche Bank (DBKGn .DE), HSBC (HSBA.L), Standard Chartered (STAN.L), Macquarie (MQG.AX), and MUFG.

The US officials said public finances would include concessional loans and equity, as well as some grants.

The United States will work with Indonesia to develop a 90-day plan to establish a secretariat to lead the initiative and for Indonesia to reform its policies, such as streamlining licensing and establishing a competitive tendering process to make the goals achievable.

South Africa said this month that the amount of funding it needs to phase out its coal far exceeds the funding mobilized through its JETP mechanism.

The State Department official said it had learned some lessons and engaged local partners from the start to “act as quickly as possible”.

Reporting by David Lawder in Nusa Dua and Valerie Volcovici in Sharm el-Sheikh; Edited by Robert Birsel and Janet Lawrence

Our Standards: The Thomson Reuters Principles of Trust.

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