U.S., Japan and partners mobilise $20 billion to move Indonesia away from coal

  • The deal will bring forward peak emissions to 2030
  • Indonesia set a net-zero goal in the electricity sector
  • The program is based on South Africa’s COP26 plan

NUSA DUA, Indonesia/SHARM EL-SHEIKH, Egypt, Nov 15 (Reuters) – A coalition of countries will commit $20 billion in public and private funding to help Indonesia close coal-fired power plants and advance the sector’s peak emissions date by seven years to 2030, the U.S. The United States, Japan and partners spoke on Tuesday.

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

Indonesia’s JETP builds on last year’s $8.5 billion initiative to help South Africa more quickly decarbonize its electricity sector launched at the COP26 climate summit in Glasgow by the United States, the United Kingdom and the European Union.

In order to access a $20 billion concessional grant and loan program over a period of three to five years, Indonesia has committed to limit electricity sector emissions to 290 million tons by 2030, with a peak in that year. The public and private sectors have pledged about half of the funding each.

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Indonesia has also set goals to achieve net-zero emissions in its electricity sector by 2050, a decade ahead of the current target in its national climate plan, and to double the rate of renewable energy deployment to account for at least 34% of all electricity generation by 2030.

“We have built a platform for cooperation that can really transform Indonesia’s electricity sector from coal to renewable energy and support significant economic growth,” said US Special Envoy on Climate Change John Kerry.

PEAK in the past

Treasury officials said peak power emissions for Indonesia in 2030 under the plan would be 25% lower than the current peak estimate in 2037. Indonesia’s annual emissions reductions in those years would be greater than the UK’s annual electricity sector emissions, officials said that. .

The plan will eliminate 300 million tons of greenhouse gas emissions by 2030 and reduce 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 yield valuable lessons for the global community.”

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US, JAPAN lead

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

The multilateral development bank and the Climate Investment Fund will provide about a third of the $10 billion in public funding for Indonesia’s JETP, CIF head Mafalda Duarte told reporters. CIF has allocated about $500 million to help Indonesia’s energy transition.

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

On Monday, Japan announced it would help Indonesia move away from coal power through public and private institutions, including the country-linked Japan Bank for International Cooperation (JBIC).

Indonesia, the Asian Development Bank (ADB) and private power producers on Monday announced plans to refinance and early retire a 660-megawatt coal-fired power plant in West Java province, the first agreement under ADB’s new carbon emission reduction financing program. .

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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.

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

The United States will work with Indonesia to map out a 90-day plan to establish a secretariat to run the initiative and for Indonesia to reform its policies, such as streamlining permits and setting up a competitive procurement process to make the target achievable.

South Africa this month said the scale of funding needed to phase out its coal was higher than the funding mobilized through its JETP mechanism.

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

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

Our Standards: The Thomson Reuters Trust Principles.

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