As G20 chair, coal-heavy Indonesia sends mixed signals on green transition

As one of the world’s biggest coal exporters and carbon emitters, Indonesia's call for funding for green energy shift has upped pressure on it to cut fossil fuel use further.

Miners_Indonesia
Coal miners in East Kalimantan, Indonesia. Image: International Labour Organization, CC BY-SA 3.0, via Flickr.

Indonesia is using its stint as G20 president to push for more international funding for the green energy transition in developing nations - but analysts say Jakarta needs to back up its calls with more ambitious plans to cut emissions at home.

The world’s top exporter of thermal coal and its eighth-biggest carbon emitter, Indonesia has made a sustainable energy transition one of three focuses for its maiden, year-long presidency of the G20 group of the world’s 20 largest economies.

The Southeast Asian nation plans to phase out coal for electricity by 2056 and has brought forward its net-zero emissions target from 2070 to 2060 or sooner - but weaning itself off the dirty, climate-heating fuel remains a challenge.

“The key thing for Indonesia is we have to find the balance,” said Fabby Tumiwa, executive director of the Institute for Essential Services Reform, an independent think-tank which also advises the government on energy policies.

“Every country wants to prioritise their energy security and affordability because people are upset with higher energy prices, and that’s very risky for the government,” he added.

Coal is not only one of Indonesia’s main export commodities besides palm oil, but it also generates about 60 per cent of electricity in the archipelago of 270 million people, where nearly 30 million live below the national poverty line, on about $1 a day.

The key thing for Indonesia is we have to find the balance. Every country wants to prioritise their energy security and affordability because people are upset with higher energy prices.

Fabby Tumiwa, executive director, Institute for Essential Services Reform

In coal-producing regions, including East Kalimantan province which accounts for nearly half of national output, about a third of local economic growth is attributed to coal, according to Tumiwa.

“There is a lot at stake in Indonesia’s energy transition - it could make or break, and financing is key,” he told the Thomson Reuters Foundation by phone from Jakarta.

Indonesia transition package?

Since assuming the G20 presidency late last year, Indonesian President Joko Widodo has repeatedly urged rich governments to provide finance and transfer clean technology to developing nations so the green transition does not burden their citizens.

Indonesia itself needs $50 billion to switch to renewable energy, Widodo told the World Economic Forum earlier this year.

A flagship report by the Intergovernmental Panel on Climate Change this week highlighted the need for a socially fair shift to clean energy, taking into account other key priorities, such as development in poorer nations.

The report said planet-warming emissions needed to be cut far more sharply and quickly, but funding to deploy clean energy on a large scale was still lacking in less developed countries.

In November, wealthy donor nations and South Africa announced an $8.5-billion partnership to help that country cut emissions and move away from coal, while taking care of affected workers and their communities.

Analysts say Indonesia and Vietnam are among the countries now being considered for a similar arrangement.

Mafalda Duarte, CEO of the Climate Investment Funds (CIF), a coordinating partner in the South Africa deal, said there were “preliminary signals” Indonesia could be next in line for a similar package but stressed the talks were not conclusive.

“Countries that are seeking international support for transition need to come up with a credible plan that indicates they are really committed to the transition,” Duarte said, adding it must also be a process that is “just”.

“You’re talking about deep transitions economy-wide. This is something massive that countries haven’t necessarily gone through before - it’s uncharted territory,” she added.

Indonesia, India, the Philippines and South Africa were named as the first countries to benefit from a separate pilot programme led by the CIF, announced in November, to accelerate their transition from coal power to clean energy.

The nearly $2.5-billion scheme is backed by pledges from the United States, Britain, Germany, Canada and Denmark, with each country expected to get $200 million-$500 million.

But environmentalists said some of Jakarta’s seemingly contradictory moves on energy could dampen its prospects for receiving international support.

While Indonesia said last year it would stop building new coal-fired power plants after 2023, there are concerns it will allow projects in the pipeline to go ahead until then.

In January, the government launched construction of a $2.3-billion coal gasification plant to convert coal resources into dimethyl ether, which can be used as fuel, a move green groups said would encourage the continuation of coal in its energy mix.

Indonesia’s coal production, meanwhile, is set to rise by close to 10 per cent this year, according to official projections.

“It’s going to be hard to get financial assistance if we are inconsistent on our energy transition policy… that would make coal still relevant,” said Andri Prasetiyo, a campaigner at Trend Asia, a nonprofit working on renewable energy in Jakarta.

Alok Sharma, Britain’s COP26 climate talks president, has suggested Indonesia will need to do more if it wants to win international funding similar to that granted to South Africa, which he said had come up with “ambitious” climate action plans.

“For any country - Indonesia, for example - that wants that support, the same thing will have to happen,” Sharma told a dialogue with foreign policy experts in Jakarta in February.

Sharma said Indonesia has a “historic opportunity” to lead on the energy transition through its G20 presidency, a group that accounts for some 80 per cent of global greenhouse gas emissions and whose leaders are scheduled to meet in Bali in November.

Windfall profits

Measures green groups have urged Indonesia to implement include boosting investment in renewable sources - mainly solar, hydropower and geothermal - which now account for about 11 per cent of the national energy mix.

The government has vowed to increase that to 23 per cent by 2025.

But the roll-out of a highly-anticipated carbon tax, welcomed as part of efforts to phase down fossil fuels, has been delayed for three months to July amid surging energy prices.

As the top thermal coal exporter, energy analyst Putra Adhiguna said Indonesia should tap the windfall profits from coal operators to facilitate its green transition.

Choosing not to do so would be “unfortunate”, said Adhiguna, an Indonesia-based policy specialist with the Institute for Energy Economics and Financial Analysis.

As G20 president, what Indonesia does “can set the tone” and show how countries can move in the right direction, he added.

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit http://news.trust.org/climate.

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