Indonesia Signs Deals To Accelerate Clean Energy Transition

Indonesia signed deals with international lenders and major nations on Tuesday that will bring billions of dollars in funding to help the country increase its use of renewable energy and reduce its reliance on coal.

The $20 billion agreement was announced on the sidelines of the Group of 20 summit in Bali, Indonesia. Called a Just Energy Transition Partnership, or JETP, it is meant to help developing countries reduce their reliance on fossil fuels such as coal and gas that cause carbon emissions that contribute to climate change.

It’s an important step for Indonesia, a major exporter of coal that has abundant potential for developing cleaner energy.

“In today’s world, climate change is a global emergency,” said Luhut Binsar Pandajaitan, Indonesia’s coordinating minister of maritime and investment affairs. “Indonesia has an important role to play in avoiding the worst impacts of climate change on our countries, our people and the environment.”

Participating governments –- the United States, Japan, Canada, Denmark, the European Union, France, Germany, Italy, Norway and the United Kingdom –- are to provide a total of about $10 billion in concessionary lending, grants and equity. Major private global financial institutions that earlier pledged to support climate investment will arrange the rest, U.S. officials said.

As part of the agreement, Indonesia has pledged to ensure emissions from the country’s power sector start falling by 2030. The country has stepped up its goal of making the entire power generation sector emissions-free by 2050.

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

U.S. climate envoy John Kerry said the U.S. and Indonesia have been laying the groundwork for the deal from the first days of President Joe Biden’s administration.

“We’ve wrestled with countless issues to arrive at today’s groundbreaking announcement,” Kerry said. The agreement “can truly transform Indonesia’s power sector from coal to renewables and support significant economic growth,” he said.

As part of the agreement, Indonesia has pledged to ensure emissions from the country’s power sector start falling by 2030. The country has stepped up its goal of making the entire power generation sector emissions-free by 2050.

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

U.S. climate envoy John Kerry said the U.S. and Indonesia have been laying the groundwork for the deal from the first days of President Joe Biden’s administration.

“We’ve wrestled with countless issues to arrive at today’s groundbreaking announcement,” Kerry said. The agreement “can truly transform Indonesia’s power sector from coal to renewables and support significant economic growth,” he said.

“Therefore, we need finance and money from the global North to help with global South’s transition to clean energy,” D’Souza said. “JETPs are a method to provide the money required.”

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

Putra Adhiguna, an IEEFA energy analyst in Indonesia’s capital, Jakarta, noted that a transition to alternative energy sources could be “low hanging fruit” for many places in the archipelago of more than 17,000 islands. However, since Indonesia already has excess power generating capacity, there’s less incentive to switch to cleaner sources.

“This is another issue energy transition deals need to address,” Putra said.

The bigger worry is that such arrangements may be too little, too late.

“Relative to what needs to be done now, when the world is in the midst of a poly crisis, these deals are a pin prick,” said Sony Kapoor, professor of climate, geo-economics and finance at the Florence-based European University Institute. “It is commendable that these deals are recognizing the issues at hand but at the same time, the financing is inadequate and is by design restricted to a few countries.”

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Arasu reported from Bengaluru, India. Associated Press writer Ellen Knickmeyer in Washington, D.C., contributed to this report.