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| Thematic image of art at the entrance to the UN Climate Change Conference Baku (COP 29) in Azerbaijan. Southeast Asia’s largest economy requires $30 billion to $40 billion annually through 2050 to shift to renewable energy, according to the Institute for Essential Services Reform. — Photo from The Jakarta Post/ANN |
JAKARTA — The foremost global conference on climate change resulted in a commitment from developed nations to fund climate change initiatives in developing nations to the tune of US$300 billion a year, but it is unclear how exactly Indonesia might avail itself of that funding.
The climate finance package is the result hammered out in last-minute wrangling at the 29th Conference of the Parties to the United Nations Framework Conference on Climate Change (COP29) in Baku last month.
Analysts argue that the agreement lacks the ambition needed to support the equitable energy transition to which Indonesia aspires, with concerns over high costs and complex negotiations stalling progress.
Purnomo Yusgiantoro, energy advisor to President Prabowo Subianto, warned that securing international funding, from multilateral development banks (MDBs) for the COP29 commitments, was no easy feat.
“There are always trade-offs,” he said on Friday at the Bloomberg Technoz Ecofest event in Jakarta, cautioning that these might involve government assets or other national interests. “The government must detail its work and negotiate thoroughly when it comes to this.”
On the sidelines of COP29, special presidential envoy Hashim Djojohadikusumo said the President was committed to generating an additional 100 gigawatts of electricity in the next 15 years, 75 percent of which would come from renewable sources like wind and solar energy as well as hydro- and geothermal power, but also nuclear energy.
Prabowo also committed to retiring all coal and other fossil fuel power plants during the same period, aiming to replace them entirely with renewables.
Indonesia will need $235 billion in investment to realize the vision, Coordinating Economic Minister Airlangga Hartarto said in a statement in November.
Purnomo emphasized the importance of international cooperation in achieving these goals, saying that shutting down coal plants and reducing emissions required international help. With support, emissions could drop by 41 percent, versus just 29 percent without it.
“Is it all free or grants? Will they actually want to give it?” Asked the former energy and mineral resources minister, raising questions about the feasibility and commitment of such aid.
Securing international financing has been fraught with delays. A push to shut down coal power plants under the Just Energy Transition Partnerships (JETP) backed by the Group of Seven (G7) countries hit a snag when a July deadline to finalize the early retirement of the Cirebon-1 power plant passed without a deal.
The government was still weighing the situation, Finance Minister Sri Mulyani said in September, as replacing Cirebon-1 with renewable energy could cost $1.3 billion, mostly in subsidies to offset higher renewable energy costs.
The much-awaited COP29 deal also states the goal of working toward raising an annual $1.3 trillion in overall climate finance for developing countries, from both public and private sources, by 2035, among other outcomes.
While the pledge marks an improvement from the $100 billion agreed in earlier climate accords, analysts argue it falls significantly short of what is needed, and the big gap has serious implications for emerging economies like Indonesia.
Southeast Asia’s largest economy requires $30 billion to $40 billion annually through 2050 to shift to renewable energy, according to the Institute for Essential Services Reform (IESR).
Yet, between 2017 and 2023, public investments in renewable energy averaged less than $2 billion annually, creating a significant shortfall that public and private sector actors must address.
“Indonesia needs significant support to bridge this gap,” said Aulia Anis, who works on energy transition issues at the IESR.
“The $300 billion commitment for all developing countries leaves a large shortfall, especially since this sum must be distributed among many nations, including those already severely impacted by the climate crisis.”
Indonesia had secured some international funding from previous COP pledges, including portions of the JETP and around $626 million from the Green Climate Fund (GCF), Aulia pointed out, but attracting more commitment from international institutions remained a challenge due to various complicating factors.
However, he noted that the “pessimistic” commitment of the COP pledge could foster a narrative promoting private sector contributions, such as financing from private banks, to boost renewable energy investments.
The private sector could play a key role in bridging the funding gap, but for now its contributions remain limited.
In 2022, Indonesia’s largest banks invested only 5 percent of their total energy sector financing, around Rp 1.7 trillion ($109 million), in renewables.
Syaharani, head of environmental governance and climate justice at the Indonesian Center for Environmental Law (ICEL), said the government needed to show stronger political will, improved stakeholder coordination and more detailed project planning to attract essential investments amid the lack of binding commitments from developed countries to provide adequate financial support for energy transition targets in developing nations.
International investors need clearer project frameworks, better coordination among stakeholders and enhanced project-level planning.
“At the project level, alignment with Indonesia’s climate energy policies, from the National Energy Policy [KEN] to utility road maps like the new long-term electricity procurement plan [RUPTL], still needs improvement,” Syahrani added.
Aligning financial interests with Indonesia’s climate agenda was essential, she added, as overlapping priorities and unclear project details could hinder progress, or worse, risk falling short of energy transition targets once again, even as global funding ambitions grow.
Last year, Indonesia missed its renewables target for the energy mix, as the share failed to reach the 17.87 per cent deemed necessary to keep the country on track for the 2025 target.
The National Energy Council (DEN) proposed cutting the target for the country’s renewables share in the energy mix to just between 17 and 19 per cent by the end of 2025, down from the previously envisioned 23 percent, to be “realistic”, according to the energy ministry. THE JAKARTA POST/ANN
Source: Vietnam News/ Vietnam Insider