Jakarta, IO – Indonesia has earned the unenviable reputation as a country with the one of the highest levels of greenhouse gas (GHG) emissions in the world, the lion’s share of which come from the energy sector – one still dominated by fossil fuels, particularly coal.
The country’s dependence on fossil energy in meeting its domestic energy needs is still high. With relatively abundant coal resources, the “black gold” becomes a very attractive and affordable element in the country’s energy composition.
It is in fact one of the country’s key export commodities as well. Alas, coal is generally considered one of the dirtiest sources of energy, with an acutely negative impact on the environment and on human health. It is said to account for 40 percent of CO2 emissions from the energy sector.
Meanwhile, Indonesia also has enormous renewable energy potential, such as solar, wind, hydropower and biomass, all of which can generate clean, inexpensive and sustainable energy for the people and the economy.
Based on these realities, Indonesia needs a clear energy transition strategy to gradually shift toward renewable energy. The Indonesian government is committed to reducing emissions by 31.89 percent independently or 43.2 percent with international assistance by 2030, in its updated Nationally Determined Contribution (NDC), submitted to the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat.
One form of this commitment can be seen through Indonesia’s “New and Renewable Energy” (EBT) target of 23 percent of the national energy mix by 2025. However, the energy transition to EBT certainly entails its own challenges.
As stated by President Jokowi in S20 “High Level Policy International Webinar on Just Energy Transition” in 2022, there are three main challenges, namely, access to clean energy, the high cost of research and technology capacity, environmental degradation and social inequality.
In response to the challenges of a transition towards clean, renewable energy and to ensure that people have equitable access to it, countries around the world are trying to fulfill their NDC commitments to the Paris Agreement, a legally-binding international treaty on climate change.
One way to do this is through the Just Energy Transition Partnership (JETP). JETP was launched in 2022, to coincide with Indonesia’s G20 presidency. It was initiated by the European Union, France, Germany, the United Kingdom and the United States.
The goal of this long-term partnership with Indonesia is to raise an initial fund worth US$20 billion in public and private moneys, to extend over three to five years. The JETP funding scheme consists of US$10 billion from public funding in the form of concessional loans and grants.
The remaining US$10 billion will come from the private sector, coordinated by the Glasgow Financial Alliance for Net Zero (GFANZ). GFANZ consists of Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG and Standard Chartered.
The JETP funding scheme will be used to encourage the retirement of coal-fired power plants (PLTU) in Indonesia, as well as investment in renewable energy technology and ecosystem.