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RECESSION ON THE WAY: What does it mean and how to survive?

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(IO/Muhammad Hidayat)

Green New Deal 

Green New Deal pioneer Alexandria Ocasio Cortez explained it thusly: “The Green New Deal is a jobs and justice-centered plan to decarbonize the U.S. economy within ten years. It is one of the only plans put forward which is actually in line with scientific consensus and the United Nations’ IPCC Report. The Green New Deal also focuses on creating the maximum amount of prosperity for working people and marginalized communities in the process.” 

The Green New Deal seeks to respond to an economic transition based on pro-environment policies that will not create unemployment (as previously feared). While 150,000 workers in the coal sector in Indonesia will be replaced by workers in the renewable energy sector, the transition process has created opportunities for re-skilling and preparation of new graduates from educational institutions. Millions of new jobs will emerge. Radical changes to the national curriculum, changing university majors from mining courses to renewable energy development: this need to be propelled urgently, so that the Green New Deal will create a surge in new job absorption. 

At the same time, the Government needs to be encouraged to phase out coal power plants as a real step in energy transition. “Phase out coal!” has become a theme in various international forums, especially those related to energy funding. It seems difficult to find a bank or private equity that still provides funding for coal or PLTU projects. Even if money is made available, interest and the premium a borrowing company has to pay is very expensive. 

Presidential Regulation 112 of 2022 has just been released, aimed to accelerate the phasing out of coal power plants. However, the title and content of the regulation seem out of sync. There are several problematic articles in the Presidential Regulation. Article 3 Paragraph 4 is inconsistent with the plan for termination or early retirement of coal power plants (PLTU). The coal power plant development plan should ideally be stopped, especially for industrial areas, because it can cause several problems. First, in the name of fulfilling electricity consumption in new industrial areas, the construction of new coal-fired power plants will lead to ongoing environmental problems, especially with the development of new industrial areas in Batang, Brebes, and Kendal as well as the development of Morowali and Konawe for the nickel industry. Second, so far there has been widespread construction of new captive power plants or PLTUs initiated by private players in the Morowali and Konawe industrial areas. 

Bhima Yudhistira
Bhima Yudhistira is Executive Director of Celios (Center of Economic and Law Studies) He received a Bachelor’s Degree from the University of Gajah Mada Faculty of Business and Economics and a Master’s Degree from Bradford University, U.K.

Captive power plants contribute to carbon emissions that harm people. Plus, new coal power plant construction by PLN will worsen efforts to achieve net zero emissions by 2060. Third, there will be a contradiction where the industrial area built is an industrial area of the future, namely the electric vehicle ecosystem, including battery factories. But coal power plants are being intensively built, to supply future industries. This actually reduces investor interest, because the ESG (environment, social, governance) rating of companies in Indonesian industrial estates will be low. It’s strange to build an electric car factory when the electricity source is from fossil fuels. 

There is an oddity in the formation of the Presidential Regulation in the JETP (Just Energy Transition Partnership) process. Is this related to the process of disbursing JETP funds, for example, which is in a negotiation stage with the government? So, it seems that this regulation seems to want to please JETP donors, but still provides space for coal-fired power plants. 

The JETP Fund is a source of funding provided by G7 Countries to accelerate the energy transition, moving away from dependence on coal plants. Previously, South Africa received US$8.5 billion of JETP funds (equivalent to Rp127.5 trillion) and Indonesia is a potential candidate after South Africa. The important lessons from the JETP are the disclosure of information, broad public participation, and the government’s strong commitment to truly make the energy transition.

The momentum of economic recession is not only seen as the end-of-old economy, but also seen as the momentum of new ideas or proposals related to restarting the economy, moving to the next level. Indonesia, with its sizeable renewable energy resources, ranging from hydropower, solar energy, bioenergy, and ocean energy, needs to be a leader in the new concept of economic growth. It is proven that relying on the commodity sector is only temporary, and poses a high risk to the economy over the long run. Support from political actors is therefore important, especially ahead of the General Election, where presidential candidates are challenged to push an agenda to change the economic landscape in a comprehensive, visionary but locally-minded manner. (Bhima Yudhistira)

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