Jakarta, September 19, 2023 – The Institute for Essential Services Reform (IESR) and Ford Foundation in Indonesia are calling on the government of Indonesia to emphasize the significance of centering justice in energy transition in Indonesia, especially through the Just Energy Transition Partnership or JETP.
The JETP is an innovative financing mechanism intended to accelerate country-led energy transition from fossil fuels to renewable energy sources. A JETP essentially links the financial package of concessional finance and grants from donor countries with energy transition initiatives in the global South.
In a report digitally launched today by IESR and Ford Foundation, it is mentioned that the pledged JETP funding is not sufficient to cover the cost of the whole transition process. Instead, it serves as an initial source of funding to catalyze and mobilize other funding sources.
The report highlights the results and recommendations from the JETP Convening, Exchange and Learning event for South Africa, Indonesia, and Vietnam that was held on 25-28 June 2023 in Jakarta. The event was collaboratively hosted by IESR, Ford Foundation, and African Climate Foundation (ACF).
“Since the initial JETP funding is time-limited, it is crucial to set reasonable and achievable milestones and projects within the agreed period and develop a strategy to leverage other funding sources to cover the costs of meeting the 2030’s target,” said Fabby Tumiwa, Executive Director for IESR.
Fabby also added that financing instruments such as concessional loans, commercial loans, equity, guarantee funds, grants, and any other instrument must be assessed carefully to hinder the ‘debt trap’ in the future.
“Governments must continue to advocate the greater demand of grants and concessional finance in order to achieve the agreed target without adding burden to the recipient countries,“ says Fabby.
This was confirmed by Edo Mahendra, Head of JETP Indonesia Secretariat when he served as speaker in a panel discussion on ‘Safeguarding the “Just” in Just Energy Transition Partnerships (JETP) and Other Emerging Climate Finance Models’ on September 18, 2023, during the Climate Week event in New York, United States.
“The highest component of the funding will still derive from commercial loans and investments that carry non-concessionary interest rates. Consequently, it is essential to build partnerships and collaborations between governments, philanthropic organizations, and the private sector, “ said Edo.
Philanthropies have a critical role in supporting the just principle both through the government and directly to the impacted communities. Their capital can act faster than the government and bridge the gap between the government and the community. Philanthropy could also support human resource development by giving technical assistance, capacity building, training, and knowledge exchange.
The just principle should also be applied to mitigate the impacts of energy transition on the communities. It is essential to support alternative socio-economic initiatives in these areas to adequately wrestle with the idea of justice for who? This includes providing skill improvements to transition from fossil fuels to renewable energy sources, educating and assisting local governments to adapt their economic development strategy and plan for the long-term, as well as creating funding dedicated to address the impacts of transitioning away from coal.
The transition from fossil fuels to low-carbon resources may affect not only the economy at the local level but also at the regional or even national level. People who live in regions dependent on fossil fuel will have to adapt to the new environment, as well as adjust their skills and knowledge that might be difficult to do in a short period of time.
Alexander Irwan, Regional Director of the Ford Foundation in Indonesia, said that the JETP implementation should meet the basic principles of the ‘justice’ element.
“Social justice elements should be included in the discussion and transition plans. The concept of fairness has to be at the center, ensuring the just transition is inclusive for all groups or communities, particularly to workers, children, women and local communities who are very reliant on fossil fuel supply chains,” said Alex.