Coal Financing Policy and Climate Ambition of Germany, South Korea, Japan, and Indonesia

Webinar Recording

As the largest coal exporter and 80% of coal production is imported by other countries, Indonesia highly relies on International demand. However, utmost Indonesian coal importer countries such as South Korea, Japan, and China are starting to limit coal dependency. On Indonesia’s fossil fuel infrastructure, Indonesia’s thermal power plant is still largely financed by these three countries. An initial step to halt overseas coal financing was taken up at Biden’s Leaders Summit on Climate last April where South Korea announced they would stop funding new overseas coal projects as a commitment to slashing carbon emission. Japan, as the second largest institutional coal share investment among G7 nations, has finally joined to end funding for unabated coal power plants overseas. This implies to upscale the number of carbon capture, utilisation and storage technologies to accelerate energy transition. Unfortunately, this global pressure has not yet urged China, as the top coal financier, to end funding for coal projects globally. In fact, China has promised to green its Belt and Road Initiative overseas construction plan. Leaving China as the last financier could push China to exit from coal investment sooner. The commitment on halting international coal financing will assist developing countries to be on the right track in achieving net zero emission and limiting the global temperature increase at 1.5 degree celsius.

The latest summit of the world’s seven largest advanced economies, G7, has promised to end a new direct government support for unabated coal power plants by 2021. This refers to reducing CO2 to meet the climate goal, which additional investments are needed to attain. It applies the responsibility to the operator and owner either to fit CCS technology to reduce the emission or to retire the existing power plant. As a result, It could increase climate-related risks such as physical and financial transition risks.

These signs of Indonesia’s decrease in demand on coal could potentially affect risk factors in climate-related transition risk known as stranded assets. Lately, Indonesia state-owned electricity utility (PLN) has stated the aim to retire CFPP as early as 2030 in an effort to reach decarbonization in the power sector. However, this brings other issues to the surface, including the potential of stranded assets.

Presentation Materials

Solutions for Our Climate (SFOC), South Korea

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Institute for Global Environmental Strategies of Japan, Japan

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Ministry of National Development Planning

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Coordinating Ministry for Maritime Affairs and Investment.

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