Indonesia Needs to Catch the Opportunity to Finance Transition

Jakarta, 22 Nov 2021 – As the COP-26 wrapped up a few weeks ago, more discussions about “what’s the next follow-up action?” are being conducted to keep reminding both the Government and the public that the pledge or commitment made during the conference should be implemented. 

Acting as the pre-opening of Indo EBTKEConnex 2021, FIRE (Friends of Indonesia’s Renewable Energy) hosted a dialogue to figure out how Indonesia is setting up its strategy to achieve the new target and commitment announced during the COP-26 in Glasgow.

Sripeni Inten Cahyani, the Special Staff of the Ministry of Energy and Mineral Resources explained the Indonesia standpoint during the conference. Earlier this year, Indonesia submitted its updated NDC to the UNFCCC Secretariat and committed to achieving net-zero emissions by 2060 or earlier. This is quite a progressive step since at the beginning of the year there is not even a word about it. 

“Indonesia signed The Global Coal to Clean Power Declaration, and one of its commitments is to retire coal power plants in the 2040s, in our initial plan of coal phase-out around the 2050s. The acceleration means we need more financial support to retire the currently operating power plant and replace it with renewables,” Inten Said.

Indonesia has been consistently urging the developed countries to distribute funds to the fewer capital countries to address climate change and energy transition. 

David Lutman of the British Embassy emphasized that the urge to take action can be translated into deploying renewable energy on a large scale and that means the phase-out of coal. “The faster Indonesia delivers the transition, there will be bigger economic growth to reap,” he said. 

The importance of materialised commitment is needed to showcase promising progress in the next 2-3 years as explained by Fabby Tumiwa, the Executive Director of IESR. “Transition is not only about Indonesia, but the international community is observing so we need to display our progress to keep our accountability, and later to attract more international assistance,” Fabby explained.

Fabby later said that  three key things that can be done by the Indonesian government to accelerate the energy transition in Indonesia i.e conducting coal early retirement, increasing RE project pipeline, and assisting PLN in terms of auction and procurement of renewable energy.

Sufficient financing is needed in transforming the energy system. During COP-26, the Government of Indonesia signed the Energy Transition Mechanism (ETM) Memorandum of Understanding (MoU) with Asia Development Bank to finance the early retirement of coal power plants. Another financing scenario is by reforming the subsidy scheme in Indonesia and diverting it for the deployment of renewable energy.

Indonesia’s Energy Transition Financing Needs to be Calculated Carefully

Jakarta, 24 November 2021 – The transition to clean energy is a necessity. The development of clean energy technology makes the price of electricity from clean energy become more and more competitive with fossil energy which is still widely found in energy systems. Citing the 2021 Climate Transparency report, Indonesia’s energy system until 2021 is still dominated by fossil energy which accounts for more than 80% of electricity production. This high level of dependence on fossil energy makes the energy transition in Indonesia need to be carried out carefully on planning and execution level.

In order for the energy transition process to run without a significant economic contraction, the government needs to prepare a sustainable financing strategy. This was discussed as the topic in the following discussion “The Role and Implementation of Sustainable Finance Towards Energy Transition and Net Zero Emission in Indonesia” organized by the Clean, Affordable, and Secure Energy Project for Southeast Asia.

Sunandar, Assistant Deputy for Utilities & Manufacturing Industry, Coordinating Ministry for the Economy, believes that careful calculations are needed so that it can mitigate the economic risks of the energy transition. In particular, it requires large funds to stop coal power plants and the development of new and renewable energy.

“With the current condition where our energy is still dominated bycoal and only 11.2% of NRE, it will require huge funds because we have to retire coal power plants and at the same time build New and Renewable Energy plants. Therefore, we need to plan the energy transition mechanism. And more importantly, ensuring the availability of affordable financing for all parties who want to contribute to the energy transition,” explained Sunandar.

This condition makes Indonesia have to look at what financing schemes are suitable to be applied for Indonesia’s energy transition. The IESR’s Deep Decarbonization study shows that the investment requirement for the transition reaches IDR 287-360 trillion/year. Dewa Putu Ekayana, a young expert on PKPPIM from the Ministry of Finance, said that the ability of the state budget (APBN) to finance the energy transition is only around 32.6%.

“To fill in this funding shortfall, the government has created a blended finance scheme by issuing green bonds, green sukuk and inviting investor involvement in climate change related projects or renewable energy,” Dewa explained.

Another type of financing that is also being explored by the government is Government and Business Entity Cooperation (Kerjasama Pemerintah dan Badan Usaha – KPBU) to develop clean energy infrastructure in Indonesia.

“This scheme will reduce the burden of the APBN/D in financing the transition of part or all of the projects that will be carried out because the resources belong to the Business Entity, with the distribution of risk between the parties (Business Entities and Government),” explained Suryo Wijiono Pambudi, Development Funding Planner, Bappenas

Suryo added that the capacity of local governments needs to be improved so that they can prepare for the transition at the grassroots level, as well as figure out what green economic opportunities can be developed in the area.

“In addition, a special set of policies related to NRE development is needed which includes special institutions, division of service areas and a national NRE development roadmap,” said Suryo.

Implementation and Lesson Learned Sustainable Financing

Renewable energy technology that continues to develop is not only making the price of the energy more competitive, it also results in lower emission levels. Therefore, renewable energy is highly considered to replace fossil energy which has high emission levels and its reserves are running low. A number of financing schemes are offered with various risks and consequences.

Evy Susanty, Chief Finance Officer, PT Surya Utama Nuansa explained that solar energy can be a priority choice for using renewable energy on various scales.

“To facilitate consumers in installing solar rooftop, PT SUN Energy provides 3 financing schemes, namely solar purchase, performance based rental, and solar lease. Of these three schemes, performance-based rental is the most favored by consumers because this scheme allows potential customers from the business and industrial sectors to install rooftop solar power plants without initial capital, “said Evy.

Apart from solar, the Government of Indonesia is also developing other renewable energy potentials such as biogas. From the ongoing biogas project, there are several lessons learned, one of the most important is the suitability of the PPA (Power Purchase Agreement) with other project documents such as land use agreements, statements on the availability of feedstock supplies, operational and maintenance contracts, and EPC (Engineering, Procurement, and Construction) contracts.

“In this biogas project several things need policy certainty such as land suitability, land use permits, income according to the PPA agreement, assurance of the availability of supply of palm oil/POME (Palm Oil Mill Effluent) effluent,” Kirana Sastrawijaya, Senior Partner in Project, Energy & Finance, UMBRA Partnership explained several things that need to be considered from the legal aspects of biogas projects.

PT Sarana Multi Infrastruktur (SMI), one of the Ministry of Finance’s special mission vehicles (SMV) for infrastructure financing, noted a number of obstacles in financing green projects in Indonesia. The limited number of green projects and no attractive incentives from the government for green projects makes investors rethink investing in Indonesia.

“In the implementation of green projects, it is common to need additional time and money to conduct studies related to sustainability, and often there are few professionals to work on them, so inevitably investors have to cooperate with other parties,” explained Pradana Murti, Head of Sustainable Financing at PT SMI.

In the energy transition process, it is necessary to have a common perception and capacity building from related parties, both from the energy and non-energy sectors. “Sustainable finance can be a solution to several bottlenecks that exist in the energy transition process,” said Deni Gumilang, Deputy Program Manager of CASE Indonesia. 

Collaboration of all parties is needed to ensure the implementation of the Glasgow Climate Pact in Indonesia

Jakarta, November 18, 2021 – The 26th World Leaders Summit on Climate Change, also known as COP-26, concluded on November 13th. The summit produced the Glasgow Climate Pact, which, in general, provides a foundation for countries to immediately implement the Paris Agreement. This is the first COP decision that explicitly states that the use of fossil energy, particularly coal, must be reduced.

On the other hand, this pact recognizes that the collective commitment of countries is insufficient to prevent global warming from exceeding 1.5 degrees Celsius above pre-industrial levels. This complicates the task of ensuring the world comes out of the climate crisis.  Komunitas Peduli Krisis Iklim held a press conference to provide an overview of what homework needs to be done and to ensure that accountability for the Glasgow Climate Pact implementation can be carried out efficiently.

According to Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), the COP26 commitments must be accompanied by concrete actions.

“So indeed what all countries have said, including Indonesia itself, is a commitment. Commitments and promises will not reduce greenhouse gas emissions; actions will reduce greenhouse gas emissions. So, following the COP, we’ll be watching to see how the actions are carried out.”

One urgent task for Indonesia is to transition from dirty energy to green energy. Coal remains the primary source of electrical energy. According to the Ministry of Energy, coal still accounts for 80% of all electrical energy. Indonesia is currently planning the early closure of some coal power plants.

Dewi Rizki, the Partnership’s Program Director for Strategic Sustainable Governance, agrees with Fabby. Dewi also stated that the government’s acceleration of climate action must be done transparently, in collaboration with the private sector and civil society.

“The government must also make opportunities for collaboration with non-party stakeholders available so that the planned (commitment) can be carried out.  The key is cross-sector collaboration,” Dewi explained.

She believes that collaboration and cooperation from all parties are critical because each party plays an equal role in meeting the agreed-upon climate change targets.

Furthermore, mentioning Indonesia’s role in the international arena related to climate action, Nadia Hadad, Executive Director of the Sustainable Madani Foundation, encouraged Indonesia to show its leadership in decarbonization efforts on all fronts.

“This is the time for us (Indonesia) to demonstrate, as a global leader, that Indonesia can be a country that leads in efforts to reduce emissions in all sectors. Policies must be consistent, and then we must be able to take concrete steps to achieve the climate ambitions that we have agreed on,” Nadia said. Nadia also emphasized the importance of strengthening the capacity of local governments and other non-party stakeholders to support comprehensive climate action.

Laetania Belai Djandam, a young environmental activist from the Dayak community, stated that Indonesia should be able to demonstrate a significant increase in ambition and climate action at the upcoming COP27.

“The public must continue to put pressure on the government and hold it accountable for every decision and action it takes,” Laetania said.

Komunitas Peduli Krisis Iklim is a civil society organization dedicated to overcoming the threat of climate change. This community seeks to persuade the government to develop policies that promote environmental sustainability and community access to environmental rights.

Fossil Energy Subsidies Hinder Energy Transition

press release

Jakarta, 12 November- Despite the commitment to step up climate action and achieve the Paris Agreement target of keeping the earth’s temperature below 1.5 degrees Celsius, the G20 countries, including Indonesia, are still providing significant fossil energy subsidies. The Institute for Essential Services Reform (IESR) views fossil energy subsidies as counterproductive to energy transitions and achieve decarbonization in the middle of this century.

At the early stage of the pandemic, the G20 countries disbursed at least USD 318.84 billion to support fossil energy. Meanwhile, according to Climate Transparency 2021 data, Indonesia has spent USD 8.6 billion on fossil fuel subsidies in 2019, 21.96% of which was for oil and 38.48% for electricity.

Indonesia had succeeded in reforming fuel and electricity subsidies in 2014-2017 but still allocated a fairly large fossil energy subsidy. Energy subsidies increased by 27% in the period 2017-2019.

“The provision of fossil energy subsidies not only hinders plans and efforts to cut greenhouse gas emissions and decarbonization but also results in inefficiency in energy use. It also creates loss due to untargeted subsidies, and makes renewable energy difficult to compete with,” said Fabby Tumiwa, IESR Executive Director.

Ending fossil fuel subsidies will create a level playing field for renewable energy. Moreover, in his opinion, fossil energy subsidy funds will be much more beneficial if they are diverted to the most vulnerable communities, building education and health facilities, developing renewable energy, and accommodating the impact of the energy transition for workers in the affected fossil energy industry. 

“Energy subsidy reform on the consumption side should not be carried out haphazardly so that the poor do not have access to quality energy at affordable prices. On the other hand, financial reforms need to be followed by collecting and applying the poor family databases and targeted subsidy distribution schemes,” explained Fabby. 

Fabby believes that the pricing policy for Domestic Market Obligation (DMO) coal and gas for PLN is a form of subsidy and has made the price of electricity from coal-fired power plants and gas-fired power plants not reflect the actual costs. This policy also makes PLN prioritize the use of coal-fired power plants over renewable energy, which is cheaper.

“The government should review the DMO price benchmark policy for power generation and make a plan to end this policy. This is in line with the government’s decision to not grant permits for the construction of new coal-fired power plants outside the 35 GW program and plans for early retirement of coal-fired power plans before 2030,” said Fabby.

Climate Transparency 2021 analysis shows that to achieve the Paris Agreement targets, all regions of the world must phase out coal-fired power plants between 2030 and 2040. By 2040, the share of renewable energy in power generation must be increased to at least 75%, and the share of unabated coal-fired power plants is reduced to zero. While in the National Energy Policy, Indonesia promised to reduce coal by 30% by 2025 and 25% by 2050. Meanwhile, to be in line with the Paris Agreement, electricity generation from coal must peak in 2020 and stop coal completely by 2037.

Based on IESR calculations in the Deep Decarbonization of Indonesia’s Energy System study, the cost to transform Indonesia’s energy system to achieve zero emissions in 2050 will reach USD 25 billion per year until 2030. It will escalate sharply thereafter to USD 60 trillion per year.

“Fossil energy subsidies increase the negative impact of GHG emissions as well as add the burden on the state due to economic losses and state financial expenditures to overcome disasters caused by climate change. These subsidies can be diverted to help accelerate the energy transition using renewable energy so that we can achieve the renewable energy mix target of 23% by 2025,” said Lisa Wijayani, Program Manager of the Green Economy, IESR.

At the G20 Declaration last October in Rome, the G20 countries agreed to extend their commitment to reducing inefficient fossil fuel subsidies. IESR views that Indonesia can use the opportunity of Indonesia’s leadership at the G20 in 2022 to encourage real action to exit the burden of financing fossil energy.

“The commitment of the G7 countries to provide climate finance of USD 100 billion by 2025 is still not enough. Therefore, G20 countries must contribute, one of which is by carrying out financial reforms towards renewable energy that supports a green economy. Indonesia as the leader of the G20 countries in 2022, can encourage G20 member countries to carry out financial reforms,” ​​said Lisa.

She said every financial policy that leads to support for fossil energy must receive attention and be strictly inventoried by the Global Stocktake (GST) as part of monitoring the climate action of the Paris Agreement. 

According to a report by the Independent Global Stocktake (iGST), a civil society consortium to support GST, the GST can offer a platform for countries to collaborate in reforming fossil fuel consumption subsidies.

“Information that is inventoried into the GST must also include social elements in it so that the objectives of climate finance in achieving economic growth and social inclusion can be achieved. This GST process must include organizations representing economic, environmental, energy, and social elements, especially gender issues and other vulnerable communities, to ensure that the just transition takes place,” said Lisa.

 

Showing Commitment, Indonesia is Ready for Early Retirement of Coal Power Plants

Throughout 2021, responding to the global demand for climate action to align with the Paris Agreement, Indonesia has updated several documents such as the NDC which targets carbon neutrality by 2060 or earlier and released the ‘green’ RUPTL which is claimed to provide more space for renewable energy. Recently, Indonesia stated that assessment about the opportunity to retire coal-fired power plants early will be conducted. Although it is not yet ambitious to comply with the Paris Agreement targets, Indonesia’s decision should be appreciated and its implementation carefully looked after.

Indonesian Minister of Energy and Mineral Resources, Arifin Tasrif, at the COP-26 Climate Change Summit, signed the Global Coal to Clean Power Statement declaration. The Minister of Energy and Mineral Resources approved 3 of the 4 points of the declaration, i.e (1) encouraging the development of renewable energy & energy efficiency; (2) Phasing-out coal in the 2040s; and (3) strengthening domestic and international efforts to support a just energy transition.

Arifin explained that Indonesia is currently conducting a simulation to retire PLTU of 9.2 GW before 2030. A total of 3.7 GW of the 9.2 GW of power plants will retire early and be replaced with renewable energy power plants. This progressive plan demands a comprehensive roadmap for the coal transition.

Met separately, Fabby Tumiwa, Executive Director of IESR emphasized that the transition to leaving coal in Indonesia needs to be carefully prepared.

According to him, a comprehensive coal transition roadmap needs to be prepared to ensure that the transition that occurs is a transition that takes into account the needs of all parties involved and affected by the abandonment of coal for energy supply, and ensures that everyone has access to reliable and affordable energy.

In the event “From Coal to Renewables: the Energy Transition in Emerging Markets” organized by Accenture in the COP-26 series in Glasgow, Fabby Tumiwa explained, as one of the largest coal producers in the world, 60% of Indonesia’s coal is destined for export. Another important thing to note is that 85% of Indonesia’s coal production is only concentrated in 4 provinces.

“Coal’s role in Indonesia is not only as income for the state, but also as basic income for coal-producing provinces. When there is a transition, and coal will slowly be abandoned, these areas need to be considered because otherwise they will be in danger of collapsing,” explained Fabby.

As a country that relies heavily on fossil energy and with a fairly complex situation, the government’s openness to decarbonization by 2060 or earlier is seen as a step forward and achievable by Fabby Tumiwa.

“86% of electricity in Indonesia is generated by coal-fired power plants. Making the transition to renewable energy in this situation is certainly not easy. But that doesn’t mean it’s impossible,” said Fabby. 

Green Jobs: Promising yet Untapped Opportunity

Jakarta, November 6, 2021 – Green jobs have become an issue that is starting to be discussed a lot. Young people try to understand green jobs to figure out what fields are included in green jobs, what are the prospects for future opportunities, as well as what should be prepared to work in this sector. Project Clean, Affordable, and Secure Energy (CASE) for Southeast Asia in collaboration with Indonesia Mengglobal hosted a webinar entitled “Green Jobs in Indonesia: Opportunities, Challenges, and Future Outlook” with the aim of providing an overview of green jobs from practitioners in various fields. 

Previously, a mini survey to gain the perception of young people about green jobs was conducted. The survey, which attracted around 200 respondents, revealed one interesting finding, namely that more than 90% of respondents stated that they would prefer companies that have concern on environmental issues.

Desi Ayu Pirmasari, a researcher at the University of Leeds, England, stated that green jobs have a wide sector. “Green jobs have a very broad spectrum, not limited to specific sectors such as energy. For example, when civil servants make greener city plans, procurement staff who consider the carbon footprint in the procurement of goods. Lawyers can also become green jobs if they help others to breathe fresh air and fight for climate change.”

Desi’s opinion is agreed by Julius Christian, a researcher on clean fuels at IESR, with the trend of using renewable energy that is getting wider. According to him, currently there are so many sectors that need workers who understand sustainability, SDGs, and the environment concepts in general.

“In the energy sector only, in the next 5-10 years renewable energy will be more competitive with fossil energy, so the energy transition is inevitable. From the IESR study on Deep Decarbonization itself, there will be around 3.2 million new jobs. Of course, this is a big opportunity and must be prepared from now, “explained Julius.

Preparation of human resources and financial resources is very important, because the development of technology moves so fast requires qualified human resources and adequate financial support.

“So if in the future we want to take advantage of this (green jobs) opportunity, for example making a solar panel manufacturing plant in Indonesia, we must act quickly. We have to consider the full lifecycle of everything, from the carbon footprint of the manufacturing process to use, and the results are not instant. We can only see (the results) in the next 10 years for instance,” said Noor Titan Putri, post-doctoral researcher, Helmholtz-Zentrum Berlin, Germany.

Jonathan Davy, founder and CEO of Ecoxyztem Venture Builder, said that many entrepreneurs are starting to invest in the green jobs sector. The challenge of developing an environmentally friendly business in Indonesia lies in the adoption of environmentally friendly technologies.

“Technology adoption must meet three categories, i.e desirability (whether the market wants to use it), viability (whether technology is needed), and feasibility (whether the business is possible to run). Currently, we are still heavily regulated so that some business processes are still locked,” explained Jonathan.

Jonathan also highlighted the development of human resources, which he said needed to shift the mindset from how many jobs could absorb workers to how many people could create jobs.

Signed the Global Declaration to Phase Out Coal, Indonesia Needs to Prepare a Coal Transition Roadmap

Jakarta, 05 November 2021- At the 26th World Leaders Summit on Climate Change or COP-26, Indonesia signed the Global Coal to Clean Power Transition declaration. On the same day, the Minister of Energy and Mineral Resources, Arifin Tasrif, also stated that the government was reviewing the opportunity to early retire coal-fired power plants with a total capacity of 9.3 GW before 2030 (4/11/2021) which could be done with funding support reaching $48 billion.

Although Indonesia has decided to exclude the third point of the Global Coal to Clean Power Transition, which demands to cease the issuance of new permits and the construction of unabated coal-fired power plants, the Institute for Essential Services Reform (IESR) appreciates the steps taken by the Indonesian government, especially the leadership shown by the Minister of Energy and Mineral Resources at COP-26, to encourage a just energy transition through the development of renewable energy as widely as possible and to phase out coal-fired power plants as part of Indonesia’s action to prevent a global crisis.

“The openness of the Indonesian government to make an energy transition, through one of which is reducing the power plant in stages, should be appreciated. Post-Glasgow, the government, and the National Energy Council must accelerate the preparation of a comprehensive roadmap and strategy for the energy transition in Indonesia. Dependence on fossil energy will end if we do not rapidly increase the capacity of renewable energy. The policy focus is no longer coal as the first option, but renewable energy must be the main choice. So the energy transition needs to be carefully designed, with the priority of developing and utilizing renewable energy as much as possible and optimizing energy efficiency,” said Fabby Tumiwa, Executive Director of IESR.

Fabby emphasized that the decision to gradually stop fossil fuels, especially coal-fired power plants, is inevitable, not only from the perspective of the climate but also from the economic side of technology.

“Remarkably, with innovation and the price of renewable energy and storage technology is more competitive than fossil energy, the use of renewable energy to ensure the reliability of energy supply to achieve net-zero emission is becoming more feasible,” said Fabby.

The results of the IESR analysis from the study of Decarbonization of Energy Systems in Indonesia projected that renewable energy complemented with storage batteries will increase significantly by 2045. The share of batteries will reach 52% of the total storage system, followed by hydrogen at 37% and other storage systems around 11%. The share of electricity demand covered by energy storage increases significantly from around 2% in 2030 to 29% in 2045. The main users of battery storage will come from utility-scale systems, and to a lesser extent from commercial and industrial areas, and housing systems.

Concerning the early 9.3 GW of coal-fired power plants with details of 5.5 GW of early retirement without replacement to renewable energy power plants and 3.2 GW of early retirement with the replacement of renewable energy plants, Deon Arinaldo, Manager of the IESR Transformation Program, views this as a progressive step for decarbonization of energy system in Indonesian. However, according to IESR’s calculations, to implement the Paris Agreement targets and keep the global average temperature rise below 1.5C, there is around 10.5 GW of steam power plants that need to be retired before 2030.

“There is still a difference of 1.2 GW that needs to be retired and can be targeted for coal-fired power plants outside PLN’s business area,” said Deon.

Referring to the study of Indonesia’s Energy Decarbonization System, at least it requires investment in renewable energy and other clean energy of USD 20-25 billion per year until 2030 and increasing thereafter for the gradual financing of coal and the development of renewable energy for emission-free by 2050. However, phasing out coal-fired power plants will avoid the risk of financial loss from the stranded assets which reached USD 26 billion after 2040.

With large funding requirements for the gradual cessation of coal-fired power plants, Indonesia is working with ADB to launch the Energy Transition Mechanism (ETM) program, which is expected to raise around $3.5 billion to launch 2-3 coal-fired power plants per country.

“The existence of ETM, which will provide a financing platform, is expected to be able to provide a source of funds to retire the steam power plant and encourage the larger investment flows in renewable energy. This is crucial so that Indonesia can optimally plan the transformation of its energy system,” concluded Deon.***

COP26: A “Soundless” Recital by Jokowi

Many parties are waiting for President Joko Widodo’s speech at COP26. Jokowi is expected to declare more ambitious commitments to reduce emissions and deal with climate change as well as to outline concrete steps towards net-zero emissions. Indonesia’s strategic position as the leader of the G20 countries in 2022 should make Indonesia take one step ahead to lead efforts to reduce emissions for G20 member countries.

Unfortunately, in his speech at the High Level Segment for Heads of State and Government COP26 session, President Jokowi did not announce a higher climate ambition target nor a concrete commitment to support the Paris Agreement target to limit the increase in the average temperature of the earth below 1.5 degrees Celsius and achieve carbon neutral by the middle of the century. The IPCC AR6 report has stated clearly that we have less than a decade left to keep the earth’s temperature rise at 1.5 degrees Celsius. The opportunity to increase Indonesia’s climate ambitions is still open and of course the Government must take it and make the best use of it to save the earth from the damage caused by climate change.

Efforts to reduce emissions and address climate change must be seen as both a responsibility and an opportunity to transform Indonesia’s economic system from a carbon-intensive one to a more sustainable low-carbon economic system. According to the IESR Deep Decarbonization study, the transformation of the energy system will create 3.2 million new jobs in the renewable energy sector. An ambitious commitment by setting targets for reducing ambitions that are larger than the current NDC and building a comprehensive energy transition roadmap will send a good signal for investors to invest in Indonesia. This will encourage Indonesia’s economic strength to become more globally competitive.

Previously at the G20 Summit which took place on October 30-31 2021, the leaders of the G20 countries agreed to achieve net-zero emissions by the mid of this century. However, this commitment has not yet been accompanied by a target for the phase-out of coal-fired power plants. Holding a strategic role in the G20 leadership, Jokowi could actually take the opportunity to encourage G20 countries to stop operating coal-fired power plants and switch to renewable energy. Of course, in this case, Indonesia also needs to implement a policy of abandoning coal so that it can set an example for other G20 countries.

In addition, there is a difference between actions and facts on the ground in Jokowi’s speech at COP 26. He mentioned that he would build the largest PLTS in Southeast Asia and encourage the use of renewable energy to reduce emissions in the energy sector. However, until COP 26 took place, supportive policy support for the PV mini-grid ecosystem, such as the Revised Regulation of Ministerial Regulation 49/2018 concerning the Use of Rooftop Solar Power Generation Systems by Consumers of PT Perusahaan Listrik Negara (Persero) as well as Presidential Regulations concerning new and renewable energy, had not been officially issued.

More ambitious climate action is urgently needed now as the effects of climate change are becoming more frequent as La Nina returns. The Climate Transparency report 2021 states that changes in La Nina and El Nino patterns will have an impact on the onset and duration of the rainy season in Indonesia. This affects the agricultural sector such as rice production. The World Bank’s global risk analysis places Indonesia in the twelfth of 35 countries that face a relatively high risk of death from exposure to floods and extreme heat. Ranked as the fifth country with a population that lives in areas lower than the coastal zone, Indonesia is also vulnerable to sea-level rise.

Indonesia is able to make a significant contribution to tackling climate change and preventing worse impacts from the climate crisis. Utilizing vast forests as carbon sinks, having renewable energy potential reaching 7879.4 GW, and playing a strategic role in the G20 Indonesia should be able to achieve and exceed the current NDC target of reducing emissions by 29% on its own and up to 41% with international support from business as usual in 2030. By doing this, Indonesia will not only save the environment but also transform the economic system, as well as demonstrate leadership innovation to the members of the G20 countries.

COP 26, Indonesia Has No Ambitious Climate Action Breakthrough

Jakarta, 03 November – President Joko Widodo at the 26th World Leaders Summit on Climate Change or COP-26 did not announce a firm statement about increasing Indonesia’s climate ambitions. The Institute for Essential Services Reform (IESR) views that the Indonesian government should be using this moment to lead and encourage the G20 countries to set compatible climate action with the Paris Agreement. However, in his speech at COP 26, President Jokowi seemed to hand over the responsibility to developed countries to determine the achievement of carbon neutral conditions in Indonesia. It showed the less ambitious state of the Indonesian government in dealing with the climate crisis.

“Indonesia should clearly state its climate ambitions, increase its Nationally Determined Contribution (NDC) targets and convey the funding needs from developed countries to achieve peak emissions by 2030 and decarbonization by 2060 or earlier. Unfortunately, the President did not state targets and plans for more ambitious mitigation actions in his speech,” said Fabby Tumiwa, Executive Director of IESR. He is also currently in Glasgow attending the COP 26 event.

The Climate Transparency Report, Country Profile of Indonesia 2021 finds that staying in the current NDC unconditional reduction target of 29%  will contribute to increased emissions (excluding the emissions from land use) to 535% above 1990 levels, or around 1,817 MtCO2e in 2030. Meanwhile, to stay below the 1.5˚C temperature limit, Indonesia’s 2030 emissions should be around 461 MtCO2e (or 61% above 1990 levels). This indicates an ambition gap of 1,168 MtCO2e.

“As a country that has quite large natural and mineral resources, such as nickel, Indonesia can raise its climate ambitions beyond the target of 29% by 2030. Moreover, if Indonesia with a large population has implemented energy conservation and efficiency since earlier, without the funds from a developed country, Indonesia can reduce carbon greater than the target in the NDC,” explained Lisa Wijayani, Manager of the Green Economy Program, IESR.

Furthermore, IESR observes that Indonesia’s plan, which was stated by Jokowi on the same occasion, to transition to clean energy is still constrained by regulations that have not yet been issued. Jokowi proposed to build the largest solar PV in Southeast Asia, but until today the Regulation of Minister of Energy and Mineral Resources No. 26/2021 Regarding Rooftop Solar Power Plants is still waiting for approval at the Ministry of Finance. Besides, the Presidential Regulation regarding new and renewable energy, which has been awaited since early 2021, has not yet been released.

“The Indonesian government should simultaneously issue appropriate regulations to create a more massive renewable energy ecosystem for development, as well as encourage investment from developed countries. Clear regulations and targets can open up greater opportunities for investors to invest in renewable energy,” added Lisa.

Not only that, but in his attention, Jokowi also plays an important role in carbon markets and prices in solving climate problems. This October, the government has issued the Law on Harmonization of Tax Regulations. A carbon tax of IDR 30 per kilogram of carbon dioxide equivalent will be applied to the number of emissions that exceed the stipulated emission limits (cap and tax).

“The determination of the carbon tax price at IDR 30 per kg (USD 2 per ton) is still very far from the recommendations of the World Bank and IMF which set the carbon tax price for developing countries to be in the range of USD 35-100t/CO2e. Even the IPCC report explains that the carbon tax rate in 2020 is in the range of US$ 40-80/tCO2. With a small carbon tax rate, the government’s goal to reduce carbon emissions significantly through this carbon tax will not be achieved,” said Lisa.