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IESR: Indonesia Needs Comprehensive Package Policy for Energy Transition


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Jakarta, 27 June 2023 – The urgency to shift energy transition into a cleaner, more sustainable one has become increasingly crucial, as highlighted by the IPCC synthesis reports, which states that global temperature has already increased 1.1 degree Celsius. Energy, as the driver of economic growth, has been a key factor in economic activities since the very beginning of fossil minerals mining. However, transitioning to cleaner energy systems brings consequences of decreased coal demand, posing a serious threat to regions heavily reliant on the coal economy.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform during the panel discussion of the ASEAN Sustainable Energy Finance on Tuesday, 27 June 2023, emphasized the situation in several provinces in Indonesia which need to consider alternative economic streams, as their local revenue currently comes from coal mining-related activity.

“We need to pay attention to some provinces such as East Kalimantan, which produces 40% of Indonesian coal, and South Sumatera which produces 15%. We need to build local capacity to generate revenue from sectors other than coal,” Fabby said.

Fabby added that the government needs to prepare a comprehensive package of transition finance. The funding should cover not only the technical costs, such as retiring coal fleet, development of renewable energy, improving the grid, but also preparing the community, particularly those employed in the coal mining industry, to adapt into the new labor market. It includes the reskilling and retraining to align their skill with market demand.

“The national government must provide special assistance for regions heavily reliant on coal economics,” Fabby emphasized.

Eunjoo Park-Minc, Senior Advisor on Financial Institutions Southeast Asia of Financial Futures Centre (FFC), agreed on the significant role of government during the transition, especially in designing a supportive policy framework which enables the private sector to participate.

“The role of the investors during this transition time is to develop innovative financing mechanisms. To make it more catalytic, we need a supportive policy framework to make it work,” she said.

Besides that, Eunjoo pointed out the need for international cooperation, as most of the (transition) projects are taking place in the developing countries while the financing primarily comes from the developed countries. 

The Asian Development Bank (ADB), as one of the multilateral banks financing the energy transition emphasized the importance of justness aspects. This is explained by Veronica Joffre, Senior Gender and Social Development Specialist at ADB. 

“One of the aspects of ETM (Energy Transition Mechanisms) is the justness. It means potential social impact should be assessed and managed, including employment, supply chains, and the environment,” said Veronica.

She added that as achieving net-zero emissions is the path for the future, the transition towards that direction should be consciously designed.

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