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Indonesia Can Push the Energy Transition Agenda during Laos’ Chairmanship of ASEAN in 2024

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Jakarta, October 20, 2023 – Indonesia, as the chair of the Association of Southeast Asian Nations (ASEAN) in 2023, has achieved significant progress in climate and energy transition issues, including the launch of ASEAN Taxonomy for Sustainable Finance (ATSF) Version 2 and the ASEAN Carbon Neutrality Strategy. The Institute for Essential Services Reform (IESR) appreciates this progress. However, IESR believes that after its leadership in ASEAN, Indonesia must consistently prioritize the development of renewable energy over untested technologies like carbon capture storage (CCS) to ensure the implementation of low-carbon ideas. IESR also suggests that Indonesia should push for the energy transition agenda to be a priority during Laos’ chairmanship in 2024. 

Besides, Indonesia must reduce emissions by demonstrating a stronger commitment and implementing effective strategies. Indonesia’s Nationally Determined Contribution (NDC) target ranking, as evaluated by the Climate Action Tracker (CAT) in 2022, is still ‘Very Inadequate’. Some causes of Indonesia’s low ranking include the energy sector’s inconsistent strategies. According to the 2021-2023 RUPTL, the percentage of coal mix increases from 62% in 2025 to 64% in 2030. Furthermore, Indonesia’s government is working on a regulatory framework for carbon capture and storage technology (Carbon Capture Storage CCS/Carbon Capture Utilization Storage CCUS) to establish Indonesia as a CCS hub in Southeast Asia.

Wira Swadana, Program Manager of Green Economy IESR,  mentioned that many issues related to climate and energy diplomacy in ASEAN still do not touch the community, even though climate actions directly impact the community. The outcome of Indonesia’s chairmanship of ASEAN 2023 shows some improvement in climate and energy ambition and implementation. However, Indonesia’s focus on developing untested infrastructure, such as CCUS and the Electric Vehicles (EV) ecosystem, remains, neglecting the principles of sustainable mobility.

“Indonesia and other ASEAN countries should focus on more decisive actions and cooperation such as building a renewable energy development ecosystem, focusing on equitable and responsible practices for the development of transition/critical minerals,” he said in the public discussion “Reflection on Indonesia’s Leadership in ASEAN 2023: Towards a Regional Front-runner in Climate and Energy Transition Issues”.

Arief Rosadi, Project Coordinator of Climate Diplomacy IESR, explained that besides Indonesia, four other ASEAN Member States (AMS), such as the Philippines, Singapore, Thailand, and Vietnam, have inadequate climate ambition based on CAT. Therefore, ASEAN countries need to increase their climate ambition by significantly reducing emissions in the energy sector, and this should be reflected in the upcoming regional energy planning document (ASEAN Plan of Action for Energy Cooperation, APAEC).

“Four gaps require attention in ASEAN’s approach to energy and climate issues. These gaps are institutional, ambition, implementation, and participation gaps. First, the institutional gap in ASEAN’s approach can be seen in the fragmented regulation of energy and climate issues. Energy issues are under the ASEAN economic pillar, while climate issues are under the ASEAN socio-cultural pillar, which creates a lack of coherence. ASEAN must comprehensively map out institutional roles and responsibilities to address this issue. This will ensure that policy implementation at national and regional levels is effective and efficient,” Arief said.

Arief continued that the second gap concerns the lack of alignment with the Paris Agreement regarding climate ambitions. Third, political and technical factors still constrain the energy transition implementation gap by giving space to untested technologies such as CCS. Fourth, there is a limited participation of civil society in these efforts. Addressing these four gaps will be crucial for ASEAN to achieve its goals.

“Indonesia plays a crucial role in ASEAN due to its position as the largest economy and significant political influence. It can use its influence to promote the energy transition agenda as a key discussion during Laos’ chairmanship of ASEAN in 2024,” Arief said.

IESR encourages Indonesia to strengthen its climate diplomacy strategy by conducting a comprehensive synchronization of various multilateral forums to produce tangible results and cooperation regarding technical, clean energy investment or funding mobilization for Indonesia and ASEAN.

On the other hand, Indonesia and other ASEAN countries need to consider the development of a Carbon Economy (NEK/Carbon Pricing) to achieve their climate goals. To ensure effective NEK implementation, Indonesia needs to identify the target NEK segmentations from the existing NEK instruments, determine the lowest cost NEK instrument, establish a carbon tax, and create a roadmap for Nationally Determined Contributions (NDC) and Net Zero Emissions (NZE) that is in line with NEK.

“Domestic carbon pricing instruments can be quite helpful to achieve the NDC and NZE targets. However, these pricing instruments should be applied to mitigation actions that are relatively no cost or low cost not to overburden domestic finances. Even though a carbon tax will help reduce greenhouse gas (GHG) emissions, it is not easy to calculate the exact reduction in GHG emissions. Therefore,  the revenue generated from carbon tax should be allocated towards climate mitigation and adaptation actions so that the benefits of a carbon tax can directly impact climate action,” said Moekti Handajani Soejachmoen, Executive Director of Indonesia Research Institute for Decarbonization.

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