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Promoting Central and Local Government Institutional Capacity for Just Transition
Jakarta, October 26, 2023 – The Institute for Essential Services Reform (IESR), in collaboration with the Stockholm Environment Institute (SEI), conducted a collaborative study on the analysis of central and local government institutional capacity for sustainable coal transition in Indonesia.
The preliminary findings of this study show that of the eight ideal capacities that governments must possess to facilitate the energy transition, national and local governments have different strengths in their ability. The national government understands the energy transition well, while local governments have sufficient capacity to implement it. However, national and local governments still require capacity building in seven other abilities to support the energy transition successfully.
Wira Swadana, Program Manager of Green Economy, IESR, mentioned that a just energy transition requires careful planning and implementation. For this reason, qualified and complementary capacities and close collaboration between the national and local governments are crucial.
“The national government can play its role in establishing regulations that support the implementation of an equitable energy transition, attracting investment and financing the energy transition through various international cooperation. Meanwhile, local governments can act as coordinators and stimulators in the energy transition process because they are better positioned to understand the field conditions and directly interact with citizens,” said Wira Swadana at the National Workshop on Equitable Transition: Building Capacity for Sustainable Coal Transition in Indonesia.
IESR assessed eight government capacities: awareness, technical knowledge, stakeholder engagement, communication, multilevel networking, finance, instrumental mastery in organizational structuring and strengthening, and implementing the energy transition. Based on IESR’s initial analysis, the national government needs capacity building in technical knowledge, communication, and networking. Meanwhile, local governments must also improve technical knowledge about the energy transition, finance, and authority, including instrumental capacity.
Martha Jesica, Social and Economic Analyst at IESR, explained three major gaps in the capacity building of the government at the national and regional levels. First, the rapid transfer of labor that limits the exchange of information. Second, there needs to be more awareness about the impact of coal and its implications on economic development. Third, multilevel communication between governments is hindered by complex bureaucratic processes.
“To address the capacity gap in technical knowledge among national and local government, shifting from a coal-centered economy to a more sustainable and equitable green economy is imperative because future economic growth and development are moving towards sustainability and equitable development. Furthermore, it is important to involve actors outside the government in planning, such as civil society groups at both the national and local levels, to facilitate knowledge exchange about this energy transition,” Martha said.
Stefan Bößner, Researcher at Stockholm Environment Institute, said that the government can enhance its capacity to create policies and regulations supporting low-carbon initiatives and technologies. He also mentioned that economic diversification is a key solution to making an equitable energy transition.
“These economic diversification options are available in Indonesia. For example, coal-producing regions can develop environmental tourism and use mining sites for solar energy installations or as energy storage,” Stefan said.
Waiting for JETP Implementation in Indonesia
Pakistan, May 31, 2023 – The energy transition is being discussed in many countries, including Pakistan. Some of the challenges faced by Pakistan in adopting renewable energy include inadequate electricity infrastructure and network integration. Similar to Pakistan, Indonesia also faces similar challenges. Still, the government’s fast action is needed to reduce the use of fossil energy as a concrete step to reduce greenhouse gas emissions.
Raden Raditya Yudha Wiranegara, Senior Researcher at the Institute for Essential Services Reform (IESR), explained the electricity sector contributes around 40% of greenhouse gas emissions in Indonesia based on the 2023 Indonesia Energy Transition Outlook (IETO) report and achieves net zero emission by 2060 or faster, Raditya said, it is necessary to transition all energy supplies. One is changing the electricity sector by gradually reducing fossil fuels in PLTU. According to Raditya, coal-fired power plants must be reduced or retired in stages until 2045 to align with the 1.5°C ambition.
“The first phase is carried out by closing 18 coal power plants with a total capacity of 9.2 GW until 2030, then 39 coal power plants with a total capacity of 21.7 GW, and 15 coal power plants with a total capacity of 12.5 GW,” explained Raditya in the Symposium on “Accelerating the Just Energy Transition in Pakistan” organized by the Sustainable Development Policy Institute (SDPI) on Wednesday (31/5/2023).
In fulfilling the 1.5°C ambition, Indonesia’s Just Energy Transition Partnership (JETP) is one of the driving forces. Raditya explained that the partnership includes a peak emission target 2030 for the Indonesian electricity sector, including on-grid, off-grid, and captive power generation systems, shifting the projected peak emissions by about seven years earlier. Apart from focusing on significant emission reductions, JETP is also promoting sustainable development and economic growth and protecting the livelihoods of people and workers in the affected sectors.
To implement this target, Raditya said, currently the JETP Indonesia Secretariat, is developing a comprehensive investment plan (CIP) for the Just Energy Transition Partnership (JETP) funding program. However, Raditya stressed the JETP Indonesia Secretariat only had a limited time to complete it, bearing in mind that the document needed to be published in August 2023. Regarding the work on the comprehensive investment plan document, Raditya emphasized that it was hoped that the analysis results in the working group could be included in it in July 2023. The working groups in JETP Indonesia consist of 4 working groups representing various parties, including the Indonesian government, national and international institutions, and elements of civil society who have expertise in their respective fields. The working group oversees Technical, Policy, Funding, and Equitable Transition.
“Reflecting on these conditions, transparency and availability of data is a problem in the working group. This needs to be a concern considering that these conditions can hinder each group member from carrying out the assigned tasks,” said Raditya.
The CIP document will contain technical, funding, policy, and socio-economic information regarding energy transition investments in the electricity sector up to 2030 which will form the basis for implementing the USD 20 billion partnership under JETP Indonesia. Based on the JETP Indonesia Joint Statement, funding mobilization is targeted to occur in years 3 to 5 after the JETP Indonesia funding partnership is agreed upon. In addition, the investment areas that have been agreed upon in the CIPP consist of developing transmission and distribution networks, early retirement of coal-fired power plants, accelerating the use of baseload type renewable energy, accelerating the use of variable type renewable energy, and building a renewable energy supply chain.
Awaiting the Decision of WTO Appeal Against The Trade Lawsuit between Indonesia and the European Union
Jakarta, April 3, 2023 – The process of submitting an appeal by Indonesia against the World Trade Organization (WTO) decision regarding the nickel ore export ban is ongoing. The government introduced an appeal against the WTO decision on December 8, 2022, stating that the export ban and downstream nickel policy violated international trade rules. However, at present, the government and the European Union are still waiting for the formation of the WTO Appellate Body because there is a blockage in the election of the Appeal Board by a WTO member, the United States.
The Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, stated that Indonesia needs to wait until the judges are formed by the WTO Appellate Body, which currently does not exist to process the case, even though it takes a long time. He revealed this on the TVRI World program “Economic Outlook” on Monday (3/4/2023).
For information, the Appellate Body, as an appellate court of the WTO settlement system since 2019, is no longer effective in resolving disputes between countries due to the vacancy of trial judges and the blocking of the appointment of new judges by the United States. Institutional improvements are being made to address the current vacuum of the Appellate Body, and it is possible to replace the two-level adjudication system with a single-level adjudication.
“The process of selecting judges will also take a long time, and there are some criteria under WTO rules that can be nominated and become members of the body, so the process is still ongoing. It can be said that this trade dispute case is currently a status quo,” explained Fabby Tumiwa.
Fabby mentioned that the settlement of trade disputes over this raw material policy depended on the diverse expertise of the composition of the judges and whether a country like Indonesia could provide new evidence showing that Indonesia’s raw material policy was in line with the WTO agreement. Furthermore, Fabby emphasized that Indonesia has strong reasons to submit an appeal to the WTO. First, Indonesia wants to spur the growth of the processing and refining industry (smelter) because it aligns with the downstream policy to increase the added value of natural resources in the country. Second, Indonesia wants to develop various domestic industries, including downstream industries and industrialization, which will continue to be improved.
“We, at least, need to prove to the WTO Appellate Body that the raw material policy positively impacts developing countries, such as Indonesia. Including evidence regarding the policy’s good impact on Indonesia’s economic development. I think this is an interesting case, and Indonesia needs to be good at presenting the evidence,” said Fabby Tumiwa.
Fabby highlighted that if this trade dispute case caused Indonesia to lose the WTO lawsuit, the government needs to use other mechanisms to increase the added value of nickel products and focus on the domestic industry. For example, Indonesia focuses on policies and implementation to increase nickel downstream.
