IESR and Ford Foundation Call for Centering Justice on Energy Transition Partnership

press release

Jakarta, September 19, 2023 – The Institute for Essential Services Reform (IESR) and Ford Foundation in Indonesia are calling on the government of Indonesia to emphasize the significance of centering justice in energy transition in Indonesia, especially through the Just Energy Transition Partnership or JETP. 

The JETP is an innovative financing mechanism intended to accelerate country-led energy transition from fossil fuels to renewable energy sources. A JETP essentially links the financial package of concessional finance and grants from donor countries with energy transition initiatives in the global South.

In a report digitally launched today by IESR and Ford Foundation, it is mentioned that the pledged JETP funding is not sufficient to cover the cost of the whole transition process. Instead, it serves as an initial source of funding to catalyze and mobilize other funding sources. 

The report highlights the results and recommendations from the JETP Convening, Exchange and Learning event for South Africa, Indonesia, and Vietnam that was held on 25-28 June 2023 in Jakarta. The event was collaboratively hosted by IESR, Ford Foundation, and African Climate Foundation (ACF).

“Since the initial JETP funding is time-limited, it is crucial to set reasonable and achievable milestones and projects within the agreed period and develop a strategy to leverage other funding sources to cover the costs of meeting the 2030’s target,” said Fabby Tumiwa, Executive Director for IESR. 

Fabby also added that financing instruments such as concessional loans, commercial loans, equity, guarantee funds, grants, and any other instrument must be assessed carefully to hinder the ‘debt trap’ in the future. 

“Governments must continue to advocate the greater demand of grants and concessional finance  in order to achieve the agreed target without adding burden to the recipient countries,“ says Fabby.

This was confirmed by Edo Mahendra, Head of JETP Indonesia Secretariat when he served  as speaker in a panel discussion on ‘Safeguarding the “Just” in Just Energy Transition Partnerships (JETP) and Other Emerging Climate Finance Models’ on September 18, 2023, during the Climate Week event in New York, United States.  

“The highest component of the funding will still derive from commercial loans and investments that carry non-concessionary interest rates. Consequently, it is essential to build partnerships and collaborations between governments, philanthropic organizations, and the private sector, “ said Edo.  

Philanthropies have a critical role in supporting the just principle both through the government and  directly to the impacted communities. Their capital can act faster than the government and bridge the gap between the government and the community. Philanthropy could also support human resource development by giving technical assistance, capacity building, training, and knowledge exchange.

The just principle should also be applied to mitigate the impacts of energy transition on the communities. It is essential to support alternative socio-economic initiatives in these areas to adequately wrestle with the idea of justice for who? This includes providing skill improvements to transition from fossil fuels to renewable energy sources, educating and assisting local governments to adapt their economic development strategy and plan for the long-term, as well as creating funding dedicated to address the impacts of transitioning away from coal.

The transition from fossil fuels to low-carbon resources may affect  not only the economy at the local level but also at the regional or even national level. People who live in regions dependent on fossil fuel will have to adapt to the new environment, as well as adjust their skills and knowledge that might be difficult to do in a short period of time.

Alexander Irwan, Regional Director of the Ford Foundation in Indonesia, said that the JETP implementation should meet the basic principles of the ‘justice’ element.

“Social justice elements should be included in the discussion and transition plans. The concept of fairness has to be at the center, ensuring the just transition is inclusive for all groups or communities, particularly to workers, children, women and local communities who are very reliant on fossil fuel supply chains,” said Alex.

Kontan | Be Cautious of Debt Traps, Bambang Brodjonegoro Provides Input for the Implementation of JETP

Chairman of the Indonesia Clean Energy Forum (ICEF), Bambang Brodjonegoro, stated that Indonesia needs to negotiate with the parties involved in the fair energy transition cooperation scheme (Just Energy Transition Partnership/JETP). This pertains particularly to the funding composition, which is still predominantly in the form of loans because the grant amount is still quite minimal.

Read more on Kontan.

Advancing Strategies for Increased JETP Funding

press release

Jakarta, August 29, 2023 – The comprehensive investment and policy plan (CIPP), which was initially scheduled for August 2023 to be the end of same year, is considered necessary by the Institute for Essential Services Reform (IESR) to refine the CIPP document to meet the agreed targets and formulate a robust cooperative effort for a just energy transition (Just Energy Transition Partnership/JETP), as well as opening more comprehensive public consultations.

The Executive Director of IESR, Fabby Tumiwa, stated that to reach the goals outlined in the JETP, which include reducing peak greenhouse gas emissions by up to 290 million metric tons of CO2 by 2030 and achieving a renewable energy mix of 34% by the same year, as well as attaining Net Zero Emissions (NZE) by 2050, a minimum of 150 billion is required.

One strategy involves decreasing the capacity of coal-fired power plants (CFPP) before 2030 through either natural or early retirements. IESR  has estimated that a gradual reduction of up to 8.6 GW in CFPP capacity is necessary until 2030. It is important to note that this figure does not account for any reductions in off-grid CFPP capacity outside the PLN’s jurisdiction.

“Until now, IPG and GFANZ’s interest in providing CFPP early retirement funding is shallow, even though a reduction in CFPP is needed to increase penetration of renewable energy,” said Fabby.

IESR estimated the early retirement costs at USD 4 billion, which is lower than the amount assessed by PLN previously. Fabby suggests that IPG should provide funding for the early retirement of CFPP due to its involvement in maintaining the credibility of JETP.

In addition, IESR believes that improving the CIPP document will clarify the funds needed for priority projects, such as constructing renewable energy pipelines. Based on the IESR study, Indonesia must invest USD 1.3 trillion to meet the Paris Agreement objective for the energy transition until 2050, which averages USD 30 billion to USD 40 billion per year. Until 2030, a minimum of USD 130 billion is necessary.

IESR believes that the allocation of the grant portion in the JETP scheme needs to be increased to support broad aspects of a just transition and the transformation of crucial actors so they can implement the ambitious CIPP soon. At least the portion of the grant required is around 10%-15% or USD 2 billion to USD 3 billion in the JETP scheme to execute the energy transition in Indonesia. IESR knows that increasing the grant allocation on the proposed scale requires intense cooperation and commitment from the Indonesian government and international partners in JETP. Through close collaboration, all parties involved can work together to meet this financial need and ensure the success of a sustainable energy transition in Indonesia.

“JETP needs to support the energy transition process in Indonesia, not just determine priority projects to achieve targets. Because JETP requires systemic changes, it requires increasing the capacity of key actors such as PLN and related ministries/agencies, grant funding to compile regulatory/policy changes, as well as supporting affected actors if JETP is implemented later, for example, workers in coal mines or the general public near the CFPP project,” explained Deon Arinaldo, Program Manager Energy Transformation, IESR.

IESR also emphasizes the importance of involving more comprehensive public consultations in the decision-making process related to JETP. Opening up opportunities for a wide range of stakeholders to provide input will ensure that the project accurately reflects community needs and aspirations. Increasing transparency and community involvement will enhance the legitimacy of JETP and lead to more enduring outcomes.

“The public, the primary beneficiary, should have the right to contribute to the CIPP document. Their participation will ensure that the aspects of a just transition, which is one of the spirits of JETP, are reflected accurately as they better understand the real conditions on the ground. The JETP secretariat only held one FGD session with the civil society community at the beginning of compiling this document. In the second leg of the document preparation process, it is hoped that the number of FGD sessions will be increased to more than once. Also, it is crucial to distribute this draft document in advance so that it can be studied before the FGD session,” said Raditya Wiranegara, Senior Analyst of IESR.

Webinar and Report Launch CREA & IESR: Health Benefits of Just Energy Transition and Coal Phase-out in Indonesia

Background

As a country that has ratified the Paris Agreement through Law 16/2016, Indonesia has taken an active role in contributing to the global climate crisis challenge; to curb the greenhouse gas emission and keep the average global temperature increase below 1.5 0C. As part of the effort, the government of Indonesia has pledged to achieve a net-zero emission target by 2060 or sooner. Furthermore, during the G20 summit in November 2022, Indonesia has also signed a Just Energy Transition partnership (JETP) commitment with the International Partner Group (IPG) countries. As part of the JETP, Indonesia would draft a Comprehensive Investment and Policy Plan (CIPP) with the objective to peak power sector emission by 2030 with absolute value of 290-million-ton CO2, reach net zero by 2050, and increase renewable electricity mix into 34% by 2030. The IPG countries, in return, promise to mobilize USD 20 billion of initial finance to support the CIPP implementation in Indonesia[1]. The JETP marked an opportunity for Indonesia to increase its climate policy ambition and provide an example of how multilateral partnership could pave the way for energy transition and solve the climate crisis.

The power sector is the low hanging fruit for mitigation action in Indonesia. About 40% of energy sector emissions comes from the power sector, where coal fired-power plant (CFPP) dominates its electricity as well as emissions shares[2]. CFPP development started in the early 2000s, with government support such as the Fast Track Program 1 and 2 (FTP1 dan FTP 2), and the 35,000 MW program. As a result, coal-fired power plant’s capacity is soaring, and as of 2022, about 67% of Indonesia’s electricity comes from the burning of coal. By 2022, Indonesia’s coal-fired power plant’s (CFPP) installed capacity has reached 44.6 GW[3].

Reducing electricity generation from CFPP is an important strategy to start reducing the GHG emissions in the power sector. Cancellation of some of the CFPP in the pipelines could become the lowest cost option to do so with cost ranging between 0.5-0.8 USD/ton CO2[4]. Moreover, there are also other benefits gained such as reduced air pollution, improved health benefits, and maintain productivity and sustainability of the surrounding environment. Yet, there is not much knowledge and analysis identifying these added benefits.

As JETP aims to accelerate energy transition Indonesia that not only answer the global climate crisis but also “just” in its process, it is therefore important to understand the implications for the JETP implementation in the social and economy aspect. This webinar will discuss the health benefits (and avoidance of air pollution) that could be gained by Indonesia for intervening in the CFPP development. The webinar and the report that will be launched is aimed to enrich discussion in the “just” aspect of Indonesia energy transition.

 

 

Objective

The objectives of the webinar are:

  1. To present and discuss the potential of air pollution of the CFPPs in Indonesia, its interventions, and its benefits, specifically from the health perspective with related stakeholders.
  2. To provide input for the just transition aspects in the JETP process of Indonesia
  3. To launch and disseminate the findings of the report titled “Health benefits of Just Energy Transition and coal phase-out in Indonesia.”

[1] https://www.whitehouse.gov/wp-content/uploads/2022/11/Joint-Statement.pdf

[2] IESR (2022). Indonesia Energy Transition Outlook 2023

[3] IESR (2023). Delivering power sector transition in Indonesia

[4] idem