Climate: a $20 billion partnership to help Indonesia go coal-free

Talks with the United States and Japan had been going on for over a year and the announcement was eagerly awaited at COP27. Indonesia, currently hosting the G20 summit in Bali, has just secured a record climate finance deal. Several advanced countries, including France, have pledged to mobilize more than $20 billion over the next three to five years to help this gigantic archipelago initiate its energy transition.

A difficult transition for a state which is the third largest coal producer in the world. According to the latest government data, 83% of the electricity consumed in the country, where the network is very fragmented due to its island structure, is still produced with fossil fuels. Coal thus generates 63% of the archipelago’s electricity.

Avoid the worst impacts

“There is no question of sacrificing economic development but we must be able to build more sustainable development for the next generations”, insisted, in Bali, Luhut Binsar Pandjaitan, the minister in charge of investments in Indonesia, before d explain that he had thought of his granddaughter when signing the agreement.

“Indonesia has an important role to play in avoiding the worst impacts of climate change on our countries, our populations and the environment”, reminded the Minister in front of delegations from other emerging countries in the region.

By signing, Indonesia undertakes to limit CO2 emissions₂ of its electricity sector to 290 megatons by 2030, i.e. seven years earlier than forecast by current policies: a peak not to be exceeded which applies both to the conventional network and to the electricity suppliers of the industrial facilities.

More than thirty coal-fired power plants to close

The aim is to bring its electricity sector to carbon neutrality by 2050 and to develop renewable energies so that they represent more than a third of electricity production by the end of the decade. Jakarta has already identified more than 30 coal-fired power plants (with a total capacity of nearly 17 gigawatts) that can be shut down before time.

“We now have six months of work to finalize this original financing which mixes ten billion dollars of public funds and the same amount in private money”, detailed John Morton, one of John Kerry’s advisers, specializing in the ‘Development Assistance.

This new kind of cooperation model between developed and developing countries – called “partnership for a just energy transition” – will also be tested by South Africa, the first country to have signed a transaction of this type. for an amount of 8.5 billion dollars. The promise was made with fanfare last year at COP26 and the country unveiled details of its plan just before the UN climate summit kicked off in Sharm el-Sheikh.

Grants rather than loans

The NGOs will scrutinize the development of the plan in the coming months, in particular the form that this funding will take. “The envelope should be mainly made up of grants and concessional financing [des prêts à des conditions très favorables, NDLR]instead of commercial loans which will only put our public institutions in debt,” said Tata Mustasya, head of the climate and energy campaign for Greenpeace Indonesia.