Indonesia’s $20 Billion Renewable Energy Investment Plan: Path to Net Zero Emissions

2023-11-21 08:04:56

Indonesia launched an investment plan on Tuesday aimed at attracting the $20 billion promised by Western countries as part of a transition pact to renewable energies to enable the archipelago to reduce its emissions and get out of coal on which it is very dependent.

This plan, launched less than two weeks before the start of the COP28 meeting in Dubai, specifies Jakarta’s ambition to reach net zero emissions in the electricity sector by 2050 in exchange for financing of 20 billion USD (18.2 billion euros), from the Just Energy Transition Partnership (JETP), concluded last November in Bali.

Southeast Asia’s largest economy wants to reduce carbon emissions from its power sector to 250 million tonnes by 2030.

This plan “provides a strategic roadmap for an ambitious energy transition in Indonesia,” Acting Minister of Marine and Investment Erick Thohir said in Jakarta.

At the same time, the country wants to increase the share of renewable energies in its electricity production to 44%, once morest an initial objective of 34%. Indonesia announced that it would need USD 97.3 billion in investment (EUR 88.8 billion) to achieve this objective, almost five times more than promised in the JETP agreement.

Jakarta is critical of the financing mix offered under the deal, fearing it will be offered mainly market-rate loans that would add to its debt.

This JETP agreement was concluded between Indonesia, the United States, Japan, Canada and six European countries to allow the archipelago, one of the main coal exporters and electricity producer in the world from coal, to get out of its dependence on coal.

This plan is inspired by a model first tested in South Africa, then announced for Vietnam and Senegal, in which rich countries commit to financially helping the energy transition of developing countries.

Faced with air pollution problems, Indonesia has pledged not to build new coal-fired power plants from 2023, but despite protests from environmental activists, continues to build the already planned coal-fired plants.

The country is also trying to position itself as a key player in the electric vehicle market as the world’s leading producer of nickel, an essential mineral for the manufacture of batteries. But certain industrial parks which house particularly energy-intensive nickel smelters are powered by coal.

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