President Widodo: Indonesia Needs 1 Trillion US Dollars for Energy Transition

A building with signs for the 28th Conference of the Parties on Climate Change (COP28) on the exterior and people walking to and from teh bui
Kompas
United Arab Emirates
President Widodo: Indonesia Needs 1 Trillion US Dollars for Energy Transition

Developing countries like Indonesia still need significant funding to support a transition away from fossil fuels to address the climate crisis. However, funding commitments without direction will not be enough. Indonesia also needs to develop its internal policies.

President Joko Widodo, in his opening speech on the World Climate Action Summit (WCAS) agenda at the 28th Conference of the Parties on Climate Change (COP28) in Dubai, United Arab Emirates, conveyed the need for energy transition funding in order to reach climate targets in the next 37 years.

"Indonesia needs an investment of more than 1 trillion US dollars for net zero emissions by 2060," said the president on December 1.

The president said Indonesia has accelerated the transition to new and renewable energy, especially solar energy, wind, hydro, geothermal and ocean currents. Indonesia is also accelerating the development of biodiesel, bioethanol and bioaviation fuel.

The president discussed the collaboration between Indonesia and the United Arab Emirates to build the recently inaugurated Cirata Floating Solar Power Plant. The plant, which can generate 192 megawatts of electricity, is said to be the largest in Southeast Asia.

Indonesia also takes a transition approach by reducing coal production and consumption, while addressing the social consequences of moving away from fossil fuels as an economic source.

Indonesia achieved this through the funding mechanism of the Just Energy Transition Partnership (JETP) alongside other developing countries such as South Africa, Vietnam and Senegal.

JETP was first launched at COP26 in Glasgow. The funding mechanism from developed countries set a commitment of 21.5 billion US dollars or 333.8 trillion Indonesian rupiah (with an exchange rate of 15,527 rupiah per US dollar).

Since Indonesia committed to the partnership, only about 7 billion US dollars have been obtained. The funds obtained are mostly in the form of soft loans rather than grants.

In a speech lasting less than 10 minutes, the president stated hopes that world development banks can increase their capacity for funding the energy transition with low interest rates.

In addition, he invited collaboration from bilateral partners, private investments, philanthropists and friendly nations.

"The targets of the Paris Agreement and net zero emissions can only be achieved if we can solve the problem of funding the energy transition," he said. "That's where world problems can be solved."

The World Bank announced yesterday its commitment to funding climate-related projects of up to 40 billion US dollars in developing countries by releasing 45% of its annual funding from July 1, 2024 to June 30, 2025.

This commitment represents an increase of approximately 9 billion US dollars from the previous target of only 35%.

World Bank President Ajay Banga stated during a session at COP28 that 50% of funding will be used for mitigation and the other 50% for adaptation for those most affected by climate change.

World Bank Group projects will also focus on preserving ecosystems and biodiversity to protect human health and the planet.

Executive Director of the Institute for Essential Services Reform (IESR) Fabby Tumiwa, said to Kompas that the Paris Agreement adopted at COP21 in 2015 mandated that funding for the climate crisis be provided primarily by developed countries.

Based on numerous scientific studies, developed countries are responsible for climate change due to their exploitation of natural resources which has triggered the climate crisis.

Developed countries at the forefront of renewable energy industries also need to accelerate their net zero emissions targets more than developing countries. Moreover, according to a study by the International Energy Agency (IEA), peak emissions from the energy industry in developed countries will arrive in 2030.

”Net zero emissions they must be in 2040, if 2050 is too long. If we read the IPCC report, this is to provide space for developing countries, whose economies have not yet been diversified, to still be able to use fossil energy to develop, alleviate poverty, while diversifying the economy," said Fabby.

In this case, Fabby continued, Indonesia could be a leader in collecting funding responsibilities from developed countries. "I think Indonesia must take that leadership (at COP28)," he said.

Meanwhile, Indonesia also needs to improve its domestic commitments to the energy transition. For example, the government has yet to adequately address energy subsidies that currently result in cheap and misdirected pricing.

"We are still subsidizing fossil energy, subsidizing fuel. That's what keeps fuel prices low," he said.

Indonesia is still struggling to promote clean and renewable energies. For instance, the improvement of subsidies makes it difficult for the country to transition away from fossil fuels.

"The problem, right, is political will. Try to fix fuel and LPG subsidies. If we reduce it as a mitigation action, fuel consumption will be more rational because it is no longer subsidized. So, instead of adding to it, like one of the presidential candidates who said that fuel will be provided for free," he said.


This story was produced as part of the 2023 Climate Change Media Partnership, a journalism fellowship organized by Internews’ Earth Journalism Network and the Stanley Center for Peace and Security. It was first published in Bahasa Indonesia in Kompas on December 2, 2023. It has been translated to English and lightly edited for length and clarity.

Banner image: The 28th Conference of the Parties on Climate Change (COP28) being held in Dubai, United Arab Emirates / Erika Kurnia for Kompas.

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