Indonesia seeks World Bank, ADB deal on US$4b coal phaseout

Indonesia is proposing about $4 billion of projects to funders including the World Bank and the Asian Development Bank to help wean itself off of coal, with a deal possible as early as next week.

The funds would go toward accelerating the retirement of up to 2 gigawatts of coal-fired power plants, according to a public consultation document. BloombergNEF data shows Indonesia has about 37 gigawatts of such plants. The financing would be done through a platform meant to let the projects tap a mix of sovereign, multilateral and private investors, instead of only bilateral funding.

Indonesia will seek the funders’ approval on the investment plan in an Oct. 26 meeting, according to a related statement.

This is a step forward in Indonesia’s bid to shift away from coal, a commodity that generates more than half of its electricity and buttresses its economic growth. The platform, known as the Energy Transition Mechanism, shows one way developing countries can fund their move to cleaner energy while retaining authority over their local policies, as nations from South Africa to India seek financing for their climate mitigation goals.

“An emissions-intensive path to economic growth remains unsustainable for Indonesia going forward,” the government wrote in the document. “Impacts of the physical hazards brought about by climate change will be felt across all of Indonesian society.”

Just Transition

Indonesian officials are also working with representatives of the US and other wealthy countries on a “just energy transition package” set to include millions of dollars in funding to support a move away from coal. Negotiations are ongoing, with a deal set to be announced on the sidelines of the Group of 20 gathering in November.

As part of the $4 billion proposal, the government is putting forward projects including the early closure of PT Perusahaan Listrik Negara’s Suralaya and Paiton power plant units, which are among the biggest in Southeast Asia. Other projects in the proposal include closing coal mines and building up renewable energy capacity while expanding women’s role in the sector.

The world’s top thermal coal exporter recently stepped up its emissions reduction goal. The country has set out a goal of reaching net-zero emissions by 2060 that includes developing solar, geothermal and nuclear power to replace coal. – BLOOMBERG

Dayang Norazhar

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