During the G20 Summit in Bali a coalition of nations, including the United States and Japan, launched a US$20 billion climate finance package for Indonesia.
Under the Just Energy Transition Partnership (JETP), the International Partners Group (IPG), co-led by the US and Japan, will help Indonesia end its reliance on coal.
Associated IPG members the UK, Germany, France, the European Union, Canada, Italy, Norway, and Denmark are also contributing to Indonesia’s power sector transition.
Over the next three to five years, they will mobilize an initial US$20 billion in public and private financing which will include a combination of grants, concessional loans, market-rate loans, guarantees, and private investments.
The IPG members will put in US$10 billion of public money, with the other half coming from the Glasgow Financial Alliance for Net Zero (GFANZ), a global coalition of financial institutions, which include Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered.
As part of the JETP, the UK will give Indonesia a US$1 billion World Bank guarantee. This would enable the Southeast Asian country to extend its borrowing on affordable World Bank terms by up to US$1 billion.
US President Joe Biden said: “Together, we are mobilizing US$20 billion to support Indonesia’s efforts to reduce emissions, expand renewable energy, and support workers who are most affected by the transition away from coal, and that can be difficult.”
The JETP is expected to have Indonesia’s power sector emissions peak at no more than 290 MT of CO2 by 2030, down from the 357 MT baseline value. This would shift the sector’s emission peaking date forward by seven years. The partnership also aims to have Indonesia’s power sector reach net zero emissions by 2050, a decade earlier than what the Indonesian government had targeted.
They will also work together to speed up renewable energy deployment, in a bid to have renewables representing at least 34 percent of all power generation in Indonesia by 2030.
Over the next six months, the parties part of this climate finance deal will work on developing a concrete plan for investments, financing, and technical assistance.