Indonesia has signed a deal with the G7 group of industrialised countries on a $20 billion financing package to help it speed up its transition from fossil fuels to renewable energy. The Just Energy Transition Partnership (JETP) will see the G7 plus Denmark and Norway deliver the funding to Indonesia over the next three to five years.
The funding will go toward developing renewable energy and phasing out fossil fuels, including shutting down coal-fired power plants, which currently account for the majority of Indonesia’s energy mix.
Indonesia was the world’s fifth-largest greenhouse gas emitter in 2019, behind China, the USA, India, and the EU as a whole. Coal-fired power generation currently produces 61 per cent of the country’s electricity.
The $20 billion fund will be split evenly between public and private financing in the forms of grants, concessional loans, market-rate loans, guarantees, and private investments.
For the private financing, seven global financial institutions – Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered – have agreed to participate in the partnership.
The signatories of the deal have agreed on a number of targets. Firstly, Indonesia will aim to cap its greenhouse gas emissions from the power sector at 290 million tonnes by 2030 rather than its initial goal of 2037. This will be achieved by retiring coal-fired power plants, starting with 5.2 GW of existing coal power in the initial phase. The government will also freeze new coal-fired power plant projects.
Another target is for Indonesia to develop renewables to account for at least 34 per cent of all power generation by 2030, which would double the total renewables deployment over the course of this decade compared to current plans.