Activists: Banks are still interested in financing dirty energy

Jakarta – Environmental activists said many banks in Indonesia are still interested in funding coal energy, even though global banks started to abandon funding coal energy because it is considered unfriendly to the environment and creates carbon emissions causing the climate crisis.

“In two decades, carbon emissions produced by the energy sector have doubled,” said Asia Market Forces Energy Finance Campaigner Binbin Mariana in the discussion “Freedom from Dirty Energy, Clean Your Bank from Coal”.

She said PT Adaro plans to build a captive coal-powered plant (PLTU) with a capacity of 1.1 Gigawatts, which will be used to supply electricity to an aluminum smelter in the Indonesian Green Industrial Zone mega project, North Kalimantan. The plant is estimated to emit 5.2 million tons of CO2 per year.

Indonesia’s commitment, as outlined in the Enhanced Nationally Determined Contribution (ENDC) in September 2022, targets reducing greenhouse gas (GHG) emissions by 31.89 percent on its own and with international support by 43.2 percent in 2030.

”Banks such as Mandiri, CIMB or UOB, which are still financing Adaro, do not take into account the financial risks and climate crisis that occur as a result of financing for coal. Even though the bank as a responsible intermediary institution should measure these risks well,” said Mariana.

The great interest of Indonesian banks in coal cannot be separated from guarantees and minimal investment risk. Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira said, the growth of bank credit to the mining sector increased by 50 percent compared to last year. This is because the banking sector still hopes for the continued increase in coal commodity prices.

“There is also an assumption that investment in the mineral and coal mining sector is in accordance with the central government’s policy roadmap. Then, there is a guarantee from the state when there is financial pressure so that investment in the mining sector is relatively small,” said Yudhistira.

He said the Financial Services Authority (OJK) plays an important role in determining banking sector policies. Until now, OJK still categorizes PLTU and some mining areas as orange or the middle zone between red and green.

The Ministry of Energy and Mineral Resources (ESDM) said that coal production in Indonesia in 2022 was realized at 687 million tons or 103 percent of the target, which was 663 million tons. Then, domestic coal utilization also increased to reach 124.8 percent or realized 206 million tons from the targeted 165.7 million tons. (Hartatik)

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