Jakarta—According to Bhima Yudhistira, the Executive Director of the Center for Economic and Law Studies (CELIOS), Indonesia needs to shift its focus to the New Collective Quantified Goal (NCQG) mechanism to obtain more flexible and less fiscally burdensome financing.
“NCQG provides an opportunity to accelerate the early retirement of steam power plants (PLTU) without relying entirely on debt. This is important to maintain a healthy fiscal space,” Bhima said in an official statement on Monday, November 25.
The results of the COP 29 Climate Change Summit in Baku, Azerbaijan, decided on a new climate financing target of USD 300 billion per year through the NCQG mechanism. This scheme is expected to be a better alternative for developing countries than the Just Energy Transition Partnership (JETP) scheme, which is considered too burdensome for the budget.
Bhima added that grant-based funding or debt relief mechanisms can accelerate the energy transition. “For example, NCQG can be utilised to develop renewable energy projects such as solar power, micro-hydro, wind, and the development of energy storage technology,” he explained.
NCQG implementation challenges
Although NCQG financing opens up great opportunities, the scheme is insufficient. Based on the NCQG draft calculations, developing countries must meet the emission reduction targets in the Nationally Determined Contributions (NDC) to reach USD 5-6.8 trillion by 2030. This shows that the agreed funding of USD 300 billion annually is far from enough.
Bhima highlighted the importance of ensuring transparency in the NCQG funding mechanism. “We must ensure that this new funding is truly a new realisation, not a reclaiming of pre-existing programs,” said Bhima.
CERAH Executive Director Agung Budiono conveyed the same message. He said the portion between grants and debt in NCQG funding must be closely monitored. Grants should dominate NCQG funding to help developing countries. If the proportion of debt is too large, it will only worsen the financial burden of countries like Indonesia,” he said.
Agung added that climate finance should be tangible proof of developed countries’ commitment to helping countries affected by the climate crisis. “Without real support, a just and sustainable energy transition will be difficult to achieve,” he added.
The JETP scheme, which was previously a reference for energy transition financing, is considered less flexible because it mainly consists of loans. With the NCQG mechanism, Indonesia can access more varied funding sources and support green development without increasing the debt burden.
“This is a moment for Indonesia to review its climate finance strategy and shift to a more profitable approach. With NCQG’s support, Indonesia can lead in creating real and sustainable climate solutions,” Bhima concluded. (Hartatik)
