Energy transition financing must be comprehensive and equitable

Jakarta – Indonesia needs to prepare a comprehensive energy transition financing package. Moreover, the economies of some provinces in Indonesia still depend on coal mining activities, according to the Institute for Essential Services Reform (IESR).

“We need to pay attention to provinces such as East Kalimantan, which produces 40 per cent of Indonesia’s coal, and South Sumatra, which produces 15 per cent. We need to build local capacity to generate revenue from sectors other than coal,” said IESR Executive Director Fabby Tumiwa in a panel discussion titled ASEAN Sustainable Energy Finance, as reported by an IESR release.

According to Tumiwa, energy as a driver of economic growth has been a key factor in economic activity since the beginning of fossil mineral mining. The shift to cleaner energy systems has the consequence of decreasing coal demand.

This change poses a serious threat to regions whose economies rely heavily on coal. Funding should therefore cover the technical costs of retiring the coal fleet, developing renewable energy and upgrading the grid. It should also prepare communities, especially those in the coal mining industry, to adapt to the new labour market.

This includes retraining to align their skills with market needs. “The central government should provide special assistance for regions heavily dependent on the coal economy,” he added.

At the G7 Summit in Germany in June 2022, the group of seven developed countries expressed their support for expanding the rollout of Just Energy Transition Partnership (JETP) funding. Indonesia is the second country after South Africa to launch the JETP initiative during the G20 side event in Bali in November 2022.

The JETP in Indonesia will mobilise USD 20 billion over the next 3-5 years consisting of USD 10 billion of public finance to be mobilised by members of the International Partners Group (IPG) and USD 10 billion of private finance to be mobilised and facilitated by the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group.

Saliem Fakir, Executive Director of the African Climate Foundation (ACF), said changes in the structure of a country’s energy system will affect the economy as a whole. As such, the JETP cannot be measured solely by emission reductions.

“The energy transition must also be equitable and therefore it is critical to explore and share lessons learnt, challenges and opportunities for innovation at all phases of a country’s JETP journey,” he said. (Hartatik)

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