Jakarta – The United States’ withdrawal from the Paris Agreement on climate change poses a significant threat to the viability of energy transition financing in Indonesia. One of the most affected is the Just Energy Transition Partnership (JETP) initiative, an international financing cooperation designed to support clean energy transition in developing countries, including Indonesia.
“The United States’ move to leave the Paris Agreement sends a negative signal for the future of JETP. The US is one of the main contributors to this funding. Without their involvement, the continuity of JETP becomes very uncertain,” said Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (CELIOS), in his statement on Wednesday, January 22.
The JETP, which consists of a group of developed countries such as Japan, Canada, Germany, and the European Union, aims to support funding for energy transition projects in Indonesia. However, with the withdrawal of the US, a co-leader of the initiative, the allocation of funds for renewable energy projects in Indonesia could suffer.
“If the US does pull out completely, there is a possibility that the JETP will be disbanded or not run smoothly. This would be a major blow to Indonesia’s energy transition, as funding from the US has contributed significantly to renewable energy projects,” Bhima added.
JETP Indonesia has been designed to support concrete steps to stop the operation of coal-fired power plants and accelerate the development of renewable energy plants, such as the solar power plant at Cirata Reservoir.
Bhima advised the Indonesian government to immediately look for alternative funding partners to reduce dependence on the United States. “Middle Eastern countries could be a potential option. They have shown commitment to renewable energy development, such as in the Cirata solar power plant project, and have large funding capacity,” he said.
Global impact
Mohammad Faisal, Executive Director of the Center of Reform on Economics (CORE) Indonesia, stated that the US decision impacts Indonesia and global efforts to reduce greenhouse gas emissions.
“The capacity of developing countries like Indonesia to meet energy transition targets is highly dependent on the support of developed countries. With the US withdrawal, the global target of reducing greenhouse gas emissions will be more difficult to achieve,” Faisal explained.
Faisal added that the US move could set a bad precedent. “If a country as big as the US is not committed to green energy, developing countries may feel no need to comply with the Paris Agreement, given their limited funds and technology,” he said.
The US withdrawal from the Paris Agreement also pressures Indonesia to secure other funding sources from countries and multilateral institutions immediately. “Indonesia must build new cooperation that can sustain energy transition financing. Without that, strategic projects designed to support a clean energy mix could be stalled,” Bhima said.
The Paris Agreement is an international deal to keep global temperature rise below 1.5 degrees Celsius above pre-industrial levels. Indonesia has committed to reducing emissions by 31.89 per cent independently and 43.20 per cent with international assistance by 2030.
Given the current situation, Bhima urges the government to rely on the JETP and explore alternative funding sources from non-traditional partners. “This step is crucial to maintain the momentum of the energy transition in Indonesia and ensure the sustainability of clean energy projects,” he said. (Hartatik)
