Jakarta – The Institute for Essential Services Reform (IESR) and the New Climate Institute (NCI) say adequate financing is needed to support a sustainable and equitable energy transition process in Indonesia.
The report titled “Identification of Financing Needs for an Equitable Transformation of Indonesia’s Electricity Sector” discusses the financing instruments needed to end the operation of coal-fired power plants, build renewable energy, and ensure justice for affected workers.
According to IESR and NCI’s analysis, financing of USD 2.4 billion is needed to support affected workers in the coal sector. The funding is for support packages for affected workers, in the form of compensation and training.
“Building community resilience at the local level is an important aspect of the energy transition. Inclusive economic transformation is needed to address social inequality, improve health, and development of infrastructure and human resources (HR) in surrounding communities,” said Wira A Swadana, IESR Green Economy Program Manager, in a written statement.
IESR Sustainable Financing Coordinator Farah Vianda added that the government needs to prioritise the issue of equitable transition and increase capacity in early planning and mobilisation of funding and institutional capacity to prepare new jobs and empower affected workers in the coal sector.
“The government needs to form a special team to make the issue of equitable transition a priority. In addition, it is necessary to increase government capacity in planning, policy making, as well as governance systems and environmental protection,” she said.
In addition to the social benefits for affected workers, ending the operation of coal-fired power plants also has a positive impact on the environment and economy. It also avoids health costs. Based on a scenario that is in line with the JETP target, ending coal power plant operations will be able to secure USD 150 billion by 2050.
According to Climate Policy Analyst from the New Climate Institute, Reena Skribbe, reducing air pollution will provide significant economic benefits. Retiring power plants would reduce pollution levels by 12 percent under the JETP target scenario and 18 percent under the Paris Agreement-compliant scenario, relative to Indonesia’s current annual GDP. Even today, there are still 48 GW of coal-fired power plants in operation and another 20 GW in the pipeline.
“With a reduction in coal combustion, the avoided cost of reducing air pollution is many times that of Just Energy Transition Partnership (JETP) funding,” Reena said.
Meanwhile, under a scenario in line with the Paris Agreement or a 1.5 degree Celsius temperature limit, the avoided health costs of phasing out coal-fired power plants would be around USD 230 billion by mid-century.
Overall, adequate financing and targeted handling are needed to ensure that the energy transition to sustainability not only runs smoothly technically, but also takes into account the social and economic welfare of the community. (Hartatik)
