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Wealthy nations offer Indonesia $20 billion to curb coal

New York Times - November 15, 2022

Brad Plumer, Sharm El Sheikh, Egypt – Indonesia, one of the world's largest consumers of coal, pledged to sharply reduce its reliance on the fossil fuel and speed up its transition to renewable power as part of a $20 billion climate finance deal announced Tuesday with the United States, Japan and other developed countries.

The deal marked the most ambitious effort yet by wealthy countries to persuade developing economies to abandon coal, the most polluting of all fossil fuels, in order to keep global warming in check. It was unveiled at the Group of 20 summit in Bali following more than a year of negotiations between leaders. The news got a flurry of attention in Egypt, where diplomats from nearly 200 countries have gathered since Nov. 6 for a two-week United Nations climate summit.

The plan roughly follows the contours of an agreement reached last year in which the United States and European countries pledged $8.5 billion in grants and loans to South Africa in exchange for that country's commitment to retire coal plants, shift to renewable energy and retrain workers. Similar arrangements, known as Just Energy Transition Partnerships, are also being discussed with Vietnam, Senegal and India.

As part of the deal, Indonesia has pledged to cap carbon dioxide emissions from its power sector at 290 million tons by 2030, which would require reaching peak emissions seven years earlier than expected and curtailing its use of coal.

Indonesia will also aim to generate 34 percent of its electricity from renewable sources such as wind and solar power by 2030, up from about 11 percent today.

"At every step, Indonesia has communicated the importance of building a clean economy that works for the people of Indonesia and attracts investment," said John Kerry, President Biden's climate envoy, in a statement. "Together, we have a shared vision for that goal and are going to be working hand-in-glove to work tirelessly toward it."

Indonesia currently generates 60 percent of its electricity from coal and was the world's ninth-biggest emitter of planet-warming carbon dioxide last year. The state-run electric utility currently has plans to build more than 13 gigawatts of new coal capacity to support the nation's fast-growing economy and provide electricity to the millions of Indonesians who don't have reliable access.

Still, there are major questions about how the deal will work in practice. Andri Prasiteyo, a researcher at Trend Asia, an Indonesian foundation, said he worried that much of the deal could consist of loans that put Indonesia further in debt, rather than grants and financing with more favorable terms. He also said that Indonesia would need major assistance in revamping policies that currently make it hard to add more renewable energy to the grid.

Over the next three to six months, Indonesia, the United States and other partners aim to finalize the details of the plan, including the structure of financing as well as what sorts of policy changes Indonesia will need to make. That could include permitting reform for renewable projects as well as new procurement policies.

"This won't be easy at all, and everything is going to depend on the details," said Mr. Prasiteyo.

The fight over money has become a major point of tension at the climate talks in Egypt, with developing countries arguing that they will likely need hundreds of billions of dollars per year to help transition to cleaner energy, adapt to the impacts of climate change and cope with damages from extreme weather. To date, wealthy nations have fallen far short of the $100 billion per year in climate finance they had previously pledged by 2020.

If the coal deals in South Africa and Indonesia are successful, they could be a model for the rest of the world, said Camilla Fenning, an expert on fossil fuel transitions at E3G, a London-based climate change think tank. While it would probably be too time-consuming for wealthy countries like the United States and Japan to negotiate partnerships with each country in need of support for an energy transition, these deals could provide a template for larger-scale programs at multilateral development banks and elsewhere, she said.

"The big question is whether money is going to flow swiftly and properly into these partnerships," said Ms. Fenning. "If it doesn't, that's really going to degrade confidence in these deals, given how much attention they've received so far."

Source: https://www.nytimes.com/2022/11/15/climate/indonesia-coal-agreement.html