Financing for gas project development from Multilateral Development Banks (MDBs) and their financial institutions, such as the Asia Development Bank (ADB) and the World Bank Group (WBG), could prevent Indonesia from meeting its Paris Agreement commitments.

Emissions from gas use, particularly methane emissions, have a significant impact on climate breakdown. Not only does this financing lock Indonesia into fossil fuel dependence, the MDBs are also reneging on their climate commitments to align their financing flows with the Paris Agreement for a just and low-carbon energy transition.

In the context of the transformation to more renewable energy sources, Indonesia continues to promote gas as an energy transition solution. However, gas continues to contribute significantly to greenhouse gas emissions, particularly through its supply chain.

Methane emissions from fossil fuel combustion are responsible for about 30% of the global temperature rise since the industrial revolution. As such, this report evaluates and maps the engagement of financial institutions and the position of natural gas, particularly LNG, as a transition energy in Indonesia, while highlighting the environmental, economic and social impacts of its use.

Indonesia has significant gas reserves with infrastructure that continues to be developed. Large projects such as Tangguh LNG, Bontang LNG, and Abadi Masela require large investments of up to USD 34.42 billion involving state-owned/private companies, the government, and MDBs. In fact, gas infrastructure development is often accompanied by adverse impacts, such as corrupt practices and governance inefficiencies in managing project development to geopolitical disputes. Hazardous waste pollution, pipeline leaks, and conflicts with local communities demonstrate weak governance and a lack of attention to sustainability.

The government's efforts to promote gas as a solution to the energy transition not only shows ambiguity in interpreting the true meaning of clean energy transition, but also puts a big question mark over the MDBs' climate commitments. Therefore, more assertive policies are needed to accelerate the transition to renewable energy, improve governance, and stop financing fossil energy projects. Indonesia needs to strengthen its global commitment to reducing greenhouse gas emissions. This report calls for a more consistent and sustainable approach to supporting energy transformation with a focus on mitigating the negative impacts of natural gas on the environment and society.

Source: https://trendasia.org/en/indonesias-lng-investment-a-step-back-from-climate-commitment