Progress on Indonesia’s delayed $20 billion climate finance deal remains possible this year if governance is improved and if a more realistic approach is adopted, the country’s deputy foreign minister said.
(Bloomberg) — Progress on Indonesia’s delayed $20 billion climate finance deal remains possible this year if governance is improved and if a more realistic approach is adopted, the country’s deputy foreign minister said.
Details of an investment plan for the landmark Just Energy Transition Partnership, signed in Bali with US President Joe Biden last year, had been expected to be set out this week. Instead, the formal launch of the process was postponed Wednesday until later in 2023.
“Part of the reason why people maybe have some dissatisfaction about the progress is because expectations were very high,” said Pahala Mansury, a former banker and ex-deputy minister for state-owned industries who was appointed as deputy minister of foreign affairs last month to bolster Indonesia’s economic diplomacy. “I think this is probably the more difficult part.”
The JETP, a high-profile combination of business nous and green credentials that seeks to pull private finance into much-needed climate solutions, was intended as a key plank in President Joko Widodo’s legacy before he steps down next year.
During speeches to the nation Wednesday, Jokowi didn’t expand on the deal or its progress.
“There’s a lot of analysis put toward this $20 billion,” Mansury said in an interview late Wednesday, during a visit to Singapore. “I think the focus should be how are we going to be able to, this year or next year, try to achieve a couple of billion.”
A focus on governance, establishing how Indonesia interacts with partner nations, on the shape of the financing on offer and on smaller wins would permit more long-term progress, he said.
Convincing major financial institutions to put significant funds into the core of the JETP — the early retirement of coal-fired power that dominates the nation’s energy mix and is crucial to reduce emissions — requires promoting “carbon-avoidance” finance to get around exclusion policies that currently block investments in fossil fuels and particularly coal, Mansury said.
“Additional renewable power plant doesn’t allow you to reduce emissions,” said Mansury, who in his previous role with state-owned enterprises had oversight of government-controlled utility Perusahaan Listrik Negara. “We need to be able to remove coal-fired power plants, and to do so quicker than what is actually expected.”
Jokowi’s address on Wednesday set more modest growth expectations for the country. But both he and Mansury, echoing the Indonesian leader’s comments, emphasized the importance of Jakarta’s commodity “downstreaming” push, which the government hopes will leverage natural-resources wealth to press forward into processing and manufacturing, creating jobs and propelling the country out of middle-income status.
Mansury said Indonesia would parlay its success in nickel processing into becoming a crucial link in the global supply chain, bringing battery and eventually electric-vehicle investments into Indonesia. Talks are underway over the Washington-led Indo-Pacific Economic Framework for Prosperity, or IPEF, he added.
“We hope the concrete benefit from that will be to become part of the global supply chain of the US,” Mansury said.
A limiting factor, however, remains the use of coal to power Indonesia’s nickel processing, and management of waste.
The government is aware of the need to improve environmental, social and governance standards, and can achieve improvements, Mansury said. Beyond nickel, the aim is to push up the value chain in bauxite — a raw material used in production of aluminum, also necessary in the green economy — and there’s also potential in silica, for use in solar panels, he said.
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