(Bloomberg) — A $20 billion international effort to accelerate Indonesia’s shift away from coal hinges on the availability of low-cost funding — and Jakarta fears there simply isn’t enough.
Indonesian President Joko Widodo and his US counterpart Joe Biden made headlines last year with their agreement to kick-start the effort to clean up Southeast Asia’s largest economy, a deal known as the Just Energy Transition Partnership and considered a potential model for o the cash-poor , coal-dependent countries.
An initial investment plan detailing how Indonesia will green its power supply and cut greenhouse emissions is due mid-August. As of now, though, government officials say far more money needs to come in at terms the country can live with.
“We don’t want our economy to be affected by the JETP,” said Luhut Binsar Panjaitan, Coordinating Minister for Maritime Affairs & Investment and the Jakarta government’s point man on the deal.
“There is no issue on our side. The point is, if we get the money with good terms, we proceed. If not, we will go ahead with our own plans.”
Panjaitan argues partners in the deal must offer sufficient funding at low enough rates, so that the green push does not add to a debt burden that currently stands at just under 43% of its gross domestic product, the fourth-lowest among G-20 nations .
“Show your money,” Panjaitan said in an interview in his Jakarta office.
Under the deal agreed last November, funds to back the JETP would come from a mix of government and private sources, with concessional loans, grants and more crowding in private finance. The overall cost, in theory, should be manageable as a result.
But Indonesian officials have expressed concern about just how much would be made up of grants, and where cheaper funding would be allocated. So far, Panjaitan said, he is underwhelmed.
“Just to remind them we have two and a half months to go. This is your credibility. We don’t lose anything if the deal doesn’t materialize.”
The JETP plan has broad ambitions, ranging from improving the grid to encouraging renewable energy investment and providing a fair transition away from fossil fuels for workers and communities that depend on them. At the heart, though, is a concerted effort to speed up the move away from coal in a country with ample resources — by buying out power plants and reconstructing debt so they can be closed early.
The $20 billion promise is only one step. According to BloombergNEF, transition in Indonesia would require $2 trillion of investment into its energy system through 2050. Reaching net zero by 2050 could cost $3.5 trillion.