Money, politics put world's biggest climate deal at risk

Published: 12 September 2023
When Indonesia agreed last year to clean up its energy system with an estimated US$20 billion of help from a coalition of wealthy countries and large financial institutions, world leaders hailed the deal as "extraordinary," "realistic," and "historically large."

Almost 10 months later, as Southeast Asian leaders gather in Jakarta, the hosts have little to show off. A much-anticipated investment blueprint has been postponed.

Parties have yet to agree on governance, baseline data or the funding required to curb greenhouse emissions and wean the world's largest coal exporter off fossil fuels. The most ambitious of the Just Energy Transition Partnerships — the international finance projects designed to cut climate-warming emissions — is faltering.

One especially thorny issue is that Indonesia's coal-dependency is greater and more complex than all sides initially acknowledged. A 362-page draft document reviewed by Bloomberg spotlights the rapid growth of a fleet of dedicated, "captive" coal-fired plants powering industrial expansion but not connected to the grid. Incomplete data, especially on new and planned facilities, means even the exact scale of the problem is unclear.

"The process started top-down," said Edo Mahendra, chair of the secretariat tasked with turning the JETP, as the climate package is known, into reality. "Once we do the bottom up, all the devils that lurk in the details come out."

How these issues are resolved will set a precedent for any future deals, determining to what extent the agreement can create "valuable lessons for the global community (that) can be replicated in other countries to help meet our shared climate goals through concrete collaborative actions," as Indonesian president Joko Widodo put it in November, when he announced the deal in Bali alongside US President Joe Biden.

Indonesia is the biggest emitter in Southeast Asia by a long shot, thanks to vast coal reserves and a power-station construction boom over the past decade or so. But its regional neighbours and other emerging economies also depend on coal-fired plants that will need to be retired to prevent the worst consequences of global warming. Vietnam is advancing with its own JETP. Senegal struck a deal in June.

In the end, the outcome in Indonesia will also reflect on the credibility of countries that enriched themselves through coal and other fossil fuels for centuries and now cite the need for global emissions cuts. It will test the claims of big private financial institutions that the capital markets can create solutions to the world's biggest problems.

Bloomberg reporters spoke with more than a dozen people with knowledge of the negotiations, most of whom asked to remain anonymous because the discussions are private and ongoing. They described deep gaps between all sides over even the most basic terms and the scope of the problem they have to fix.

The initial promise of peaking Indonesia's power sector emissions by 2030 at no more than 290 million tons of carbon dioxide, about 20 percent below a baseline level for the year, looks out of the question.  .
- Bloomberg
Tags: Money,


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