How Indonesia is fighting against its reputation as a climate sinner

The politician, who his compatriots mostly call “Jokowi”, describes the ecological turnaround in his country as one of the cornerstones for the new economic start with which the G20 country wants to leave the economic slump as a result of the corona crisis behind.

In 2020 the gross domestic product shrank for the first time in more than two decades. “We have to work to make a green economy a reality,” said the president.

Indonesia is one of the ten largest CO2 emitters in the world

With the new focus, his government also wants to get rid of the reputation of the climate offender – the emerging country is the largest coal exporter in the world and has been criticized in recent years for the deforestation of rainforests.

Activists still see massive weaknesses in the country’s climate policy, which was recently among the ten largest CO2 emitters in the world. But the leadership in Jakarta is now emphasizing more clearly than ever that it no longer wants to rely solely on the exploitation of natural resources.

Instead, high-ranking officials in Jakarta are increasingly focusing on the long-term chances of a sustainable restructuring of the economy. An analysis by the Ministry for National Development Planning assumes that more ambitious climate targets would even lead to higher growth rates than sticking to the status quo.

The authors assume that without intervention, environmental damage and health problems such as air pollution would lead to noticeably lower productivity.

Indonesia is already one of the countries in the world most severely affected by climate change. In 2019, a severe drought led to widespread forest fires. In 2020, the island nation experienced massive floods from the heaviest rainfall in decades.

Capital Jakarta could sink into the sea

The Asian Development Bank (ADB) estimates that 110 million Indonesians are directly affected by the climate crisis. The poor sections of the urban population in particular suffered from the consequences. In July, US President Joe Biden warned in a speech about global climate impacts that Indonesia’s capital Jakarta, which is just above the sea surface, could be under water within the next ten years.

Because of the regular flooding in the metropolis, Jokowi is already planning to relocate the administrative center – a 33 billion dollar project. The plans to reduce CO2 emissions are also associated with massive expenditures.

Finance Minister Sri Mulyani Indrawati estimates that investments of US $ 365 billion will be necessary to cut carbon dioxide emissions by 29 percent as planned by 2030 – compared to what the country would achieve without climate initiatives.

But she also believes that even more ambitious goals are possible: A 41 percent cut would be possible if the country could raise $ 479 billion in investments. A fifth should come from the state budget. For the rest, the government wants to attract private investors – especially from abroad.

This means that the country is facing a decisive course of action: If the government misses the financing targets, its climate promises threaten to fizzle out. But if it succeeds in presenting itself to international donors as a global hot spot where climate change can be effectively combated, it could benefit from a massive economic stimulus.

Big run on green government bonds

According to the economist Victoria Kwakwa, who is responsible for East Asia at the World Bank, the chances are good. Indonesia has the potential to become one of the world’s leading private climate investment destinations, she said.

In order to tap into the rapidly growing market for sustainable investments, the country’s government is issuing green government bonds that are used to finance climate projects. There is great interest: the papers, which have already raised more than three billion dollars, have so far been regularly oversubscribed. A 30-year green bond last raised three-quarters of a billion dollars in June.

The capital is necessary, among other things, to cope with Indonesia’s energy transition. By 2025, the country, which is currently relying primarily on coal-fired power plants, wants to increase the share of renewable energies in electricity generation to 23 percent – a doubling compared to the end of last year.

The goal could be achieved by expanding solar power to a total output of 18 gigawatts, according to a study by the Indonesian think tank IESR. According to the analysis, this would cost around $ 14 billion.

The first major projects are already underway. In August, the state energy supplier Perusahaan Listrik Negara (PLN) announced the start of construction work on a 145 megawatt solar power plant in Jakarta’s neighboring province of West Java, which is to be operated jointly with the renewable energy group Masdar from the United Arab Emirates.

Export ban on raw materials in Indonesia

An investor from Singapore is planning a 2.2 gigawatt solar project on the Indonesian island of Batam for around two billion US dollars. President Jokowi also wants to use the expansion of renewable energies to advance his most important economic policy project: He is no longer just exporting Indonesia’s raw materials, but also processing them locally and thus creating additional jobs.

Last year, he therefore issued an export ban on nickel ore, which is of great importance for the production of batteries for electric cars, among other things. Since then, the raw material has only been allowed to be exported if it has previously been processed in domestic smelting plants.

However, especially in the field of electromobility, customers are increasingly demanding clean supply chains. “Without sustainability standards, Indonesia will be punished by the markets,” says Indonesian economist Andry Satrio Nugroho with conviction.

On Kalimantan, Indonesia wants to prove that it can meet the requirements. In the planned green industrial park, in addition to an eleven gigawatt hydropower plant, a melting plant fired by renewable energies is to be built in the coming months. Corporations such as the Australian mining company FMG are planning to invest billions according to government information.

At the same time, Indonesia is working on phasing out coal: the government announced in May that it would no longer approve any new coal-fired power plants. PLN submitted a schedule for the shutdown of the power plants. Environmentalists criticize him as too unambitious.

Climate researcher: Indonesia’s climate policy is inadequate

The last coal-fired power plant is not expected to go offline for more than three decades. In addition, dozens of new coal-fired power plants that are currently under construction are allowed to be completed. The Climate Action Tracker, operated by climate researchers, rates Indonesia’s climate policy as inadequate for this reason, among other things.

Frank Malerius, Indonesia expert at the German foreign trade agency GTAI, sees the country in a difficult position: Low electricity and energy prices are a prerequisite for lifting millions of people out of poverty.

The fear of price increases is great with a view to the expansion of renewable energies. But the pressure for higher climate ambitions is no longer only coming from activists. Indonesia’s judiciary also intervenes.

A court in Jakarta ruled in mid-September that the government had violated the capital’s residents’ right to clean air – the neighboring coal-fired power plants are the main reason for the high levels of particulate matter. The judges ordered the government to take countermeasures immediately.

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