Experts call on developing counties to increase contribution into energy transition efforts as developing countries can’t rely on pubic funding alone.
Developed countries need to participate in overcoming the energy transition financing shortfall, and understand the approaches offered by developing countries, including Indonesia. This assessment was shared at a seminar entitled “Sustainable Financing for the Energy Transition”, organized by the Environment Institute in Jakarta, Friday (6/10/23).
In Indonesia, according to Article 12 paragraph 4, Law 28 of 2022 concerning the 2023 State Budget (APBN), the Special Allocation Fund (DAK) for physical renewable energy infrastructure is pegged at Rp88 billion.
This is a far cry from the budget that the finance ministry estimates Indonesia will need — IDR4,000 trillion by 2023.
Joko Tri Haryanto, executive director of the Environmental Fund Management Agency (BPDLH) admits that the energy transition target cannot be achieved if Indonesia relies on public funding alone. This is because the government still has to allocate funding to other sectors.
But Indonesia is hardly alone. Other developing economies are in the same boat. Thus Haryanto believes support from developed countries in the energy transition in Indonesia must prioritize just and inclusive aspects.
“Climate crisis (fund) is part of global public goods, it should not only be borne by developing countries,” said Haryanto.
He underlined that the emphasis on the energy transition narrative is influenced by a Western perspective. Unlike developing countries, developed countries are no longer burdened with human resource development programs and poverty issues.
According to the World Meteorological Organization, we will reach 1.5 degrees in 5 years. There is no other choice. We must accelerate efforts to reduce greenhouse gas emissions.
Mahawan Karuniasa, CEO, Enviromental Institute
This is why, Haryanto said, in a number of international agreements, including the Just Energy Transition Partnership (JETP), the Indonesian government dared to offer an early retirement scheme for coal power plants. While asking developed countries, and private sector involved, to understand our (phase-out) approach.
“Shutting down coal power plants takes time, not immediately. There are also many technical characteristics involved. The trick is to look at all concessions. For example, there is a 30-year concession. We can offer to retire quickly. Cut it by 10 years, but there is compensation. The last is by 2040,” added Haryanto, adding that the gradual phase-out of coal power plants is crucial for development.
Ratna Juwita Sari, Member of Commission VII of the House of Representatives — which oversees energy, research and innovation, and industry — believes that the energy transition program is riddled with uncertainty. Apart from the lack of funding in developing countries, developed countries are indecisive in overcoming climate problems.
Despite their commitment to curb emissions, the development of various industries by developed countries outside their region, she said, has the potential to increase carbon emissions in countries like Indonesia.
“We are like being false hopes by big countries. Meanwhile, countries like the US, Japan, China, and so on, are competing to clean their air,” she explained.
At the same time, Ratna said, developing countries also need financial support to finance development, optimize energy transition programs, and achieve climate targets in their respective countries.
Accelerate climate action
According to the latest findings from the World Meteorological Organization, efforts to reduce greenhouse gas emissions must be accelerated. By September 2023, the Earth’s temperature will have reached 1.75 degrees Celsius compared to pre-industrial times.
“According to the World Meteorological Organization, we will reach 1.5 degrees in 5 years. There is no other choice. We must accelerate efforts to reduce greenhouse gas emissions,” said Mahawan Karuniasa, CEO of the Environmental Institute.
Based on the UN executive summary titled “Too Little, Too Slow: Climate Adaptation Failure Puts the world at Risk”, global emissions, which should be capped at 33 GtCO2e, are estimated to reach 53 GtCO2e by 2030, under the current policy scenario.
“The excess is 20 GtCO2e. That is the problem. There must be a balance between us and developed countries. It must be divided into how much for wealthy countries and how much for developing countries. It must be fair,” Mahawan added.
In 2023, Mahawan continued, the UN conducted the first global stocktake to calculate emission reduction efforts around the world. It found that global emission reduction efforts were not aligned with the Paris Agreement.
Climate crisis (fund) is part of global public goods, it should not only be borne by developing countries.
Joko Tri Haryanto, Executive Director, Environmental Fund Management Agency (BPDLH)
Mahawan emphasized that notes from the stocktake indicate that the net zero emissions (NZE) agenda will be difficult to achieve if developed countries’ contribution is still minimal and not based on equitable principles. “It (1.5 degrees) will be broken because global efforts are still lacking,” he explained.
Mahawan said that equitable cooperation in the energy transition program must be carried out rationally and with mutual understanding. This must take into account the stages set in each country, especially developing countries. This, he believes is in accordance with the principle of common but differentiated responsibility.
“You can’t shut down (coal power plants) too fast. Can’t take too long either, because our costs will increase. So we need a middle ground,” said Mahawan.
Mahawan also believes that financial readiness can help advanced countries accelerate their energy transition agenda, by 2030 or 2040. Although developing countries can also make similar efforts, it is unlikely to exceed or match developed countries’ targets.