Indonesia Advised to Exercise Caution in Utilizing JETP Funding, Why?

energy transition

The Transition Zero energy research institution has sounded a note of caution for the Indonesian government, urging careful consideration when it comes to harnessing energy transition funding from advanced nations through the Just Energy Transitions Program (JETP).

Handriyanti Diah Puspitarini, an Energy Analyst at Transition Zero, emphasized the imperative for Indonesia to exercise prudence as it charts its path toward energy transition programs funded by JETP.

Yanti underscored that Indonesia would undoubtedly capture international attention should it decide to leverage JETP financing for its domestic energy transition initiatives. This is particularly noteworthy given Indonesia’s current commitment to achieving a clean energy mix of 34 percent by 2030.

“In the current climate, all eyes on the international stage are firmly fixed on Indonesia, closely monitoring how the JETP program unfolds, especially in light of the 34 percent target set for 2030. Should this ambitious target be included in the JETP funding framework and subsequently not met by 2030, the global discourse surrounding Indonesia could take a different turn,” Yanti pointed out during a discussion titled ‘Driving an Ambitious Green RUPTL Following JETP Commitments,’ which took place on Monday, August 21, 2023.

Yanti posits that if Indonesia falls short of its 34 percent clean energy goal by 2030, there’s a tangible risk that the nation may encounter difficulties securing additional funding from foreign sources.

“There exists a palpable risk for Indonesia, one where it may find itself unable to secure further financial backing from other nations to bolster the development of its power infrastructure and clean energy systems should the JETP’s ambitious objectives not be met,” she cautioned.

As previously reported, the climate-focused pact within the JETP partnership had collectively pledged an impressive $20 billion, roughly equivalent to a staggering Rp310.7 trillion (calculated based on an exchange rate of Rp15,535 per US dollar), to be drawn from both public and private coffers over the course of the next 3 to 5 years. This financial commitment is intended to bolster Indonesia’s energy transition efforts.

It’s crucial to note that the JETP financing mechanism consists of a substantial $10 billion allocated from public funding commitments and an additional $10 billion sourced from private sector financing.

This private sector funding is orchestrated and managed by the Glasgow Financial Alliance for Net Zero (GFANZ), an assemblage of notable financial institutions including Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered.

The JETP partnership, spearheaded by the United States and Japan, features participation from other G7 member countries such as Canada, the United Kingdom, France, Germany, and Italy, alongside the active engagement of Norway and Denmark.

This collective effort reflects the global commitment to steering the transition towards a cleaner and more sustainable energy future, and Indonesia finds itself at the forefront of this transformation with all eyes watching closely to see how it navigates this critical journey.