Japan Ready to Fund IDR 207 Trillion Annually to Support Indonesia’s Energy Transition

energy transition

Indonesia’s strides towards an energy transition are showing promising signs of success, bolstered by a collaborative endeavor with Japan. The two nations have jointly established a Task Force dedicated to implementing energy transition initiatives and vital infrastructure projects within Indonesia. This cooperative effort has been further fueled by Japan’s commitment to provide substantial funding, amounting to a significant IDR 207 trillion annually.

Airlangga Hartarto, the Coordinating Minister for Economic Affairs, has shared insights into the multifaceted discussions taking place between the Indonesian and Japanese governments.

Among the noteworthy topics under consideration is the development of a hydropower plant in Kayan, North Kalimantan, a visionary project intended to replace coal-fired power plants on Java Island.

Additionally, the agenda encompasses ventures into cutting-edge technology domains, such as carbon capture, efficient geothermal power generation techniques, carbon utilization and storage (CCUS), the blue economy paradigm, and the revitalization of peatland areas through the integration of advanced Japanese technologies.

Airlangga has underscored the pivotal role played by Japan in this collaborative effort, stating, “Through JBIC and METI, Japan will provide funding for cooperation projects within this Task Force through the Green Innovation Fund, amounting to 2 trillion yen per year, or approximately IDR 207 trillion per year.”

With unwavering optimism, Airlangga believes that the infusion of funding from the Japan Bank of International Cooperation (JBIC) and METI will act as a catalyst, significantly expediting Indonesia’s journey towards energy transition. He aptly remarked, “This funding can help accelerate the energy transition in Indonesia,” emphasizing the transformative potential of this partnership.

Furthermore, the engagement between the Indonesian and Japanese governments extends to exploring the Joint Crediting Mechanism (JCM) and other prospective initiatives aligned with the Asia Zero Emission Community (AZEC) framework.

Airlangga has highlighted the JCM scheme as a strategic avenue for collaboration between Indonesia and Japan, particularly in the sphere of carbon mitigation. The JCM’s pivotal role comes to the fore in shaping national policies related to carbon pricing, thus cementing its significance in the global drive towards sustainability.

Moreover, the implementation of JCM carries the promise of fostering greater private sector involvement in climate action. Indonesia’s ambitious plans include the launch of a carbon exchange, poised to facilitate the trading of diverse carbon credits and solidify its position as a proactive contributor to global environmental initiatives.

Under Japan’s supportive aegis, Indonesia stands to implement as many as 54 JCM projects and embark on 150 feasibility studies dedicated to carbon emission reduction programs. This underscores the far-reaching impact of this collaboration on Indonesia’s sustainability landscape.

In a forward-looking move, the Japanese government has also disclosed plans for a high-level AZEC meeting, a significant event coinciding with the commemoration of the 50th anniversary of ASEAN-Japan relations. The meeting is slated to take place in Tokyo in December 2023, and Japan has sought Indonesia’s invaluable support in making this event a resounding success.

Reflecting upon past developments, the establishment of the Task Force in July, spearheaded by Minister Airlangga and Special Advisor to the Japanese Cabinet, Tadashi Maeda, remains pivotal. The Task Force, comprising a diverse ensemble including a steering committee composed of high-level policymakers, expert groups guided by senior officials from Indonesia’s Coordinating Ministry for Economic Affairs, Japan’s Ministry of Economy, Trade, and Industry, as well as the Japan Bank of International Cooperation (JBIC), has solidified its mandate.

This holistic approach, encompassing relevant ministry officials and corporate entities, underscores the depth and breadth of this collaborative effort aimed at propelling Indonesia’s energy transition and infrastructure development, with a primary focus on the Kalimantan region.