Under the Paris Agreement to tackle global warming, Indonesia – one of the world’s biggest carbon polluters – has committed to cut its emissions by about 32% by 2030 versus business-as-usual levels, and hopes to reach net-zero by 2060.

But nearly 85% of electricity in the Southeast Asian archipelago is generated from fossil fuels, the bulk of it coming from coal-fired plants, energy experts say.

Under the new finance deal – split about equally between public and private sources of money – Indonesia set a goal to reach net-zero emissions in its power sector by 2050, a decade before its current target.

Alessandro Gazzini, a Jakarta-based partner at management consultancy Kearney, said with the added incentives and greater international scrutiny, Indonesia would hopefully be able to make the structural reforms needed to accelerate its exit from coal power and boost the share of renewables in the sector.

They include creating an independent power grid manager and an independent regulator for the power market, he said.


As the world’s largest exporter of thermal coal, Indonesia aims to increase the proportion of renewables in its energy mix to 23% by 2025, but has only reached about 12% so far, most of it from hydropower.

More details on the newly agreed green energy deal are expected in the coming months, said Pratama at Traction Energy Asia.

It should improve fiscal and financial incentives for moving to clean energy and support policies to drive the growth of renewables such as solar, wind and geothermal – including switching subsidies from fossil fuel and industrial agriculture to encourage clean energy choices, he said.

Indonesia also needs to develop robust governance systems for disbursing funds and monitoring and reporting carbon emissions, to counter corruption and minimise political influence from the fossil fuel industry, Pratama said.

The JETP should avoid supporting biofuels, biomass, carbon capture and storage, hydrogen and nuclear – energy options “that risk deforestation, are very expensive and unproven or … very dangerous and impractical”, he said.

Indonesia – home to the world’s third-largest tropical forest area but also its biggest producer of palm oil – has steadily increased the share in its biodiesel mandate derived from palm oil, a major driver of deforestation, since 2018 to boost demand.

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