Jakarta. A coalition of wealthy nations, comprising the US and Japan, among others, on Tuesday launched a $20 billion climate finance package for Indonesia at the sidelines of the G20 Summit in Bali.

Under the Just Energy Transition Partnership (JETP), the International Partners Group (IPG) —co-led by the US and Japan— will help Indonesia end its reliance on coal. Fellow IPG members the UK, Germany, France, the European Union, Canada, Italy, Norway, and Denmark are also chipping in for Indonesia’s power sector transition.

“Together, we are mobilizing $20 billion to support Indonesia’s efforts to reduce emissions, expand renewable energy, and support workers who are most affected by the transition away from coal, and that can be difficult,” US President Joe Biden said at the Partnership for Global Infrastructure and Investment (PGII) event.

“That $20 billion from partner governments and some of the world’s leading financial institutions will accelerate an energy transition that has a global impact,” he added. 

Over the next three to five years, they will mobilize an initial $20 billion in public and private financing. 

The funding encompasses a mix of grants, concessional loans, market-rate loans, guarantees, and private investments. The IPG members will put in $10 billion of public money, with the other half coming from the Glasgow Financial Alliance for Net Zero (GFANZ), a global coalition of financial institutions, which include Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered. 

The partnership will also leverage the expertise, resources, and operations of the multilateral development banks.

As part of the JETP, the UK will give Indonesia a $1 billion World Bank guarantee. This would enable the Southeast Asian country to extend its borrowing on affordable World Bank terms by up to $1 billion.

The EU member states which are part of the IPG will mobilize $2.5 billion. From this amount, the EU's European Investment Bank (EIB) will provide €1 billion to support eligible projects to decarbonize Indonesia's power system through renewable energy development. The EU will also earmark 25 million in grants and technical assistance.

The JETP is expected to have Indonesia’s power sector emissions peak at no more than 290 MT of CO2 by 2030, down from the 357 MT baseline value. This would shift the sector’s emission peaking date forward by seven years. The partnership also aims to have Indonesia’s power sector reach net zero emissions by 2050, a decade earlier than what the Indonesian government had targeted.

They will also work together to speed up renewable energy deployment, in a bid to have renewables representing at least 34 percent of all power generation in Indonesia by 2030.

Over the next six months, the parties part of this climate finance deal will work on developing a concrete plan for investments, financing, and technical assistance.

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