Major Banks Join Pledge to Mobilize $20 Billion to Support Indonesia’s Clean Energy Transition
The International Partners Group (IPG), a coalition of countries led by the U.S. and Japan, announced today the launch of a Just Energy Transition Partnership (JETP) with Indonesia, aimed at accelerating and supporting the shift of Indonesia’s power sector to clean energy sources, and mobilizing tens of billions of dollars to finance the transition.
The agreement, announced at the G20 summit in Bali, includes a commitment to mobilize $20 billion over three to five years, with half in public sector contributions for the IPG, which also includes Canada, Denmark, the EU, France, Germany, Italy, Norway, and the UK.
The remaining $10 billion will be facilitated by the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group, which includes an initial set of financial institutions including Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered.
Mark Carney, Co-Chair, GFANZ and UN Special Envoy on Climate Action and Finance, said:
“The Government of Indonesia’s ambitious, comprehensive strategy to accelerating the transition of its energy systems can be transformative for its economy and a model for the world. This will require overcoming multiple barriers to capital mobilisation through close collaboration between a broad range of public and private partners.”
Citi CEO Jane Fraser added:
“Financial institutions can play an important role in contributing to the global net zero transition. Today’s announcement demonstrates the importance of the private and public sectors working together to develop solutions that can help scale the funding required to achieve net zero ambitions.”
As part of the new agreement, Indonesia will commit to a series of climate goals for its power sector, including peaking sector emissions by 2030, and capping emissions that year to 290 megatons, setting a 2050 net zero emissions target for the sector, and reaching 34% renewable energy in the power generation mix by 2030.
The goals will require a rapid transition away from coal, which currently accounts for over 60% of Indonesia’s electricity generation, according to a report released today by the IEA.
Indonesia is also the world’s largest exporter of coal, by weight.
The JETP model was established last year at the COP26 climate conference, and in addition to helping developing countries meet the infrastructure and investment gap needed to shift to clean energy, also emphasizes the achievement of a just energy transition. Under the new agreement, the IPG countries will support Indonesia’s development of an investment plan to achieve its targets, and policies to support communities impacted by the transition.
In a White House statement announcing the JETP agreement, President Biden said:
“The resulting new and accelerated targets demonstrate how countries can dramatically cut emissions and increase renewable energy while advancing a commitment to creating quality jobs and protecting livelihoods and communities.”