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Major Banks Pledge to Raise $20 Billion to Support the Clean Energy Transition in Indonesia

Updated: Dec 21, 2022

The International Partners Group (IPG), a coalition of countries led by the United States and Japan, has announced the launch of a Just Energy Transition Partnership (JETP) with Indonesia. The partnership aims to accelerate and support the transition of Indonesia's power sector to clean energy sources, as well as to raise tens of billions of dollars to finance the transition.

The agreement, which was announced at the G20 summit in Bali, includes a commitment to mobilize $20 billion over three to five years, with half coming from public sector contributions for the IPG, which includes Canada, Denmark, the European Union, France, Germany, Italy, Norway, and the United Kingdom.

The remaining $10 billion will be facilitated by the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group, whose members include Bank of America, Citi, Deutsche Bank, HSBC, Macquarie, MUFG, and Standard Chartered.

Co-Chair of GFANZ and UN Special Envoy for Climate Action and Finance, Mark Carney, stated:

"Indonesia's ambitious, all-encompassing strategy to accelerate the transition of its energy systems can be transformative for its economy and an example for the rest of the globe. This would necessitate close collaboration between a large number of public and commercial partners to overcome different impediments to capital mobilisation."

Jane Fraser, CEO of Citi, said, "Financial institutions may make a big difference in the move to net zero around the world. Today's announcement shows how important it is for the private and public sectors to work together to find solutions that can help scale the investments needed to reach net zero goals."

As part of the new agreement, Indonesia will commit to a number of climate goals for its power sector, including peaking sector emissions by 2030 and capping emissions in that year at 290 megatons, setting a net zero emissions target for the sector by 2050, and achieving 34% renewable energy in its power generation mix by 2030.

According to a report released today by the IEA, the goals will necessitate a swift shift away from coal, which presently accounts for over 60% of Indonesia's electrical generation.

Indonesia is also the top exporter of coal by weight in the world.

The JETP model was formed during the COP26 climate summit last year, and in addition to assisting poor nations in bridging the infrastructure and investment gap required to transition to clean energy, it emphasizes the attainment of an equitable energy transition. Under the terms of the new agreement, the IPG countries will assist Indonesia in developing an investment strategy and policies to assist populations impacted by the transition.

President Biden stated in a White House statement announcing the JETP agreement:

"The resulting expanded and accelerated targets indicate how countries can significantly reduce emissions and develop renewable energy while furthering their commitment to create quality jobs and protecting livelihoods and communities."

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